Michael Huppe of SoundExchange: ‘All players in the industry, creators or platforms, have to rethink how they work together’

Here SoundExchange CEO Michael Huppe weighs in on what a post-pandemic music industry is shaping up to look like, and why creators and platforms alike will need to rethink what their relationship looks like moving forward.

Guest post by Emmanuel Legrand of the Legrand Network

Michael Huppe, CEO of US neighbouring rights society SoundExchange, has warned the music industry to prepare for a world that “will not be the same after the pandemic.”

  In his keynote address at the virtual Canadian Music Week conference, Huppe said that in the past 15 months, the industry has been “navigating the crisis that is the pandemic,” but there are now “glimpses of what life will look like past the pandemic.”

  “New artists, new business models, new styles are already emerging,” he explained. “The transformation to a fully digital music ecosystem, already underway in recent years, has accelerated over the past 15 months. That will continue and by 2025, the US music industry is projected to reach and exceed the historic height of the CD era.”

An industry reinventing itself

  For Huppe, the growth will come from “an industry that is constantly reinventing itself, seemingly week to week, from live streaming on Twitch to virtual concerts in the Metaverse on Fortnite to real-time, multi-continent collaboration over Splice, or even watching fitness instructors become the newest music influencers, the way we discover and experience music is transforming before our eyes.”

  He also believes that as new technologies “are shattering barriers to entry” for creators to record, produce, and play their music, this will be driving “a surge in the growth of independent creators in all aspects of the business.”

  He added: “These innovations and growth are exciting, but they also add to the complexity of an industry that can be difficult for creators to navigate.”

Make order out of chaos

  He also noted that change has to happen, not least in the way the industry operates. “To make order out of chaos, we have to confront the reality that the industry is plagued by fractured and outdated systems and incomplete information, all of which hinders the accurate and efficient payment to creators,” said Huppe. “Think about it. In what other industry would it be acceptable that hundreds of millions of dollars is lost or squandered because the money doesn’t make it to the rightful recipient? That has to change.”

  Huppe offered a few suggestions that would improve the functioning of the industry: 

  1: Making the business of music “easier and more simple to navigate” by ensuring that there are systems in place that “remove friction,” by making it easy to identify those who are due royalties, directing payments in an accurate and efficient manner, and making transparency a core principle so that everyone can trust the process. “As the industry grows, both in the number of players, volume of recordings, and scope of revenues, the need to simplify the business will be even more critical,” said Huppe. 

  2: Tackling fairness, equity and social justice. The industry must also be about “fundamental fairness and respect for the hundreds of thousands of people who create the music that we listen to and love.” This is the case when it comes to achieving social justice by taking “a hard look at the music industry and ensure that we are part of the solution.” For Huppe, it is also about ensuring that “creators are respected and paid, fully and fairly, for their work, which contributes so much to our culture.”

  3: Developing data and tools to empower the music community. This will allow to “more effectively manage and monetise their space in the value chain.” He added: “We also have to anticipate an explosion of new creators, artists and songwriters, studio producers, labels and publishers, who, due to tech innovations, can easily produce and distribute their work.”

  4: Resolving long-standing inequities over remuneration for creators. For Huppe, this includes making sure that in the United States AM/FM radio stations start paying for the use of sound recordings.

Stuck in a stalemate

  “For decades, the broadcast radio industry has raked in hundreds of billions of dollars in advertising by playing music it doesn’t pay for,” said Huppe. “It’s not fair.” He added: “As an industry, we cannot remain stuck in a stalemate over fair pay for artists because the long-term health of music is at stake. We need to find a way to break through this log jam.”

  He recognises that increasingly broadcasters are “shying away” from the label radio as they face their own digital transition, which is leading them to new forms of content and new distribution platforms for listeners like streaming apps, podcasts, and other on- demand and live digital audio and more. 

  “The broadcast industry, just as much as the creative community, must adapt to the new social experience of music,” analysed Huppe. “Notwithstanding our differences, we should not shy away from opportunities where we can achieve a win-win outcome that ensures a bright future for both creators and broadcasters. We are, after all, all in this together.”

Recognising national treatment

  Huppe also addressed the issue of “fairness and respect” for US artists outside of the US. He noted that many countries, like the UK, “deny creators royalties solely based on where they born.” The answer, according to Huppe, is to end this “outrageously unfair” by recognising what is called national treatment for US artists, so that they can be paid when their recordings are played.

  In recent months, SoundExchange has taken the lead in a campaign to obtain national treatment for US artists. Countries, mostly in the European Union, do not recognise neighbouring rights for American artists because the US has not ratified the Convention of Rome and does not have performance royalties for sound recordings for FM and AM radio. 

  “All countries should provide national treatment, which means paying all creators fairly for their work and not favoring one group over another,” said Huppe.

Doubling the size of SoundExchange’s community

  Within that framework, SoundExchange, which collected over $1 billion in 2020, has the ambition to be a key player in the renewed industry, said Huppe, who pledge to “build the systems and services to scale that growth.” 

   Looking at what the future looks like for SoundExchange, Huppe said he is expecting the non-profit society to service nearly double the size of its current community, from nearly 250,000 creators today to approximately 400,000 by 2025. 

  “That will have a huge impact on SoundExchange and our tech assets,” said Huppe.

Strategic efforts

  He added that SoundExchange will embark on four strategic efforts:

  > Streamlining the identification of royalty payments to ensure that all participants in music are paid, which includes upgrading music data exchange application, which facilitates the exchange of sound recording and publishing ownership data.

  > Expanding the use of music identifiers to ensure all creators are paid accurately and efficiently. “We are one of the world leaders in ISRCs, which confirms specific recordings, the critical first step, in almost all usage reporting,” said Huppe. “They are an important tool to help lessen some of the chaos”.

  > Developing data analytics tools so all music industry players can better understand their work’s usage, all with “an eye towards more effectiveness and transparency.”

  > Enhancing systems to make it easier for all of those who play music to report and pay digital royalties to creators. For Huppe, that includes “building out new services for publishers and DSPs to simplify data collection and payments.”

Leveraging data to build a better industry

  “As an industry, we are far from fully leveraging the data to build a better music industry that is more simple, efficient, and fair,” said Huppe. He invited the industry to confront these challenges of complexity and scale, and “bring some order to what we all know can be a chaotic business.”

  He concluded: “We are in a pivotal time. These next five years will offer equal doses of opportunity and challenge and those opportunities and challenges, demand that all the players in the industry, whether creators or platforms, rethink how they work together. In the next five years, the music industry will be bigger than ever, both in participants and financial scope.”

  He continued: “If there is a lesson to be learned from the pandemic, it is that our world can shift incredibly quickly. We know the challenges we collectively face as an industry. The only thing that can stop us from overcoming them is outdated thinking. In order to succeed, we, those who are the stewards of the business side of music, have to be just as creative in finding solutions as the remarkable artists who create the music we all love.”