SoundExchange Releases 'Music Data Exchange (MDX)' - Here's Everything You Need to Know

SoundExchange, a non-profit royalty collection agency subject to federal disclosure laws, has refused to disclose critical financial information from 2018 to Digital Music News.

In 2017, SoundExchange CEO Michael Huppe collected compensation of nearly $1.4 million, a 27% year-over-year increase of roughly $300,000.  That ‘non-profit’ payout drew serious criticism, though a ‘black box’ unmatched holding balance of nearly $300 million also raised eyebrows.

So what are the figures for 2018?

Unfortunately, we’ve been stonewalled by numerous SoundExchange executives on that question.

Despite repeated attempts dating back to January of this year, SoundExchange has refused to disclose critical financial information from 2018.  That includes important information related to top executive salaries, as well as unmatched ‘black box’ royalty holding balances now believed to be in excess of $300 million.

As previously reported, SoundExchange’s unpaid holding balance sat at a massive $527 million by the end of 2017.  Of that, $294 million remained unpaid due to insufficient data, missing paperwork, and other matching problems.

The classic ‘black box’ pile is part of a multi-billion dollar issue plaguing the music industry worldwide.  In fact, the black box issue is widely believed to be fueling a highly-profitable shadow economy — at the expense of unpaid artists and rights owners.

SoundExchange’s ‘pile’ only covers US-based non-interactive streaming royalties, not other licenses like mechanicals, performances, or other license funds that aren’t properly matched and paid to artists.  But SoundExchange is widely expected to assume responsibilities for streaming mechanical collections for the Music Modernization Act’s Mechanical Licensing Collective, or MLC, despite the agency’s recurring payout problems.

Attempts to receive information for 2018 were repeatedly ignored or rebuffed by SoundExchange CEO Michael Huppe, Chief Communications Officer Helaine Klasky, and John Vlautin of outsourced PR firm Spinlab Communications.

In total, more than one dozen attempts were made across email and LinkedIn.

Both Huppe and Klasky ignored repeated requests, while Vlautin said he was ‘flummoxed by the aggressive tone’ used by DMN in attempting to receive the information.  Vlautin never supplied anything substantive despite claiming conversations with numerous SoundExchange employees.

Klasky eventually responded by offering SoundExchange’s 2017 IRS Form 990, which we’d previously obtained from the IRS and earlier sources.

SoundExchange did, however, publish a selective disclosure of 2018 data.

That includes a year-2018 payout of $952.8 million in non-interactive radio royalties to artists and labels, a 46.1 percent increase over year-2017 payouts.  In 2017, SoundExchange’s payouts suffered a dramatic drop, thanks to a substantial pullout from streaming radio giant Pandora.

It was in that year that Huppe received a massive raise.

Earlier, Pandora shifted out of SoundExchange in favor of direct licensing deals with various record labels.  The move was partly a response to heavy SoundExchange administration fees and matching issues, according to a Pandora investor speaking to Digital Music News.

Statutory licensing inflexibility was another cited reason, with direct deals allowing Pandora to offer music with fewer usage restrictions.

In fiscal (and calendar) year 2017, several SoundExchange executives received salaries exceeding $500,000.

That includes Chief Operating Officer Jonathan Bender ($545,205), Chief External Affairs Officer Richard Conlon ($544,798), Senior VP and General Counsel Charles Rushing ($512,254), and Chief Technology Officer Scott Day ($502,754).

At least four other executives received salaries in the $300,000 and $400,000 range, including Chief Financial Officer Anjula Singh ($475,704), SVP Strategic Initiatives Mark Eisenberg ($467,899), VP Global Public Policy Julia Massimino ($345,596), and VP Industry Relations Barry Levine ($329,589).

In total, the top 10 executives alone at SoundExchange received more than $5.4 million, with all receiving substantial non-taxable sums.

Huppe received $1,397,404, per the IRS disclosures.

Helaine Klasky, who was recently named to the top PR post, reportedly receives compensation north of $350,000, though this number has not been verified by DMN.  It’s still unclear what SoundExchange pays outside PR firms like Spinlab.

SoundExchange itself enjoys sweeping tax-exemption privileges.  But according to the Internal Revenue Service, non-profit entities like SoundExchange are required by federal law to file their 2018 financials by May 15th, though SoundExchange may seek extensions to that date.