Speaker 1: Carol. You'll recall just last week at the Bloomberg Tech
Speaker 1: Summit we sat down with hit Boy.
Speaker 2: Was it one we could go today?
Speaker 1: It was one we could go today. Three time Grammy
Speaker 1: Award at winning artist producer is known for shaping the
Speaker 1: sounds of jay Z, Beyonce, Nosdrich and more. Check out
Speaker 1: his instagram for some fun shots from last week behind
Speaker 1: the scenes.
Speaker 2: It's a lot of fun.
Speaker 1: The topic of our chat was all about AI and
Speaker 1: using AI to create music. He's actually game. He says
Speaker 1: that it's music the same way he was using fruity
Speaker 1: loops earlier in his career. It's just you got to
Speaker 1: adjust with the times. That is not, in fact, the
Speaker 1: AI problem with music that Michael Huppy, the Presidency of
Speaker 1: Sound Exchange, has identified. Sound Exchange is this nonprofit. It's
Speaker 1: owned by the radio industry. It calls itself the music
Speaker 1: industry excuse me, calls itself the largest global neighboring rights
Speaker 1: organization in the world. It says it's collected and distributed
Speaker 1: more than thirteen billion dollars in digital performance royalties to date,
Speaker 1: on behalf of more than eight hundred thousand music creators.
Speaker 1: Michaelhuppy joins us here in the Bloomberg Interactive Broker's studio.
Speaker 1: It has been quite a bit since we've talked to you.
Speaker 1: I want to get to the AI problem that you've
Speaker 1: identified before. We do that, though Sound Exchange not a
Speaker 1: household name for a lot of people, even though every
Speaker 1: day they're interacting with the product that it touches. Where
Speaker 1: do you sit? Remind everybody where you sit in sort
Speaker 1: of the artists get paid when you listen to the
Speaker 1: radios or when you listen to certain radio.
Speaker 3: Should sure, first off, thanks for having me back. It
Speaker 3: was always great to be here. Sound Exchange is a
Speaker 3: company that represents the entire recorder music industry, all artists,
Speaker 3: all record labels. We sit between a lot of the
Speaker 3: streaming radio services think Sirius, XM, Pandora, iHeart Online.
Speaker 1: And not Spotify Spotify, but a.
Speaker 3: Lot of the ones that are not interactive radio. And
Speaker 3: then on the other side you have all the labels,
Speaker 3: all the artists, and we help pay out all of
Speaker 3: the all of the royalties basically that are created by
Speaker 3: all these services to the whole record and.
Speaker 1: So every time somebody listens to Taylor Swift on Pandora,
Speaker 1: for example, you then handle writing the check to.
Speaker 3: Who exactly, to Taylor Swift or her management company or
Speaker 3: whoever may be. We also send half that money to
Speaker 3: a record label. Okay, So it's a centralized place, makes
Speaker 3: it very efficient. You know, thousands of services, over eight
Speaker 3: hundred thousand accounts we have, and it's one efficient, centralized
Speaker 3: way to get all of that money out to the
Speaker 3: artists and labels who form the basis of these products.
Speaker 2: I'm curious, are you paying out more than you were
Speaker 2: last year?
Speaker 1: Like?
Speaker 2: Is it growing or is there more competition? It's an other.
Speaker 3: Yeah, it's pretty it's consistently grown. I would say fifteen
Speaker 3: twenty years ago we were paying out twenty five million.
Speaker 3: Now we pay north of a billion dollars a year.
Speaker 3: It's been pretty consistent growth due to a lot of reasons. Obviously,
Speaker 3: streaming is up and the way people consume music, you know,
Speaker 3: it's all collapsing onto the phone. So it's been a
Speaker 3: pretty banner of fifteen years.
Speaker 2: What do people get paid like for an album a song?
Speaker 2: I'm always curious or does it vary? Like how is it?
Speaker 3: Well? It varies and it depends on the product, right,
Speaker 3: So satellite radio, for instance, a subscription based business. They
Speaker 3: we get a percentage of revenue based on you know,
Speaker 3: relevant revenue. But when you're talking about webcasting, for instance,
Speaker 3: typically every stream to every set of years is a
Speaker 3: fraction of a penny and it's all set every five years.
Speaker 3: And you know, that doesn't sound like a lot of money,
Speaker 3: but as I said, over the course of a year,
Speaker 3: it adds up to over a billion dollars. We are alone,
Speaker 3: you know, twelve or twelve ish fifty percent or so
Speaker 3: of the whole US recorded music revenue.
Speaker 1: I know it's past his bedtime, but Tom Keene, he
Speaker 1: the host of.
Speaker 2: Bloomberg, thinks he has you.
Speaker 1: Know, he has a new England folk album out, I know,
Speaker 1: nineteen ninety two searching for Ward in June, So you
Speaker 1: could ask him about the royalties.
