Streaming platform Spotify dominates the digital music industry. With 433 million users, it accounts for a third of the global music streaming market. One of the platform’s hallmarks is its vast collection of curated playlists. Unlike AI-generated recommendation playlists for individual users, these so-called editorial playlists are assembled by Spotify staffers, and typically center around a genre or mood.
Within the latter category, there are some playlists that function as, in essence, background music. With names like “Peaceful Piano” and “Beats to think to,” these ambient playlists are designed to be unobtrusive. It’s no surprise, then, that most of the artists on these mood playlists aren’t well-known names. But savvy listeners have noticed something peculiar: hundreds of these ambient artists don’t exist at all. They’re “fake”—that is, they have no internet presence, and their music cannot be found anywhere beyond Spotify.
Trade publication Music Business Worldwide (MBW) has been covering these fake artists extensively since 2016. While Spotify has never admitted outright to populating editorial playlists with fake artists, MBW has managed to track down two Swedish music production companies responsible for some of the songs in question, which are in reality churned out by small teams of songwriters and published under a variety of eclectic-sounding pseudonyms. Why go to so much trouble to obscure the source of these songs? Industry insiders have speculated that Spotify pays significantly lower royalties to these production shops than it would to legitimate record labels. This theory is supported by a paper from economic researchers Bourreau and Gaudin, who used game theory models to demonstrate that streaming platforms like Spotify that charge uniform subscription fees have both the ability and incentive to steer subscribers toward the most profitable content. The authors focused their attention on recommendation algorithms—something more akin to Spotify’s AI-generated recommendation playlists. But Spotify’s editorial playlists also push listeners toward certain songs, albeit in a less precise way.
There’s no doubt that all of this feels wrong on an intuitive level. But who is being harmed here? Is it legitimate artists who are denied spots in these playlists and miss out on streams and exposure? Is it the record labels who represent them? Or is it the listeners, who are being misled? The answer is likely a combination of all three. Bourreau and Gaudin point out that by minimizing their costs in this way, streaming platforms offer users a less diverse array of content than what is optimal. Not only that, but by steering listeners away from less profitable songs, Spotify is aggravating the already fierce competition among legitimate artists.
From a legal standpoint, it’s not immediately clear where Spotify’s conduct falls. Aggrieved listeners might have a claim that Spotify engaged in fraudulent misrepresentation. As a threshold matter, Spotify’s terms and conditions contain an arbitration clause that prohibits class proceedings. But even if consumers were permitted to bring a claim, they would have a tough time demonstrating that they were actually harmed by Spotify’s obfuscation. It’s also hard to believe that any Spotify listener would be very upset that ambient artists like “Lo Mimieux” don’t exist. After all, mood playlists are by their very nature somewhat anonymous. Users don’t hit play on “Instrumental Study” because they’re hoping to discover up-and-coming artists. They’ll likely be so engrossed in studying, reading, or sleeping that they won’t even pay attention to individual tracks.
The more likely scenario is that record labels with enough sway will push regulators to look into Spotify’s conduct. And given antitrust’s recent revival as a cudgel against big tech, it seems like an obvious choice.
In fact, Spotify bears many resemblances to other companies that regulators are scrutinizing for allegedly anticompetitive practices, such as Amazon and Facebook. Like these companies, Spotify is a two-sided platform. Definitions for this term differ, but at its core, it means that Spotify unites two interdependent markets—listeners and artists—both of which rely on Spotify for their survival. These tech mammoths find themselves in a uniquely beneficial situation. They have access to vast amounts of user data, which means they are in an ideal position to use that data, as well as the algorithms that undergird the platforms, to steer customers toward certain products. Which products? Well, their own products. Amazon, for example, has come under fire for outcompeting other sellers with its AmazonBasics line. Spotify is arguably pulling off a similar trick here. While Spotify is not producing songs itself, it has (allegedly) found a way to source them more cheaply than music from legitimate record labels. And it’s steering customers toward this phony product by placing it in its most popular playlists.
While this situation may seem like an ideal application for antitrust regulation, a 2018 Supreme Court ruling casts doubt on how much tech platforms owe to sellers. In Ohio v. American Express, the majority held that the credit card company did not violate antitrust law by prohibiting vendors from encouraging their customers to use other cards. Before reading his dissent from the bench, Breyer warned of the implications the ruling would have as applied to two-sided platforms that deal in “internet-related goods and services.” Lina Khan, FTC chairperson since 2021, echoed this concern in a Vox op-ed she wrote in 2018. “In practice, the Court has shielded from effective antitrust scrutiny a huge swath of firms that provide services on more than one side of a transaction—and, in today’s digital economy, there are many,” Khan wrote. As a result of the ruling, “Amazon…can continue to squeeze the suppliers and retailers reliant on its platform with little worry about being charged with the abuse of monopsony power.” Khan’s bleak prediction might apply to Spotify, too—it wields the same kind of overwhelming market power within the music industry (Amazon accounts for 40% of the e-commerce market, while Spotify occupies one third of the streaming market).
But all is not lost. Spotify, unlike Amazon, still has a major competitor: Apple Music. In what seems like a direct rebuke, Universal Music Group has partnered exclusively with Apple Music to assemble an ambient playlist called Peaceful Music that is populated with songs from a handful of lauded, very much real composers like Max Richter and Víkingur Ólafsson. Here’s to hoping it will strike the right chord with listeners.