How AI-generated Tracks are Exploiting Streaming Platforms’ Royalty Systems

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**SPEAKER_2** (0:08)
You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:14)
Carol, you'll recall just last week at the Bloomberg Tech Summit, we sat down with Hitboy.

**Carol Massar** (0:19)
Was it one week ago today?

**Tim Stenovec** (0:20)
It was one week ago today. Three time Grammy Award winning artist, producer he's known for shaping the sounds of Jay-Z, Beyonce, Nas Drake and more.
Check out his Instagram for some fun shots from last week behind the scenes.

**Carol Massar** (0:31)
It was a lot of fun.

**Tim Stenovec** (0:33)
The topic of our chat was all about AI and using AI to create music. He's actually game. He says that it's music the same way he was using Fruity Loops earlier in his career. It's just you got to adjust with the times. That is not in fact the AI problem with music that Michael Huppe, the president and CEO of SoundExchange has identified. SoundExchange is this nonprofit. It's owned by the radio industry.
It calls itself the largest global neighboring rights organization in the world. It says it's collected and distributed more than $13 billion in digital performance royalties to date on behalf of more than 800,000 music creators. Michael Huppe joins us here in the Bloomberg Interactive Brokers Studio. It has been quite a bit since we've talked to you. I want to get to the AI problem that you've identified. Before we do that though, SoundExchange, not a household name for a lot of people, even though every day they're interacting with a product, it touches, where do you sit? Remind everybody where you sit in the artist get paid when you listen to certain radio.

**Michael Huppe** (1:33)
Sure. First off, thanks for having me back. It was always great to be here. SoundExchange is a company that represents the entire recording music industry, all artists, all record labels. We sit between a lot of the streaming radio services, think SiriusXM, Pandora, iHeartOnline.

**Tim Stenovec** (1:47)
And not Spotify, not Apple Music.

**Michael Huppe** (1:49)
But a lot of the ones that are not interactive radio. And then on the other side, you have all the labels, all the artists and we help pay out all of the royalties, basically that are created by all these services to the whole record industry.

**Tim Stenovec** (2:01)
So every time somebody listens to Taylor Swift on Pandora, for example, you then handle writing the check to who?

**Michael Huppe** (2:10)
Exactly, to Taylor Swift or her management company or whoever may be. And we also send half that money to her record label. So it's a centralized place, makes it very efficient, thousands of services, over 800,000 accounts we have and it's one efficient centralized way to get all of that money out to the artists and labels who form the basis of these products.

**Carol Massar** (2:32)
I'm curious, are you paying out more than you were last year? Like is it growing or is there more competition on other?

**Michael Huppe** (2:39)
It's pretty, it's consistently grown. I would say 15, 20 years ago, we were paying out 25 million. Now we pay north of a billion dollars a year. It's been pretty consistent growth due to a lot of reasons. Obviously, streaming is up and the way people consume music, you know, it's all collapsing onto the phone. So it's been a pretty banner of 15 years.

**Carol Massar** (2:59)
What do people get paid like for an album, a song? I'm always curious or does it vary? Like how is it?

**Michael Huppe** (3:06)
Well, it varies and it depends on the product, right? So satellite radio, for instance, a subscription-based business, we get a percentage of revenue based on relevant revenue. But when you're talking about webcasting, for instance, typically every stream to every set of ears is a fraction of a penny.
And it's all set every five years. And that doesn't sound like a lot of money, but as I said, over the course of a year, it adds up to over a billion dollars. So we are alone 12 or 12-ish percent or so of the whole US recorded music revenue.

**Tim Stenovec** (3:38)
I know it's past his bedtime, but Tom Keen, the host of Bloomberg's surveillance.

**Carol Massar** (3:42)
I don't think he sleeps to be glad of this.

**Tim Stenovec** (3:44)
You know he has a New England folk album out.
1992, Searching for Ward in June. So you could ask him about the royalties.

**Michael Huppe** (3:51)
He should register for SoundExchange because if he gets play on any of those platforms, we have money for him.

**Carol Massar** (3:56)