Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. All right, sound
Speaker 1: Exchange is what we're talking about. They collect and distribute
Speaker 1: digital performance royalties on behalf of nearly six hundred thousand
Speaker 1: music creators and growing. And we want to get an
Speaker 1: update on the business. How it all works. Well, we
Speaker 1: got a good guy with us to help us do that.
Speaker 1: We got the president and CEO of sound Exchange, Michael Huppy,
Speaker 1: joining us live in the Bloomberg Interactive Broker studio. He's
Speaker 1: on Twitter at Mike Copy. You can follow him there. So, Michael,
Speaker 1: how does sound Exchange work? Like? You guys are a nonprofit?
Speaker 1: Tell us how you get your money because it's not
Speaker 1: from every single music service out there. Well, we're a
Speaker 1: very we're a very interesting billion dollar company that a
Speaker 1: lot of your listeners probably haven't heard of. But we
Speaker 1: make a lot of the services they use work better. Uh.
Speaker 1: And a big part of what we do is help
Speaker 1: connect hundred streaming services like sirius, XM and Pandora and
Speaker 1: I heart Online. And we, on the one hand, connect
Speaker 1: with them and collect payment from them for use of
Speaker 1: the recordings and the data, and then we take care
Speaker 1: of all that bad data, clean it up, UH, fix
Speaker 1: the airs, combine it with the other thirty six D services,
Speaker 1: and paid out to over six hundred thousand creators. Basically,
Speaker 1: if you are an artist or a label or a
Speaker 1: studio producer who has play on any of these services,
Speaker 1: you get a check from us. Why does it have
Speaker 1: to be a nonprofit? Doesn't have to be a nonprofit.
Speaker 1: We were actually created by the industry to do this
Speaker 1: very thing. We are purpose built. Who when you say
Speaker 1: the industry, who got together and created you? So? Uh,
Speaker 1: kind of the entire recorded industry is what came together
Speaker 1: were well. So we have major record labels, indie record
Speaker 1: labels on our board. We have the Artist Union SAG
Speaker 1: after a f M. We have artists themselves, artists, managers,
Speaker 1: trade associations. If if you are uh an entity in
Speaker 1: the music sound recording space, you're you're represented on the board.
Speaker 1: You you did mention that, um, you did not mention
Speaker 1: a couple of big names. You didn't mention Spotify, you
Speaker 1: didn't mention Apple Music. Uh. Those services are on demand
Speaker 1: streaming platforms that are interactive. Right, There's two two types
Speaker 1: of streaming platforms. One is we call interactive where you
Speaker 1: lean forward, you make playlists, um. And then there's lean back,
Speaker 1: where it's just a stream of music to you. Uh.
Speaker 1: And we operate a lot in the non interactive space.
Speaker 1: We do to other things. We you know, we're we're
Speaker 1: music tech companies. So we have data services that we
Speaker 1: provide some folks, we administer certain settlements. But for purposes
Speaker 1: of this discussion, it's the lean back, non interactive services
Speaker 1: that we we spend the most. In bottom one, it's tracking,
Speaker 1: you know, services that are tapping into artists content and
Speaker 1: making sure that they get paid for it exactly. And
Speaker 1: and to give you a sense of scale, um, it's
Speaker 1: it's exploded. I mean the music industry, especially the streaming
Speaker 1: part is taken off. When I first came to the company,
Speaker 1: you know, fifteen years ago, we were paying out maybe
Speaker 1: twenty million dollars a year. We now pay out regularly
Speaker 1: over one billion dollars a year, and we pay it
Speaker 1: out very quickly. We pay every month. Of the money
Speaker 1: you we get in the door is out within forty
Speaker 1: five days. Uh. And you know, as I said, thirty
Speaker 1: six hundred services, we process thirty five billion performances a month,
Speaker 1: so it is a serious, high tech, high data operation.
Speaker 1: So if artist is getting paid by because their music
Speaker 1: is being played on Serious x M, are they only
Speaker 1: getting paid because of sound exchange? Are they also getting
Speaker 1: a check from Serious x UM for the sound recording
Speaker 1: part of the business that generally comes from us UM.
Speaker 1: There are other licenses in the music industry as well,
Speaker 1: so very very complet. It's very complicated. You know, There's
Speaker 1: there's a whole another music publishing side of the business,
Speaker 1: and Serious XM has to deal with other organizations for that.
Speaker 1: But for the sound recording, the featured artists get money
Speaker 1: from us. And another interesting thing, we also send money
Speaker 1: to a fund that pays all the background vocalists and
Speaker 1: musicians as well, which is a cool, cool aspect they
Speaker 1: get now they now get some downstream revenue and your
Speaker 1: proprietary technology to make sure that everybody who is creating
Speaker 1: content at whatever level is getting paid. But I'm thinking
Speaker 1: about how conversations we have, couldn't the blockchain do this? Well?
