AI and Music: Streaming Fraud, Responsible AI Policy and the Fight for Creative Rights
Artificial intelligence is rapidly changing the music industry, but its expansion is also creating new legal, financial and policy questions.
Recent developments in the United States and the wider music industry show how the conversation is moving beyond AI-generated music itself. Regulators, music companies, rights holders and sound professionals are increasingly focusing on streaming fraud, responsible AI policy, licensing and unauthorized use of creative works.
Three recent developments highlight this shift: the ongoing sentencing case involving AI-assisted streaming fraudster Michael Smith, Sony Music Group's decision to join the Alliance for Responsible Innovation in the Arts & Media (ARIAM), and the launch of the Professional Sound Alliance to address unauthorized use of sound recordings and sound-effect libraries in AI systems.
What Happened in the Michael Smith AI Streaming Fraud Case?
Michael Smith, a North Carolina musician and producer, pleaded guilty in March 2026 to conspiracy to commit wire fraud after using AI-generated music and automated accounts to manipulate music streams.
According to the U.S. Department of Justice, Smith created hundreds of thousands of songs using artificial intelligence and used bots to stream those recordings billions of times. The scheme generated more than $8 million in fraudulent royalties. Smith agreed to forfeit $8,091,843.64 as part of his plea agreement.
The case is significant because it demonstrates how generative AI can be used not only to create music but also to scale fraudulent activity within streaming systems.
How Did AI Help the Streaming Fraud Scheme?
According to federal prosecutors, Smith needed a very large number of recordings to distribute his automated streams and avoid detection.
AI allowed him to create hundreds of thousands of tracks at a scale that would have been extremely difficult to achieve through conventional music production.
The recordings were then streamed through automated accounts designed to make the activity appear to be generated by real listeners. Prosecutors said the scheme involved billions of fraudulent streams.
The case demonstrates an important distinction:
AI-generated music itself is not the crime described in this case.
The criminal conduct involved allegedly manipulating streaming activity and obtaining royalties through fraudulent means.
Are Michael Smith's Lawyers Asking for Probation?
Yes.
Smith's lawyers have asked the federal court to impose probation rather than a prison sentence. Their sentencing memorandum argues, among other things, that the financial effect on individual artists was extremely small because the alleged losses were distributed across a large royalty pool.
However, prosecutors are seeking a substantially more serious sentence. Recent reporting indicates that the government has asked for at least 46 months in prison, while the U.S. Probation Office's presentence report reportedly recommended 24 months.
As of the latest reports, the judge has not yet imposed the sentence.
The case is therefore being closely watched because it could establish an important U.S. criminal precedent for AI-assisted streaming fraud.
Why Does Streaming Fraud Matter to Artists?
Streaming platforms distribute royalty revenue according to systems that depend on legitimate consumption data.
When automated streams are presented as genuine listener activity, they can affect the distribution of royalty pools and undermine the data used by platforms and rights holders.
The Department of Justice specifically stated that Smith's scheme diverted royalty payments from legitimate musicians and songwriters.
For artists and distributors, the case reinforces the importance of:
Genuine audience growth.
Accurate streaming data.
Anti-fraud monitoring.
Transparent royalty reporting.
Responsible use of AI-generated content.
Sony Music Joins ARIAM to Help Shape Responsible AI Policy
While the Smith case focuses on criminal misuse of AI and streaming systems, another major development is taking place at the policy level.
Sony Music Group has joined the Alliance for Responsible Innovation in the Arts & Media (ARIAM), becoming the first music company to join the global coalition. Sony announced the move on September 24, 2026.
ARIAM brings together organisations from creative industries, media and technology to develop approaches to responsible AI policy.
Its members include companies and organisations from areas such as film, television, journalism, publishing and technology.
What Is ARIAM?
The Alliance for Responsible Innovation in the Arts & Media, known as ARIAM, is a coalition focused on developing policy approaches for AI that protect creativity and consumers while allowing technological innovation to continue.
Rather than focusing exclusively on copyright, ARIAM takes a broader approach to responsible AI development and policy.
Sony Music's membership brings the recorded-music sector directly into that discussion.
Why Did Sony Music Join ARIAM?
Sony Music said generative AI creates both opportunities and challenges for artists and songwriters.
The company said it wants to contribute to discussions about how AI can be incorporated into the creative industries while protecting human creativity and consumers.
Sony Music also highlighted the importance of a healthy licensing environment, in which responsible AI companies work proactively with rights holders.
This places licensing at the centre of the discussion around how AI companies access and use creative works.
