Chicago Music Magazine Exclusive interview with Mike Huppe President of SoundExchange at their Washington DC headquarters.

SoundExchange Information:
SoundExchange is a non-profit performance rights organization that collects statutory royalties from satellite radio (such as SIRIUS XM), Internet radio (like Pandora), cable TV music channels and similar platforms for streaming sound recordings. The Copyright Royalty Board, which is appointed by The U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the U.S. to collect and distribute these digital performance royalties on behalf of featured and non-featured recording artists, master rights owners (usually record labels), and independent artists who record and own their masters.

Michael Huppe Information:
Michael Huppe is president of SoundExchange, a non-profit organization that represents a diverse group of recording industry featured artists, musicians, managers, unions, as well as major and indie record labels. As head of the organization, Michael oversees one of the fastest growing segments of the music industry: the digital music royalties paid by services such as satellite and internet radio, and other forms of digital or streaming media platforms.

Michael’s appointment to SoundExchange’s top position follows a 12-year career devoted to protecting the cultural and commercial value of music, most recently serving as executive vice president and general counsel for the organization. In directing SoundExchange’s mission, Michael prioritizes business-positive solutions and agreements with industry services, promoting a dynamic digital music universe while ensuring much-deserved compensation for content creators. Michael holds a B.A. from the University of Virginia and a JD from Harvard Law School. He is an adjunct professor at the Georgetown University Law Center, and has lectured on intellectual property topics at various universities. His optimism and expertise helped to place SoundExchange among Forbes Magazine’s “Top Names You Need to Know for 2011.”

Shawn Kellner (CMM): Hello Mike,Thanks for taking the time to sit down with me for this interview.
Mike Huppe- Thank you for coming as well.

CMM: Who were the key players when you were at the RIAA that came up with the concept for SoundExchange and what was the focus then compared to now?
MH: Well, the concept of SoundExchange happened prior to me joining the RIAA, so I can’t really speak to the key players at that time. But, I can tell you that the digital performance right we administer, didn't even exist until 1995. That means performers and record labels were not paid for their recordings played in a broadcast format – before 1995. It’s a travesty that we can touch on another time. Thankfully, we now have a performance right for digital streaming, but we’re still waiting for terrestrial radio to follow suit. This right was created in 1995, tweaked a little in 1998, and only in the late 90's and early 2000's did things really start going. The question became: Who is going to distribute the money? You have this collective right, you have this statutory license, there has gotta be a way to get this money out there. The RIAA stepped up and offered to do it for their members, and then after some discussions with the copyright office and others decided they would just go ahead and collect on the labels side. That’s how it started as an unincorporated division of the RIAA. It quickly became apparent that SoundExchange needed to spin off as an independent entity, which is what we are now. In 2003, after many negotiations and conversations SoundExchange took its form. We’re nearing our 10 year anniversary, and can tell you that while we started as a tiny little music experiment, we are anything but that today. We represent both recording artists and record labels, including the Majors and Indies. And today we have more than 48,000 artist accounts and over 20,000 rights owner or label accounts.

CMM: I would like to take a moment to help my reader have the opportunity get to know you a little bit better on the personal side of things:

CMM: What is the most played song on your iPod/Itunes?
MH: There are so many it would be hard to tell you exactly what gets the most plays! For me, the music I listen to really comes from how I am feeling on a particular day. I love music and believe there is a song for every moment. If you walk around the office, you’ll find everyone at SoundExchange loves music. My taste in music has a very broad range to it. Some of my favorite genres and those on my SiriusXM channels are the 60s, 70s, Funk, Top 20 and Classic Rock. The song I hear the most every day is “Brick House,” which happens to be my ringtone.

CMM: When you visit Chicago do you prefer enjoying our famous Chicago Style Hot Dog or Deep Dish Pizza? 
MH: Definitely a Chicago Style Hot Dog…although I notice that many people try to reproduce Chicago Deep Dish Pizza and it just isn't the same as when you have it in Chicago.

CMM: You have been president of SoundExchange for a little over a year now, where do you see SoundExchange headed in 1 year, 5 years, and even into the next decade?
MH: Over the last few years we have experienced rapid growth and have been evolving and changing as that has happened and continues to happen. To give you an idea of the growth we have experienced: In 2003 we distributed $20 million dollars, in 2005 we distributed $292 million dollars in 2011. Today, in the U.S. we are the #2 digital revenue source behind iTunes for the record labels. We’re optimistic about where the music industry is headed and see opportunity for SoundExchange to help digital music services thrive. Since inception, we’ve paid out $900 million in royalties alone. Although we squabble over royalty rates with the service providers, we view ourselves as partners that enable music service to do what they do best – creating new ways to listen and discover music. On the other hand it is our job to fight for the value of content – a battle we will never shy from. In the end, we are here to help all that we represent – content creators and service providers thrive.

