SoundExchange President and CEO Michael Huppe Talks AI in Music Industry

**Tim Stenovec** (0:00)
Carol, you'll recall, just last week at the Bloomberg Tech Summit, we sat down with Hitboy.

**Carol Massar** (0:04)
Was it one week ago today?

**Tim Stenovec** (0:05)
It was one week ago today. Three-time Grammy Award-winning artist, producer, he's known for shaping the sounds of Jay-Z, Beyoncé, Nas Drake and more.
Check out his Instagram for some fun shots from last week behind the scenes.

**Carol Massar** (0:16)
It was a lot of fun.

**Tim Stenovec** (0:18)
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 non-profit. 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 that it touches. Where do you sit? Remind everybody where you sit in the artists get paid when you listen to certain radio.

**Michael Huppe** (1:18)
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** (1:32)
And not Spotify, not Apple Music.

**Michael Huppe** (1:34)
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** (1:47)
So every time somebody listens to Taylor Swift on Pandora, for example, you then handle writing the check to who?

**Michael Huppe** (1:56)
Exactly, to Taylor Swift or her management company, whoever may be, and we also send half that money to her record label.

**Tim Stenovec** (2:01)
Okay.

**Michael Huppe** (2:02)
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** (2:17)
I'm curious, are you paying out more than you were last year? Like is it growing or is there more competition on other, yeah?

**Michael Huppe** (2:24)
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** (2:44)
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** (2:51)
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 years is a fraction of a penny.
And it's all set every five years. And you know, that doesn't sound like a lot of money, but as I said, over the course of a year, adds up to over a billion dollars. We are alone, you know, 12-ish percent or so of the whole US recorded music revenue.

**Tim Stenovec** (3:23)
I know it's past his bedtime, but Tom Keen, the host of Bloomberg Shadalins.

**Carol Massar** (3:27)
I don't think he sleeps to be quite honest.

**Tim Stenovec** (3:29)
You know, he has a New England folk album out. 1992, Searching for Ward in June. So you could ask him about the royalties, Carol.

**Michael Huppe** (3:37)
He should register for SoundExchange, because if he gets play on any of those platforms, we have money for him.

**Tim Stenovec** (3:41)
I love it.

**Carol Massar** (3:42)
So where does AI fit into all of this?

**Michael Huppe** (3:44)