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While Some Cry ‘Fake,’ Spotify Sees No Need to Apologize

A year ago, Apple stirred controversy by striking special deals with some of pop music’s biggest stars. Now Spotify is under fire for dealings with artists who, in a sense, do not exist at all.

For the last week, the music industry has been buzzing over the accusation that Spotify’s playlists are dotted with hundreds of supposedly “fake” artists, with names like Amity Cadet and Lo Mimieux, who are racking up tens of millions of streams yet have no public profile — no Facebook page, no Twitter feed, not even a face.

Spotify has also been accused of secretly controlling the rights to these songs — atmospheric, wordless tracks on mood-focused playlists with titles like “Deep Sleep” and “Peaceful Piano” — an arrangement that, if true, would allow the company to reduce the amount of money it pays in royalties to record labels and “real” artists.

The reality, however, may be more complicated.

Spotify denies that it owns the rights to the music under question, although the company may well pay lower royalty rates for these tracks than it does for more standard pop fare. And the pseudonymous creators of the tracks — real composers and producers, whose work appears under numerous made-up names — do not want to be called fake.

Peter Sandberg, a 27-year-old composer in Sweden who has created a number of tracks on these playlists, called the term unfair.

“I’m a composer trying to find a way to grow and spread my work,” Mr. Sandberg wrote in an email relayed through an intermediary, “and to be called fake is not something I appreciate.” (Mr. Sandberg, who records music under his own name as well, does have a social media presence, making him a less anonymous figure than many of the other creators of this music.)

For Spotify, the issue could damage its already strained relationships with artists and record labels as the company prepares to go public. Streaming may now contribute a majority of the revenue for the record business, but many artists still have doubts about the format’s underlying financial model.

The suggestion that Spotify’s system is unfair would exacerbate the problem.

“Generally, folks are excited to see growth in the legitimate digital marketplace,” said Kevin Erickson, the national organizing director of the Future of Music Coalition, an advocacy group. “To the extent that artists will have lingering questions about whether they are going to meaningfully share in that growth, incidents like this will add to their skepticism.”

The idea that Spotify was commissioning its own music was first reported last summer by the online publication Music Business Worldwide; the issue gained renewed attention after an article last week in Vulture. Since then, Music Business Worldwide has been listing dozens of what it says are fake artists on Spotify whose work has generated more than 500 million streams.

Many of these tracks, it turns out, were made by a small group of professional producers and songwriters in Sweden, some of whom have worked with pop stars like Kelly Clarkson and the Pussycat Dolls. About 50 of these composers, including Mr. Sandberg, are represented by Epidemic Sound, a Swedish company that specializes in music for television and film. (Spotify and Epidemic Sound share an investor, the European venture capital firm Creandum.)

Oscar Hoglund, the chief executive of Epidemic Sound, said in an interview that as part of an effort to “soundtrack the internet,” his company also supplies background music for YouTube and Facebook videos, which he said had garnered 10 billion views.

The company has put nearly 1,500 songs on Spotify, Mr. Hoglund said, but has no role in placing the songs on the service’s playlists.

Jonathan Prince, Spotify’s global head of strategic initiatives, said in an interview that the unexpected popularity of its mood-based playlists — “Peaceful Piano” has 2.9 million followers — has created a demand for more of that material, which the company has actively worked to satisfy.

“We’ve found a need for content,” Mr. Prince said. “We work with people who are interested in producing it.”

By Spotify’s standard royalty rates, 500 million streams would be worth about $3 million — money that the company could theoretically save if it owned the material that generated those streams.

That amount may be minuscule for a company that last year had $3.3 billion in revenue. But as Spotify readies itself for a public offering, it has made lowering content costs a priority.

“These guys are in a big fight with the music business right now over how much they pay creators,” said Matt Pincus, the chief executive of Songs Music Publishing, whose roster includes Lorde and the Weeknd. “The more controversies they have that have a moral underpinning to them, the more of a problem they will have in the bigger fight.”

This spring, Spotify signed a new licensing deal with Universal Music, which agreed to a lower royalty rate in exchange for more control over how its music appears on the service. Spotify may be close to signing a similar deal with Sony.

As some in the business see it, the “fake” controversy could endanger future deals, although many labels, big and small, have protections in their licensing contracts that forbid Spotify from owning content or deliberately driving customers to lower-cost songs.

Mr. Prince did not deny that the songs may cost Spotify less to play. But he said that the placement of all songs on its playlists was determined only by their popularity among listeners.

“This is a marketplace, and not all content is priced the same,” he said. “These are legit deals between us and labels that everyone feels comfortable with.”

If Spotify has arranged a lower royalty rate for these tracks, those 500 million streams could cost it much less than $3 million. For some musicians, that may still be plenty.

Mr. Hoglund, the Epidemic Sound chief, said that his company typically purchased the rights to music from its composers for a flat fee, but that for music on Spotify it split additional royalties evenly with its composers.

Mr. Sandberg, who said he was “born and raised” in the Swedish city of Uppsala and started out wanting to be a concert pianist, added that he was “quite pleased” with his Spotify earnings. Some of his tracks there are listed under his own name, and some under pseudonyms (which he did not reveal).

“A lot of big composers, writers and filmmakers have used pseudonyms,” he said. “Why shouldn’t I?”

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