Flood at the Gate: AI Slop, Streaming Fraud, and the Collapse of the “39-Step” Mechanical Royalty at the CRB

Key Takeaways

• Deezer reports 44% of new uploads are AI‑generated.
• 85% of AI‑track streams are flagged as fraudulent.
• CRB urged to bar compulsory license for non‑human‑authored music.
• Proposal to replace 39‑step formula with a simple penny‑rate.
• AI‑driven fraud threatens sustainable royalties for human songwriters.

Pulse Analysis

The streaming landscape is already awash with generative‑AI tracks, and the numbers are startling. Deezer disclosed that roughly 44 % of newly uploaded songs are created by AI systems, while an estimated 85 % of the streams tied to those tracks are flagged as fraudulent or subject to demonetisation. This flood of synthetic content not only skews play‑count metrics but also siphons revenue that would otherwise support human songwriters and composers. As bots and algorithmic amplification amplify these streams, the traditional royalty pool is being eroded faster than any existing safeguard can address.

Against this backdrop, the Copyright Royalty Board (CRB) faces a regulatory blind spot. Current statutes grant a compulsory mechanical licence only for works that meet the Copyright Office’s human‑authorship threshold, a principle reinforced by cases such as Thaler v. Perlmutter. Yet many digital service providers (DSPs) continue to claim the licence for AI‑generated recordings, effectively diverting funds meant for human creators. Industry advocates are urging the CRB to (1) explicitly bar compulsory licences for non‑human‑authored material, (2) exclude synthetic and fraud‑associated streams from royalty calculations, and (3) retire the cumbersome “39‑step” formula in favour of a straightforward escalating penny‑rate model.

If the CRB adopts these reforms, the royalty architecture could regain stability while accommodating rapid AI evolution. A simplified penny‑rate would provide transparent, predictable payouts and reduce administrative overhead, mirroring the webcasting framework that has proven resilient. More importantly, separating AI‑generated content from the compulsory pool safeguards the financial substrate that underpins the Constitutionally protected creative community. Failure to act, however, risks a permanent shift of revenue toward machine‑produced works, leaving human composers with diminishing returns and potentially prompting broader legislative intervention.