SoundExchange issues record payouts to artists, record labels

November 25, 2012

Since it was established in 2003, SoundExchange has been riding a fast-growing wave of people listening to streams of digital music.

The District-based nonprofit serves as a middle man between recording artists and digital radio stations such as Pandora, collecting licensing fees from the radio services and then distributing that money to artists.

As the popularity of these outlets has increased, so, too, have the payouts that SoundExchange has made to musicians. In the third quarter, the organization distributed a record $122.5 million.

“Usage is up. More people are listening to more digital music services for longer periods,” said Michael Huppe, president of SoundExchange.

And as that shift happens, the organization has moved to accommodate it by bringing in a new chief technology officer and revamping the platform it uses for tracking data and processing payments.

“Some of the tweaks we’ve done internally have certainly helped with our payouts,” Huppe said.

These changes have put SoundExchange on track to issue more than $400 million in payments this year, a massive leap from the $36 million it paid out five years ago.

While it has had a record quarter and is on pace for a record year of distributions, a recent bill introduced on Capitol Hill threatens to take a bite out of SoundExchange’s payouts. The Internet Radio Fairness Act, a proposal scheduled to come up Wednesday at a House Judiciary subcommittee hearing, would cut the royalties that Pandora and other Web radio services have to pay to artists. Pandora has been lobbying for the bill because it would bring its payment rates in line with the lower ones paid by satellite and cable music outlets.

SoundExchange, as well as a coalition of prominent recording artists, oppose the bill because it would mean that musicians are eligible for fewer royalty dollars.

“Let me be clear: We love Pandora; we generally consider them business partners,” Huppe said. But, when it comes to this bill, “We just happen to have a healthy disagreement with them.”

As the debate over the Internet Radio Fairness Act plays out, SoundExchange is pursuing new opportunities to increase payouts to the 70,000 artists and 20,000 copyright owners that have registered with the organization.

It is in the process of re-litigating the royalty rate for Sirius XM, a process that is adjudicated by a three-judge panel at the Library of Congress. It hopes the panel’s decision will lead to higher royalty rates for the satellite radio outlet.

SoundExchange also said it plans to focus on building its ties with similar organizations around the world. By establishing better cooperation with these groups, it aims to pull in more dollars for American artists who are missing out on royalty payments from abroad.

The organization also will continue its efforts to make its work more widely known in the music community. As of August, the company had a list of more than 50,000 artists and record labels for whom it had unclaimed royalties. Some of those payouts are worth as little as $10, while others total more than $100,000.

Sarah Halzack is a reporter and Web editor for Capital Business. She covers the local job market and the business of talent and hiring. She occasionally writes for other sections at the Post, most frequently in the form of dance reviews, dance features, book reviews and obituaries.
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