Sitting in a navy blue blazer in front of a corner-office wall covered in academic accolades, Michael J. Huppe looks the part of a staid Washington executive. But his signed poster of singer Steve Forbert offers the first hint that there might be something more to this corporate president.
Then his cell phone rings: She’s a brick house/ She’s mighty, mighty, just lettin’ it all hang out.
A Harvard Law graduate, trombone player and classic rock enthusiast, Huppe sits at the nexus of the digital era and the music industry. His District-based nonprofit, SoundExchange, collects music royalties from streaming services, such as Pandora, SiriusXM Radio and Music Choice, and distributes them to artists and record labels.
For the beleaguered music industry, that’s a fast-expanding stream of revenue. SoundExchange distributed $20 million in royalties for 2005. Last year, that number climbed to $292 million.
Meanwhile, CD sales have plummeted in the past decade. Once an industry mainstay, Nielsen Soundscan reported 330.6 million albums were sold in 2011, about a third of them in a digital format. In 2000, 785.1 million albums were sold, almost exclusively on discs.
Still, Huppe contends there are pockets of growth and that SoundExchange facilitates one of them.
“There are lots of different streams of revenue, it’s not just about focusing on the sales of LPs or CDs,” he said. “You need to be mindful about monetizing all of them. And if you do that and you’re clever about it, you’re not necessarily going to make less money.”
Huppe has had a front-row seat at some of the industry’s most turbulent moments. He joined the Recording Industry Association of America as a lawyer and policy adviser just one month after it filed a lawsuit against file sharing service Napster. That legal action shaped his industry view.
“How can it not, really? The industry exists in that medium now more than anywhere else,” he said. “I view our No. 1 mission right now is to work on behalf of the whole industry protecting [the value of] content for the long term.”
SoundExchange was created by the music industry in 1995 as a division within RIAA after Congress gave copyright protection for the public performance of digital music recordings. It spun off as its own entity in 2003.
For many of its early years, the nonprofit collected little or no money. The digital streaming business was fairly nascent at the time, and only began to take off as AOL and Yahoo grew more popular with the average consumer.
Today, about 1,400 streaming music services in the United States send SoundExchange a list of recordings they’ve played and royalty payments each month. That translates to about 16,000 checks sent to artists and rights owners each quarter.
“Lady Gaga and Katy Perry get decent checks from us,” Huppe said. “But you know what’s even more rewarding? It’s the working class artists who we track down.”
SoundExchange has found and delivered royalties to a rabbi who performs comedy, cash-strapped indie bands and little-known children’s artists, among others. Of the 60,000 payments it made last year, Huppe said about 90 percent were worth less than $5,000.
But the nonprofit has tens of millions of dollars sitting in its coffers waiting to be distributed, Huppe said. Many small artists aren’t familiar with the group, and as one might expect, are skeptical when an organization declares it has their unclaimed money.
But as much as SoundExchange provides a wallet-friendly service to musicians, it’s also a mouthpiece and advocate for the industry. Each time a consumer downloads a radio application on a smartphone or computer, that voice becomes more significant.
The nonprofit negotiates with digital music providers about the rates they pay each time a subscriber listens to a song. When the matter can’t be resolved in a boardroom, and it often can’t, SoundExchange appears before judges at the Library of Congress.
“We want Webcasting to thrive, we want satellite radio to flourish, but we also want to make sure the people we represent get their fair share of that,” Huppe said.
And the share is more imporant to them than ever.
“I teach a class at Georgetown law school on music law and you sort of have to caveat everything with ‘Well this is how it’s traditionally done,’ or ‘This is the classic business model but it’s all changing,” he said. “And five years from now it will be different.”