What Could Responsible AI Policy Mean for Music?
For the music industry, responsible AI policy can involve several areas:
Licensing
AI developers may need clear pathways to obtain permission to use copyrighted music and other creative works.
Transparency
Artists and rights holders need better information about how their work is being used and where it appears in AI development.
Artist Protection
Policy frameworks can address issues involving voices, identities, likenesses and other aspects of human creativity.
AI Labelling
Clear information about whether and how AI was used can help listeners understand the music they are consuming.
The music industry has already begun developing voluntary approaches to AI transparency. In July 2026, major music organisations and industry groups announced proposed track-level labels distinguishing between “AI-Generated” and “AI-Assisted” recordings.
Sound Professionals Create New Alliance Against Unauthorized AI Scraping
The AI debate is also expanding beyond songs and recordings.
On September 24, 2026, sound designers, recordists, mixers and sound-effects library companies launched the Professional Sound Alliance, a coalition focused on protecting professional sound from unauthorized use in media production and AI.
The alliance says it wants to establish fair licensing for professional sound and sound effects used across film, television, games and AI development.
What Is the Professional Sound Alliance Concerned About?
The alliance identifies two major forms of unauthorized use.
Data Piracy refers to the scraping of professional sound libraries into commercial AI models without permission or compensation.
Sync Piracy refers to the use of sounds and sound libraries in film, television and games without the necessary licence.
This expands the AI rights debate beyond traditional music recordings.
Sound effects, field recordings, production libraries and other audio assets can also represent significant creative and commercial work.
Why Does Sound Matter in the AI Debate?
AI models capable of generating sound effects need large amounts of audio data.
The quality of an AI-generated sound can depend heavily on the quality and diversity of the material used to develop the underlying model.
The Professional Sound Alliance is therefore calling for a licensing framework that recognises the value of professional sound libraries and the work of the people who create them.
The issue also intersects with emerging AI audio technology. Sony AI, for example, has developed Woosh, a foundation model designed specifically for sound-effect generation. Sony AI has said that a private version was trained using licensed professional sound libraries.
This illustrates one possible model for AI development: using licensed material rather than relying on unauthorized scraping.
What Do These Developments Mean for the Music Industry?
These developments show that the AI conversation is expanding beyond the question of whether AI can create music.
The industry is increasingly asking:
How should AI-generated music be identified?
How can streaming fraud be detected?
Who should receive royalties when AI-generated content is streamed?
Can copyrighted music be used to train AI without permission?
Should AI companies license creative works?
How should artists protect their voices and identities?
Can professional sound libraries be used for AI training without authorization?
What information should AI developers disclose?
There is no single answer to all of these questions. Different countries, platforms and rights holders are developing different approaches.
What is becoming clearer is that rights management, licensing, transparency and fraud prevention are becoming central parts of the AI-music conversation.
What Should Artists and Music Companies Watch?
For artists, labels, distributors and rights holders, several areas are particularly important.
1. Streaming Fraud
AI can dramatically increase the amount of content that can be produced for fraudulent streaming schemes. Platforms and distributors are therefore continuing to develop more sophisticated methods of detecting manipulated activity.
2. AI Licensing
The question of whether AI companies should license copyrighted music and other creative works remains one of the industry's major policy debates.
3. AI Transparency
Labels, platforms and industry organisations are increasingly working toward systems that allow listeners and rights holders to identify AI-generated or AI-assisted content.
4. Sound and Non-Music Rights
The same questions affecting songs are increasingly being raised about sound effects, production recordings, voice recordings and other forms of audio.
5. Regulation
Industry participation in organisations such as ARIAM shows that major music companies are increasingly engaging directly in discussions about future AI policy.
What Comes Next for AI and Music?
The next phase of the AI-music debate is likely to focus less on whether artificial intelligence will be used and more on how it is used and under what conditions.
Streaming fraud cases such as Michael Smith's demonstrate the financial risks created when AI and automation are used to manipulate music platforms.
Sony Music's participation in ARIAM demonstrates the industry's growing involvement in policy development.
The Professional Sound Alliance demonstrates that the debate is expanding beyond music recordings to the wider professional audio ecosystem.
For the global music industry, the key issues are increasingly connected: copyright, licensing, transparency, identity, royalties and responsible AI development.
As AI technology continues to develop, artists and rights holders will need clearer systems for protecting their work while companies and developers will need increasingly transparent and accountable ways to build and deploy AI systems.
Art City follows developments across music, artificial intelligence, copyright, royalties, distribution and the global creative industries.
