Michael Huppe is responsible for the strategic direction of SoundExchange, the nonprofit organization that collects digital music royalties paid by internet radio, satellite radio and other digital media services on behalf of recording artists and record labels. SoundExchange represents one the music industry’s fastest growing segments including more than 48,000 payable performer accounts and over20,000 rights owners and label accounts. Michael has devoted the past 12 years of his career to protecting the value of music. Prior to being appointed to SoundExchange’s top position in 2011, he most recently served as organization’s executive vice president and general counsel. Michael ho
lds 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. His optimism helped to place SoundExchange among Forbes Magazine’s “Top Names You Need to Know for 2011.”
1. What in your career path led you to your initial job at SoundExchange?
I’ve had an interest and passion for music since childhood, but my career path -- mixed with a little bit of luck -- brought me to SoundExchange. I was drawn to intellectual property law ever since law school, because of what it meant for our culture and the policy goals behind it. I tried to work on as many IP cases as I could at my law firm, ultimately moving to focus on the music industry at the Recording Industry Association of America, and spent the last two years there doing work related to SoundExchange. When my focus shifted to digital issues, it was clear how important this area was going to be for the industry as a whole. When the opportunity at SoundExchange to become general counsel opened up, it was a natural and exciting move. About four years later, I became president.
2. How has SoundExchange evolved the last few years?
It’s an exciting time in the music industry, and new services and innovation mean consumers have more access to music than ever before. As a result, SoundExchange has experienced explosive growth over the past few years. Our numbers are proof of our growing contribution to the industry: In 2011 we distributed more than $292 million to artists and record labels – that’s nearly triple what we paid out in 2008! What used to be a rounding error on the books of most recipients has now become a very real and meaningful source of income.
These new revenue streams makes a difference not just in the lives of well-established artists and labels, but also in those of working class artists and labels. That is a very rewarding part of our work. Of the over 60,000 checks SoundExchange sent out last year (2011), over 90 percent were for less than $5,000.
3. Where do you see SoundExchange five to 10 years from now?
First of all, you can expect to see continued growth from SoundExchange. In the next five to 10 years, we could very well become as large as other performance rights organizations that have been around much longer.
In addition, we’re increasing our technology game. We are building a next-generation technology platform that lays the foundation for our future and for the benefit of the entire industry. We’re also in the process of developing a repertoire database – a single authoritative database for U.S. recording that is critical for SoundExchange to expand and improve our service – also for the benefit the entire music industry. As an organization, we’re focused on creating an environment to allow this new part of the industry to flourish.
We are developing technologies that can have a broad application. We will be able to do more than simply administer the statutory license, such as helping companies with their “back office” functions, or even helping distribute royalties for other industries.
I can promise you what won’t change: SoundExchange will always fight for the music community – artists, artists’ managers and copyright owners. We will always work to protect the value of content.
4. What is your greatest professional challenge today?
While there are many, I think our greatest professional challenge as of this moment is probably also the industry’s most exciting challenge: a change of mindset, and a conversion to a completely different way of consuming music. The historic model was based on sales, and while sales are still important we need to focus on other revenue sources as well. The consumption today might just as easily be for “access to a stream” as it is “purchase of a CD.” The model is changing and it affects everyone -- managers, artists, labels, consumers and everyone in between. SoundExchange has found itself right in the middle of the industry’s evolution. Yes, it creates challenges in terms of the need to enhance our technology to keep up with the explosive growth in the streaming industry. But, the real challenge is helping to broaden industry perspectives in order to keep up with consumer expectations for legally accessing music.
There are some who like to preach “doom and gloom,” or that the music industry is dying. That’s just not true. Our industry isn’t dying; it’s simply evolving, and we’re just starting to tap the new potential of this evolution.
5. What's the best advice you've received since heading up SoundExchange?
It’s actually a philosophy that I’ve carried with me throughout my life and career, which is “never be satisfied.” I’ve always been the type to push a little harder, or strive for that target that’s a little higher. Running a company is about what lies over the hill, and not where you’re standing right now. I believe the entire team at SoundExchange shares the same forward-looking vision that we’re working towards, for the future of our organization and for the future of the music industry.
6 Do you think we will ever get an artist terrestrial Performance Right? If so what do you think it will take to achieve this?
Absolutely. It is only a matter of time. For anyone who truly looks at the issue, there is really no good factual or policy reason that the U.S. is the only industrialized nation without a terrestrial performance right. This situation is simply a victim of history and politics.
In the last Congress, we moved farther than ever before in the 80-year plus fight for this right. More artists and more people in the industry are recognizing the undeniable fairness of our position, and this drumbeat is only getting louder. I certainly recognize the long business relationship between the broadcasters and the music industry, and that they have historically provided benefits to one another. But it is neither fair nor appropriate that broadcasters make billions of dollars every year from the creativity, hard work and investment of others, without sharing any of that profit. If someone wants to give away their content, that’s their choice, but it shouldn’t be given away as a matter of law. Everyone with a stake in this fight should speak up and lend their voice to this fight.
7. Do you think services like Spotify have the potential to hurt SoundExchange. Please explain.
SoundExchange is excited about the growth of all digital music services as long as they appropriately compensate artists and rights holders. We’re not privy to terms of any particular deal, but SoundExchange always fights to ensure artists and rights owners get their fair share. It’s our job to ensure that content continues to have a value. That said, we think services like Spotfiy can coexist with those that rely on the statutory license that SoundExchange administers. They offer entirely different experiences and cater to different types of consumer demands. One is a more active “lean-forward” experience, requiring far more input, while the other is a more passive “lean-back” model that requires less interaction from the listener. It wouldn’t surprise me if the most passionate Spotify fan also listens to Pandora whenever they are in the car, just as the avid record collector would listen to FM radio before. There is no reason both of these models – and others – can’t easily coexist in the music ecosystem.
8 Do you see any new revenue streams for Artists from new media?
Definitely. We expect digital radio to continue to grow, so more and more artists will see increasing royalties from SoundExchange. Sirius XM, for example, is projected to grow, Pandora’s usage is exploding, other webcasters are seeing double-digit growth every month, and new digital music services are launching every week.
In addition, we are just beginning to scratch the surface on the potential for monetizing the online audience. Unlike broadcast technology (which is a “shotgun approach” to messaging), online marketing can be ultra-targeted. Digital services can match a fan with not only their demographics, but their online preferences, online usage patterns, geo-location, or even hyper-local marketing (such as texting someone as they’re passing a relevant sales location). As this convergence of data is perfected, it will allow artists to connect with fans like never before. And with that greater connection come new abilities to monetize the experience.
9 What advice would you give a new manager coming into the industry?
I would advise any new manager entering the business to be forward-thinking and keep an open mind. And most importantly – don’t miss out on any of these revenue streams. Remember, many of these models did not exist five to 10 years ago. (Just imagine how different this same discussion would have been even only five years ago.) If you think you know everything, and every possible stream of revenue, you almost certainly don’t. We still find managers who think they don’t need to sign up their artists with SoundExchange because they’ve already signed them up with BMI, ASCAP, or SESAC. So many people in this industry don’t know what they don’t know.
The successful artist of tomorrow will be drawing significant revenue from 10-15 (or more) different sources, as opposed to two to three primary streams under the traditional model. So be ready to work all the angles for these different sources, including maximizing your online presence and social networking strategy, and recognizing that it is important to extract value from every stream possible. And make sure you have someone on your team who really knows new media, and how to exploit it to the artists’ maximum advantage.