Hank's IP Brew — Issue #23

Howdy, y'all.

This week: Tidal became the first major streaming platform to cut off royalties for AI-generated music entirely — and the numbers behind why they did it are staggering. Plus, Jermaine Dupri just sued Sony for $18 million, alleging 32 years of "contemptuous accounting practices" on royalties for Mariah Carey, Usher, Kris Kross, and more. Both stories are about the same thing: who actually gets paid, and whether the people holding the money can be trusted to count it right.

Let's get into it.

On July 15, Tidal became the first major streaming service to move beyond labeling AI-generated music to actually demonetizing it. As of this week, any track Tidal's detection system identifies as 100 percent AI-generated stops earning royalties — full stop. The tracks can still be on the platform, and listeners can still find them, but they carry a visible "AI" badge and earn nothing.

That's a meaningful line to cross, and understanding why requires understanding how streaming royalties actually work.

The royalty pool problem

Every streaming platform uses a pro-rata model: subscriber fees go into a shared pool, and each artist gets a share of that pool based on their proportion of total streams. This sounds fair until you realize what happens when AI-generated tracks start accumulating streams at scale.

Tidal has historically paid the highest per-stream rates of any major platform — roughly $0.012 to $0.015 per stream, three to five times what Spotify pays. That made it the platform where AI-generated tracks had the most to gain. Flood the pool with AI tracks, generate streams, collect a larger slice of the pool — and every dollar that goes to an AI track is a dollar that doesn't go to a human artist.

The scale of this is not theoretical. Deezer, which launched the music industry's first AI detection system in 2025, found that 44 percent of all new music uploaded to its platform daily — roughly 75,000 tracks — was fully AI-generated. Of the streams those tracks generated, 85 percent were fraudulent, driven by bots rather than actual listeners. The IFPI estimates streaming fraud now drains roughly $2 billion a year from legitimate artist royalties.

The fraud mechanism has also evolved. Early bad actors were easy to catch: upload a few tracks, run bots hard, create obvious spikes. Modern fraud is harder to detect: flood the platform with millions of AI tracks and stream each one just a few thousand times, staying under individual detection thresholds while extracting royalties in aggregate across a massive catalog.

The structural advantage nobody talks about

There's a deeper problem that most coverage misses. Wholly AI-generated music isn't just diluting the royalty pool through volume — it's structurally advantaged within the pool because it has zero songwriter royalty overhead.

Under U.S. and EU copyright law, works without human authorship can't be protected by copyright. That means AI-generated tracks owe no mechanical royalties to songwriters, no performance royalties to composers, no sync fees, no publishing splits. A human artist who writes, records, and releases a song owes a slice of every stream to the underlying composition's rights holders. An AI track owes nothing to anyone. Every stream it generates is pure margin.

Tidal's policy doesn't solve all of this, and it creates its own complications — notably, who decides what counts as "wholly AI-generated," and what happens to legitimate artists using AI as one tool among many. Tidal acknowledged its detection tools aren't perfect and said it will expand the policy to "substantially AI-generated" music as detection improves. That's a significant open question.

But the direction is clear, and other platforms will face the same pressure. Spotify has a verification program that excludes primarily-AI profiles from badges. Deezer has detection tools and a public scanner. The patchwork is becoming policy, one platform at a time.

What this means if you make music

If you use AI tools in your production process — as a co-writer, as a sound design tool, as a mixing aid — you are almost certainly fine under Tidal's policy, which targets fully AI-generated work. But you should document your creative process. As platforms get more aggressive about detection and enforcement, being able to demonstrate human authorship at each stage of production will matter.

If you distribute through a distributor (DistroKid, TuneCore, CD Baby, etc.), read the updated terms from each platform. Several are now requiring distributors to self-report AI content, and passing that obligation down the chain to artists. The self-reporting gap — platforms relying on good-faith disclosure while bad actors ignore it — is the enforcement problem everyone is trying to solve right now.

On July 7, Jermaine Dupri and his So-So Def Recordings filed a lawsuit against Sony Music Entertainment in New York federal court, seeking more than $18 million in unpaid royalties. The complaint alleges a "systemic pattern" of what Dupri's lawyers call "contemptuous accounting practices" — underpayments, hidden accounting systems, cross-collateralization tricks, and amended statements designed to conceal prior underpayments.

The relationship at issue spans 32 years. So-So Def was founded in 1993 as a joint venture with Columbia (a Sony imprint). Over the following three decades, Dupri produced and released music by Mariah Carey, Usher, Kris Kross, Xscape, Bow Wow, Da Brat, J-Kwon, and others — essentially the catalog of a generation of mainstream hip-hop and R&B.

According to the complaint, Sony never reported producer royalties from Kris Kross's first two albums — including Totally Krossed Out, the platinum record that gave the world "Jump" in 1992. More than $2 million is allegedly owed on those records alone, and Sony reportedly only disclosed it owed any royalties at all after Dupri's team did their own audit in 2023 — thirty years later.

The complaint also alleges that Xscape — whose early albums were certified platinum — somehow still has more than $1.5 million in "unrecouped advances" on Sony's books, decades after release. Dupri's lawyers call this "unfathomable." It's also, if accurate, a textbook example of how cross-collateralization can be weaponized: bundle multiple albums together into one accounting unit, claim the combined advances haven't been recouped, and avoid paying royalties indefinitely.

The mechanics of getting underpaid

Most creators who sign with a label, publisher, or distributor never audit their royalty statements. Most don't know they can. Most don't have the resources to hire forensic accountants even if they do. And most contracts contain audit rights that expire — typically within two to three years of the statement date — meaning the window to catch underpayments is deliberately narrow.

The tools Sony is accused of using here aren't exotic. Cross-collateralization — combining multiple projects into one recoupment pool so that a hit subsidizes a flop instead of paying royalties — is standard in major label deals and can be negotiated out if you know to ask. Separate accounting systems for different royalty streams (producer royalties vs. artist royalties vs. label royalties) create complexity that makes auditing harder. Amended statements that "correct" prior underpayments without disclosing that they were underpayments in the first place are harder to catch still.

What to do

You don't need a 30-year Sony deal to be at risk here. The same dynamics — complex royalty structures, limited audit windows, deliberately opaque accounting — exist in publishing deals, sync licensing agreements, distribution agreements, and platform licensing arrangements at every level.

Three things worth doing regardless of where you are in your career:

First, read your audit rights clause. If you have a deal with a label, publisher, or distributor, find the audit provision. Note the deadline. If it's within two years of each statement, that clock is running right now on your oldest statements.

Second, request a royalty statement if you haven't recently. Just asking for one — and reading it — is more than most creators do.

Third, if the numbers don't make sense, ask someone who can read them. A music attorney or royalty auditor doesn't need to be retained for a full audit to review a statement and tell you whether the numbers look right. That conversation is cheaper than discovering you were underpaid for a decade.

Jermaine Dupri has Grammy awards, decades of industry experience, and a legal team. It still took him until 2023 to discover what Sony had allegedly been doing since 1993. That's the lesson — not that the system is broken beyond repair, but that it rewards the people who check.

See you next time,

Hank

P.S. If someone forwarded this to you and you find it useful, subscribe at newsletter.creatoripacademy.com. No spam, no filler — just IP news that actually matters.

About Hank's IP Brew

Creator IP Academy helps creators understand and protect their intellectual property. Got a question? Reply to this email.