Speaker 1: One day the blockchain may or may not do it.
Speaker 1: I mean, technology is not trying to replace you in yours,
Speaker 1: but I wonder how you think about you've got proprietary technology,
Speaker 1: how do you take it to another level that maybe
Speaker 1: even makes it pure more direct. So I will tell
Speaker 1: you for us, all technology, all platforms, they're just tools. Right.
Speaker 1: Our job is to work on behalf of creators to
Speaker 1: make sure they get paid fairly and accurately. And if
Speaker 1: blockchain becomes the next thing, you're still going to need
Speaker 1: a place where there's authoritative data about who owns the
Speaker 1: rights and what recordings and where do they own those rights.
Speaker 1: So even if you have the blockchain and smart contracts,
Speaker 1: we would very likely still be a part of that
Speaker 1: as well. And it's something we're considering for our future.
Speaker 1: You know, where are we going to be in ten years?
Speaker 1: And the blockchain and web three is very much something
Speaker 1: we're thinking about. Do you see what is the trend
Speaker 1: when it comes to the lean back versus interactive experiences?
Speaker 1: I mean, is it? Why aren't Why isn't Spotify and
Speaker 1: Apple Music? Why aren't they part of your platform? Well
Speaker 1: because they they do have lean backs experience, but they
Speaker 1: also have more interactive and for that they have to
Speaker 1: go to the record labels to get the to get
Speaker 1: the rights. Will they ever be be just? Will they
Speaker 1: ever be part of your platform. Well, look, we're happy
Speaker 1: would you like them to be? We're happy to work
Speaker 1: with anybody, you know, if you think about it. We
Speaker 1: are a trusted resource with as you say, state of
Speaker 1: the art, cutting edge proprietary technology and the best data
Speaker 1: music data in the industry. Um, And we would be
Speaker 1: open to working with any of these companies to help
Speaker 1: their back office, saves them money, helps us, you know,
Speaker 1: serve the industry better. So we would be very open
Speaker 1: to working with anyone who wants to make it take
Speaker 1: advantage of that. What's the impact of musicians selling their
Speaker 1: music catalogs, um, Phil Collins, Bob Dylan Springsteen. I mean
Speaker 1: the list just continues to grow. So what impact has
Speaker 1: that had on you guys? Um and kind of on
Speaker 1: the growing monetization if you will, in the music industry. Well,
Speaker 1: I will say it's a fascinating development. Um. You looking
Speaker 1: at this as an asset class now and having these
Speaker 1: institutional investors invest in an asset class, it's great for
Speaker 1: the industry. It shows interest, it shows the future and
Speaker 1: what people expect from our perspective. It just means, look,
Speaker 1: well we'll we'll send our camations. Now does that help
Speaker 1: we our payments very much work into the valuations because
Speaker 1: we are you know, we're a large part of of
Speaker 1: the revenue stream. Sound exchange alone is ten to fift
Speaker 1: of the US recorded music market. So when these when
Speaker 1: these artists go to sell their catalog, the investors are
Speaker 1: going to look at the history of the revenue and
Speaker 1: we are very much a part of that. And from
Speaker 1: our perspective, you know, we'll pay whoever the artist tells
Speaker 1: us to pay. If they want us to send fifent
Speaker 1: to the studio producer, we do. If they, you know,
Speaker 1: tell us to split the money this way among their bandmates,
Speaker 1: we will. And if they say, hey, I just sold
Speaker 1: my catalog to this pe firm, then that's where the
Speaker 1: check goes. So do you know an up and coming
Speaker 1: artist before they are an up and coming artist, because
Speaker 1: you have this data we it is it's we do
Speaker 1: have a little bit of insight into trend maybe before
Speaker 1: they hit the mainstream. So I won't name any names
Speaker 1: of trying it to play favorites, but there are big
Speaker 1: artists now who we knew and we're friendly with. Long's
Speaker 1: your favorite, who's your favorite one, my favorite my favorite artist,
Speaker 1: favorite your favorite artist? Favorite artist? I would say else
Speaker 1: Costello or Billy Jewel Nice. I didn't expect you to
Speaker 1: answer the question. It's not like he's going to get
Speaker 1: them a better deal all because of are you um
Speaker 1: really interesting? And I think a business that we all
Speaker 1: just take for granted in terms of how it works.
Speaker 1: So great to get some insight. Come back soon. I
Speaker 1: appreciate you having Carol always tries me to get me
Speaker 1: to sing a song on air and then I'm like,
Speaker 1: I can't because we don't have the rights to it,
Speaker 1: So don't get me in trouble. Michael Happy President, Is
Speaker 1: that the reason? Just the right? Michael Happy President, CEO
Speaker 1: of Sound Exchange, Thank you so much. Check out Tim's
Speaker 1: Crypto show, check out our weekend show. Have a great weekend, everybody,