In the next five years, we hope to increase digital royalty payments (remember we went from $20M in 2005 to $292 million in 2011). We will also have an authoritative repertoire database in place that will not only be a resource to the industry, but improved tracking of collections and more timely payments. The possibilities are endless!

CMM: How important is SoundExchange to music estates of deceased artists still receiving digital royalties such as Frank Sinatra, Mahalia Jackson, Kurt Cobain, Ect and in what ways does SoundExchange ensure that those artists and legacy artists get the money that is collected on their behalf?
MH: Money collected by SoundExchange and distributed to estates of deceased artists and even legacy artists in incredibly important to them. In a lot of cases the legacy artists are not performing live music anymore. The money they receive that was collected by SoundExchange represents a revenue stream that still continues for them, in fact 50% of all money collected on behalf of artists goes to their accounts. Even for deceased or artists who are no longer touring. For some it may be the only revenue stream still coming in for them. Although I am not allowed to disclose specific amounts, I can say that Elvis Presley to this day is an example of an artists estate that still receives a large sum of money from digital royalties collected by SoundExchange. We work with our network of relationships with entertainment attorneys/managers or the family members handling the estate of deceased artists and we deal directly with legacy artists and their representatives to ensure that they are receiving the money that was collected on their behalf by SoundExchange.

CMM: How willing have digital streaming services such as Spotify, Pandora, Rhapsody, XM/Sirius Radio and other digital streaming services been to establish a relationship with SoundExchange in order to ensure the proper royalties are collected in compliance with the statute and that artists receive the proper compensation from having their music streamed?
MH: Allot of people think that there was a large heated battle between SoundExchange and companies like Spotify, Pandora, Sirius XM radio, etc when we went to them to collect money on behalf of artists. We actually view ourselves as business partners. In reality the only time there was/is a large discussion over the money is when we negotiate the rates every so often. Outside of that the companies generally speaking have been/are willing to work with us to ensure the right amount of money is being collected based on the services they offer and the amount of artists they work with. We don't only represent musical artists. We also collect and distribute money from digital royalties for other types of digital materials that are being streamed such as audio books, comedians, and other similar materials. And for clarification, we don’t work with interactive platforms like, Spotify. SoundExchange works with digital music platforms that are more “radio-like” and non-interactive. Pandora, Sirius XM and iHeartRadio are examples of these types of services.

CMM: Does that include podcasts?
MH: No, it does not include podcasts or on demand streaming. It mainly includes audio that can be streamed in a format that mixes up the programming into a form of a radio style format or streaming service.

CMM: What outreach programs does SoundExchange have to educate the public about the services that are available?
MH: We have many programs at SoundExchange that involve outreach in order to educate the public about what services are available. We get lots of recordings reported every month from people that we’ve never heard of, and who have never heard of us. But the money comes to us, and it’s our job to find and get these individuals to sign up.

As a result, we have dedicated team of about 20 full-time staff, plus additional part-time staff and consultants, who are focused solely on tracking down performers and labels to get them to claim their money.

On first impression, we often hear that SoundExchange royalties sound too good to be true. Understandable, but we go to great lengths to get artists to register, including: placing ads in print and online news outlets; targeting individuals via social media channels like Twitter, Facebook and YouTube; speaking on panels; sponsoring events or exhibiting at tradeshows. We host regular “how to register” webinars; and have even purchased large banners, like at SXSW, where we put up a large banner and hand out flyers with band names asking them to register. We’ve partnered with other organizations like NARAS and A2IM to match their lists against ours and conduct email, mail campaigns – all with the message: “Do any of you know these bands? Send them to our way -we got money for them!” The list goes on and on…

The real reward is when we register that individual or band where the money truly makes a difference. Nearly 90 percent of the 60,659 checks SoundExchange sent out last year (2011) were for less than $5,000. We often hear from artists who express gratitude that we found them or those who might have registered with us, and forgot until they receive a check in their mailbox.

CMM: Thank you Mike for your take the time to sit down with me today and talk about Sound Exchange.

Special Thanks to Sound Exchange VP of Communications Marie Knowles and Communications and Operations Coordinator Erika Brown for assistance with this interview.