Michael Huppy, CEO of Sound Exchange, discusses how the rise of AI-generated music—comprising over 80% of 75,000 daily new recordings—poses challenges like streaming fraud but is currently excluded from royalties under U.S. copyright law to protect human creators. Despite these risks, Huppy emphasizes that the music industry is proactively working with AI companies to responsibly integrate AI technology, viewing it as a potential opportunity for growth rather than a disruptive threat.
The Bloomberg Businessweek podcast features a discussion with Michael Huppy, President and CEO of Sound Exchange, a nonprofit organization that collects and distributes digital performance royalties to music creators. Sound Exchange acts as an intermediary between streaming radio services like Pandora and SiriusXM and the artists and record labels, ensuring that royalties from digital plays are efficiently paid out. Over the past 15-20 years, the organization has seen significant growth, now distributing over a billion dollars annually, reflecting the rise of streaming as a dominant mode of music consumption.
Huppy explains that royalties vary depending on the platform and type of service, with payments often amounting to fractions of a penny per stream but accumulating to substantial sums over time. Sound Exchange handles payments for over 800,000 accounts, making it a centralized and efficient system for distributing revenue generated by digital music performances. The organization plays a crucial role in ensuring artists and labels receive their fair share from the growing digital music economy.
The conversation then shifts to the impact of AI on the music industry. Huppy acknowledges AI’s potential to create new revenue streams and products but emphasizes the need for safeguards to protect human creators. A significant concern is the rapid influx of AI-generated music uploads—estimated at 75,000 new recordings daily, with over 80% being AI-created. This surge raises issues around streaming fraud, where AI tracks are used with bots to siphon royalties away from genuine artists, a problem that the industry is actively working to combat.
Huppy clarifies that under current U.S. copyright law, fully AI-generated music is not eligible for royalty payments through Sound Exchange because it lacks copyright protection. This legal stance aims to protect human creativity and ensure that AI-generated content does not unfairly exploit the work of human artists. Despite this, AI music quality has improved significantly, with some AI-generated songs even including vocals and sounding impressively close to human-made music, as noted in studies like one conducted by the New York Times.
Ultimately, Huppy stresses that while AI presents risks, it also offers opportunities for growth in the music industry. Unlike the disruptive Napster era, today’s recording industry is proactively collaborating with AI companies, licensing content, and developing models to integrate AI responsibly. He draws parallels to past technological advances in music, such as autotune, highlighting that technology has long been part of music evolution, and with proper management, AI can be a positive force for the industry.