Speaker 3: He should register for sound Exchange because if he gets
Speaker 3: play on any of those platforms, we have money for him.
Speaker 1: I love it.
Speaker 2: So where does AI fit into.
Speaker 3: All of this? AI is a fascinating part of the
Speaker 3: industry coming up. It's something that has a lot of
Speaker 3: danger but also a lot of potential. So you know,
Speaker 3: I think we should all view AI as something that
Speaker 3: can make really potential revenue growth for the industry, new
Speaker 3: products for consumers, but it has to be rolled out
Speaker 3: the right way. Specifically, we need to make sure that
Speaker 3: human creators are protected. There need to be guardrails so
Speaker 3: that doesn't steamroll over the whole creative industry.
Speaker 1: Well, what's the problem that right now artists are facing
Speaker 1: when it comes to AI generated music.
Speaker 3: I mean, there's a lot of potential problems. One is,
Speaker 3: you know, when you think about the streaming world, there
Speaker 3: are services now that are reporting seventy five thousand uploads
Speaker 3: a day a day of new recordings, eighty percent or
Speaker 3: plus of them are AI music. When you dump what.
Speaker 1: Does that make it onto Pandora? Does it make it
Speaker 1: onto serious excent?
Speaker 3: It is making it into some of these streaming services,
Speaker 3: maybe not at the scale that you would expect yet,
Speaker 3: but I mean there have been reports of you know,
Speaker 3: whether it's one to two or three percent. Sometimes people
Speaker 3: estimate that it's up to ten percent. There's also the
Speaker 3: ability to streaming fraud is another big issue. There are
Speaker 3: cases where people use AI tracks, set up bots around
Speaker 3: and they siphon away payment from the pipeline that would
Speaker 3: otherwise go to real artists and real record label. It's
Speaker 3: fraud basically straight up fraud. There are people in prosecuted.
Speaker 3: There's a famous case in the Southern District of New
Speaker 3: York that was prosecuted recently.
Speaker 1: What's a bigger issue for AI generated music is that
Speaker 1: the fraud or is it the uploading of AI generated music?
Speaker 2: Right?
Speaker 3: I mean it's both the uploading of I mean fraud
Speaker 3: is something that I think we're tackling better as an industry.
Speaker 3: There are company is dedicated to it now. I think
Speaker 3: if you were to talk to a lot of the
Speaker 3: artists or the labels, they want to make sure that
Speaker 3: when as AI expands that it doesn't squeeze out the
Speaker 3: human element, you know, human creativity, human input is critical.
Speaker 2: But will you get a percentage of AI created songs?
Speaker 2: Like it's like, how is that?
Speaker 1: What this like?
Speaker 2: I'm just curious how you guys are jockey?
Speaker 3: Well, so so sound exchange AI created songs. Actually, this
Speaker 3: is going to be interesting. They actually don't merit a
Speaker 3: payment because they're not protectable under the law. And under
Speaker 3: US law, something is holy AI created. It's literally not copyrightable.
Speaker 3: So this isn't about more money coming through sound Change
Speaker 3: or not. It's basically about looking to protect the creative community,
Speaker 3: protect creators and make sure that these companies, I mean
Speaker 3: AI companies are made are going to will make trillions
Speaker 3: of dollars and they part of that. Part of that
Speaker 3: business models built on the backs of artists and labels
Speaker 3: when they scraped their content.
Speaker 1: So but if it's not good, nobody's going to listen
Speaker 1: to it.
Speaker 3: Well, do you think a music is good?
Speaker 1: I've never known till I don't know. I've never listened
Speaker 1: to it.
Speaker 2: Sometimes did it like a study, like pick the AI
Speaker 2: generated song, and I was pretty impressed at how good
Speaker 2: it was. But I mean, if it if it sounds
Speaker 2: like vocals, I think it did have vocals.
Speaker 3: Yeah. AI music has come a long way. Say, when
Speaker 3: it first started out, you could pretty much tell. But
Speaker 3: the stuff that AI is putting out now is pretty impressive.
Speaker 3: But but it's great if they do that. I want,
Speaker 3: I want to be clear. You know, AI has this risk,
Speaker 3: but it also has a lot of potential to grow
Speaker 3: the industry, grow revenue. And one thing about what's happening
Speaker 3: now compared to say, the napster days, I mean you
Speaker 3: you guys remember the napster days. It's very different now.
Speaker 3: Is the recording industry is leaning in. They're working with
Speaker 3: the AI companies. Their AI companies are licensing, and they're
Speaker 3: trying to work together to develop these models.
Speaker 2: I mean computers. Technology has been part of music for
Speaker 2: a long time. What do they call those things when
Speaker 2: people can't sing and.
Speaker 1: They auto tune auto ten.
Speaker 2: There you go, Michael Happy, Thank you so much, President,
Speaker 2: CEO of Sound Exchange,