The Music Industry’s Silent Crisis: How Unchecked Distribution Models Are Undermining Value
By: George Karalexis & Donna Budica
Executive Summary
Over the past decade, democratized music distribution has enabled millions of creators to reach global audiences without the traditional barriers of label systems or physical infrastructure. However, this shift—largely enabled by scalable backend providers like FUGA, Vydia, and others—has come with unintended consequences. The rise of low-friction, unvetted distribution models has opened the door to a rapid influx of fraudulent, AI-generated, and rights-infringing content.
This structural failure threatens not only the financial health of artists and rights holders but also undermines platform trust, distorts consumption data, and challenges the sustainability of streaming economics.
Unless systemic reforms are adopted—spanning policy, technology, and incentive alignment—the long-term value chain of the music industry may be fundamentally compromised.
The State of Play: Distribution at Scale, Integrity in Decline
Music streaming platforms now receive over 100,000 new tracks per day. According to Music Business Worldwide, more than 20,000 of these are AI-generated and bot-uploaded on Deezer alone. Many of these uploads are indistinct, low-quality, or fraudulent, siphoning royalties away from legitimate creators.
Historically, distribution acted as a natural filter—enforcing quality, rights clearance, and metadata accuracy. Today, open-access distributors have flipped the model: anyone can become a "label," plug into a backend system, and mass-upload content—often with no identity verification or rights validation.
This shift has created a flood of music that lacks authenticity, integrity, or ownership clarity. Platforms, caught between scale and curation, often ingest these tracks with minimal oversight, further exacerbating the problem.
Root Causes: A System Optimized for Volume, Not Validity
Our analysis points to three key drivers of the current distribution crisis:
Proliferation of White-Label Infrastructure
Companies like FUGA, Vydia, and Symphonic have enabled entrepreneurs to build distribution services atop their platforms. While this has fueled innovation, it has also led to a “race to the bottom,” where speed and volume trump quality control.Lack of Rights Enforcement Protocols
Most distributors lack standardized, front-end rights verification processes. Tracks can be uploaded with incorrect or deliberately misleading metadata, often going unnoticed unless challenged post-release.Misaligned Incentives Across the Value Chain
Distributors earn revenue on volume. Platforms gain from engagement. Neither has a short-term financial incentive to scrutinize uploads—creating a systemic blind spot in quality assurance.
Implications: Erosion of Value Across the Ecosystem
If left unchecked, the long-term consequences for the industry are significant:
Diluted Royalty Pools: Fraudulent and AI-generated content consumes a growing share of royalties, impacting artists and rightsholders.
Decreased Platform Trust: Users exposed to low-quality or deceptive content are more likely to churn, reducing long-term retention and brand value.
Data Integrity Loss: Inaccurate consumption data leads to poor A&R decisions, faulty demand forecasting, and flawed investment models.
Regulatory Exposure: As AI-generated music blurs ownership lines, the risk of legal challenges and regulatory scrutiny increases—especially in global markets.
A Path Forward: Safeguarding Distribution in the Next Era
To address this growing risk, stakeholders across the ecosystem must consider coordinated interventions. We propose the following multi-layered framework:
Implement Pre-Upload Rights Verification
Develop industry-wide standards for verifying rights ownership at the point of submission. Integrate with existing ISRC, IPI, and blockchain-based registries where applicable.Enforce Distribution Licensing and Accountability
Introduce tiered licensing models for distributors, with compliance checks and audit rights for backend partners. Hold distributors financially liable for repeat violations.Deploy Machine-Learning Integrity Filters
Platforms should use AI to proactively flag suspect uploads based on file similarity, metadata anomalies, and behavioral patterns.Create a Global “Content Integrity Score”
Similar to credit scoring, distributors and uploaders would be assigned integrity scores based on historical performance, dispute rates, and metadata accuracy.Establish an Industry Governance Body
A cross-industry task force—similar to the IFR or MPA—could coordinate standards, recommend policy, and arbitrate disputes around fraud and misrepresentation.
Looking Ahead: Innovation with Guardrails
Democratized access has been one of the music industry’s greatest breakthroughs. But scale without structure creates fragility. To preserve long-term value, the industry must build a new foundation—one that prioritizes trust, ownership, and transparency alongside innovation.
The cost of inaction is not just short-term revenue leakage. It's the erosion of the legitimacy and value of music itself in the digital age.
