Carol. You'll recall just last week at the Bloomberg Tech Summit we sat down with hit Boy.
Was it one we could go today?
It was one we could go today. Three time Grammy Award at winning artist producer is known for shaping the sounds of jay Z, Beyonce, Nosdrich and more. Check out his instagram for some fun shots from last week behind the scenes.
It's a lot of fun.
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 Huppy, the Presidency of Sound Exchange, has identified. Sound Exchange is this nonprofit. It's
owned by the radio industry. It calls itself the music industry excuse me, calls itself the largest global neighboring rights organization in the world. It says it's collected and distributed more than thirteen billion dollars in digital performance royalties to date, on behalf of more than eight hundred thousand music creators. Michaelhuppy joins us here in the Bloomberg Interactive Broker's 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 Sound Exchange not a household name for a lot of people, even though every day they're interacting with the product that it touches. Where do you sit? Remind everybody where you sit in sort of the artists get paid when you listen to the radios or when you listen to certain radio.
Should sure, first off, thanks for having me back. It was always great to be here. Sound Exchange is a company that represents the entire recorder music industry, all artists, all record labels. We sit between a lot of the streaming radio services think Sirius, XM, Pandora, iHeart Online.
And not Spotify Spotify, 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 all of the royalties basically that are created by all these services to the whole record and.
So every time somebody listens to Taylor Swift on Pandora, for example, you then handle writing the check to.
Who exactly, to Taylor Swift or her management company or whoever may be. We also send half that money to a record label. Okay, So it's a centralized place, makes it very efficient. You know, thousands of services, over eight hundred thousand 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.
I'm curious, are you paying out more than you were last year?
Like?
Is it growing or is there more competition? It's an other.
Yeah, it's pretty it's consistently grown. I would say fifteen twenty years ago we were paying out twenty five 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 fifteen years.
What do people get paid like for an album a song? I'm always curious or does it vary? Like how is it?
Well? It varies and it depends on the product, right, So satellite radio, for instance, a subscription based business. They we get a percentage of revenue based on you know, 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,
it adds up to over a billion dollars. We are alone, you know, twelve or twelve ish fifty percent or so of the whole US recorded music revenue.
I know it's past his bedtime, but Tom Keene, he the host of.
Bloomberg, thinks he has you.
Know, he has a new England folk album out, I know, nineteen ninety two searching for Ward in June, So you could ask him about the royalties.
He should register for sound Exchange because if he gets play on any of those platforms, we have money for him.
I love it.
So where does AI fit into.
All of this? AI is a fascinating part of the industry coming up. It's something that has a lot of danger but also a lot of potential. So you know, I think we should all view AI as something that can make really potential revenue growth for the industry, new products for consumers, but it has to be rolled out the right way. Specifically, we need to make sure that human creators are protected. There need to be guardrails so that doesn't steamroll over the whole creative industry.
Well, what's the problem that right now artists are facing when it comes to AI generated music.
I mean, there's a lot of potential problems. One is, you know, when you think about the streaming world, there are services now that are reporting seventy five thousand uploads a day a day of new recordings, eighty percent or plus of them are AI music. When you dump what.
Does that make it onto Pandora? Does it make it onto serious excent?
It is making it into some of these streaming services, maybe not at the scale that you would expect yet, but I mean there have been reports of you know, whether it's one to two or three percent. Sometimes people estimate that it's up to ten percent. There's also the ability to streaming fraud is another big issue. There are cases where people use AI tracks, set up bots around and they siphon away payment from the pipeline that would otherwise go to real artists and real record label. It's
fraud basically straight up fraud. There are people in prosecuted. There's a famous case in the Southern District of New York that was prosecuted recently.
What's a bigger issue for AI generated music is that the fraud or is it the uploading of AI generated music?
Right?
I mean it's both the uploading of I mean fraud is something that I think we're tackling better as an industry. There are company is dedicated to it now. I think if you were to talk to a lot of the artists or the labels, they want to make sure that when as AI expands that it doesn't squeeze out the human element, you know, human creativity, human input is critical.
But will you get a percentage of AI created songs? Like it's like, how is that?
What this like?
I'm just curious how you guys are jockey?
Well, so so sound exchange AI created songs. Actually, this is going to be interesting. They actually don't merit a payment because they're not protectable under the law. And under US law, something is holy AI created. It's literally not copyrightable. So this isn't about more money coming through sound Change or not. It's basically about looking to protect the creative community, protect creators and make sure that these companies, I mean AI companies are made are going to will make trillions
of dollars and they part of that. Part of that business models built on the backs of artists and labels when they scraped their content.
So but if it's not good, nobody's going to listen to it.
Well, do you think a music is good?
I've never known till I don't know. I've never listened to it.
Sometimes did it like a study, like pick the AI generated song, and I was pretty impressed at how good it was. But I mean, if it if it sounds like vocals, I think it did have vocals.
Yeah. AI music has come a long way. Say, when it first started out, you could pretty much tell. But the stuff that AI is putting out now is pretty impressive. But but it's great if they do that. I want, I want to be clear. You know, AI has this risk, but it also has a lot of potential to grow the industry, grow revenue. And one thing about what's happening now compared to say, the napster days, I mean you you guys remember the napster days. It's very different now.
Is the recording industry is leaning in. They're working with the AI companies. Their AI companies are licensing, and they're trying to work together to develop these models.
I mean computers. Technology has been part of music for a long time. What do they call those things when people can't sing and.
They auto tune auto ten.
There you go, Michael Happy, Thank you so much, President, CEO of Sound Exchange,