‘Non-Profit’ SoundExchange Refuses to Disclose Top Executive Salaries, ‘Black Box’ Holding Balances from 2018

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.

17 Responses

  1. Word

    Shameful that you let a misinformed investor-type refer to the artist’s share of Pandora money as “administrative fees” — they decidedly are not, totaling roughly half the money.

    It is a stain on DMN that it would confuse direct licensing around paying artists their half of the fees with administrative fees.

    Disgusting, really. It’s a scam perpetrated on performing artists — direct license and you can save half by not paying performing artists their half. Instead of criticizing those responsible for direct licensing around performing artists, you falsely blame SX.

    SX paying artists directly their performance money without recoup or work for hire issues, almost a billion a year, is an impressive wealth transfer. Real SX admin fees — not the fake investor claim you cite — are under five percent.

    • Paul Resnikoff

      This is a pretty serious investor, who had been unsuccessful in changing the massive fees and unmatched holding balances at SoundExchange. Not sure if he was rallying for the change, but those issues seemed to be a motivator in the switch. Pandora as you know was one of the largest sources of non-interactive royalties processed by SE.

  2. sammy

    this yr mr bandier takes home $100 million+ but you grind huppe & co over market salaries 100x-300x smaller? whats eating you? pls hassle peeps not efficiently divvying a billion a yr to musicians

    • Loser

      Paul tried for years to get a job at SX, but couldn’t get hired. He’s decided to be a baby about it ever since.

      • Paul Resnikoff

        I did?

        Guess I must have been really drunk when I filled out that application 😉

        • oh paul

          when you interviewed with SoundExchange were you more or less drunk than when you wrote this garbage. You’re headline says “SoundExchange refuses to disclose executive salaries” but you mention in the very last sentence in the piece that aren’t due until May 15th.

          Please explain why SoundExchange should go out of their way to release their financials early to a clown like you?

          Seriously, pull back a little champ you’re becoming the laughing stock of this industry.

          • Paul Resnikoff

            Now I’m curious. When exactly did this ‘interview’ occur?

  3. Chris

    It would be a shame if they were selected to be the Licensing Collective with shady business like this.

  4. Anonymous

    So if they’re paying out $952.8 million, and they take a 5% admin fee, that gives them $47.64 million in revenue. $5.4M of that goes to executive salaries. Their financial disclosures aren’t due until May 15. The size of the black box is significant, but not unusual compared to the volume of what they are paying out. I’m not saying there isn’t a problem, but I’m not sure I follow what that problem is yet.

    On the other hand, what sort of experience do they have administering US publishing royalties? If they intend to work for the MLC, that strikes me as being relevant. It’s not quite the same as administering sound recording royalties.

  5. Tihsllub

    Why 5%?

    Why not 2.5% so artists get more

    Think about the money they’re not showing you.

    Looks like a scam to me

    • Jacko

      So… why can’t they match the funds? Just look at the Annual Interest on $294MM. 2.5%-3% is the easy low-risk return now on a CD these days. So you get $7-8MM free interest cash a YEAR for doing a bad job.
      Where is that in the filing?

      • Ritch Esra

        I too have to question why they can’t match the funds. Funds that are in the hundreds of millions of dollars. That’s STAGGERING – given their financial resources. If their share is 5% ($47.64M) they should be utilizing more of those financial resources to find those people. I’m in the information business in the Music Industry and if I, a solo 3 person company can find 95% of people – who are so-called missing or can’t be found, with the resources available today then so can Soundexchange. Also, where does all of the interest from that money go to?

  6. Johnny

    Pretty ridiculous to think that everybody in the music business is now making money except the people who make the music! And the musicians who had a chance to build their own Platform and eliminate all these middle men continue to give away their content and get day jobs in order to pay their bills! Sad business!

  7. Cedric

    The point is rendered moot once you put your metadata on (or build your business on top of) a Blockchain. Being transparent and open means anyone can verify balances on third party platforms, such as block explorers.
    Don’t trust humans with their financial reporting duty? Good! You now have the option to cuts these little monkeys out the equation all together.

    If you look at PeerTracks’ relationship to copyright holder’s money, it is non-existent. PeerTracks never handles any funds! A stream is reported to the blockchain and IT handles the funds. Direct, instant and at no cost.
    Zero transaction fees.
    Zero middlemen.
    Zero friction!

  8. Cedric

    They can now plug their own platforms to SOUNDAC (dot io) and actually get paid for streams.
    These coming years are really going to shift the tides for musicians!