How AI-generated Tracks are Exploiting Streaming Platforms’ Royalty Systems

Summary

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Podcast Summary: How AI-generated Tracks are Exploiting Streaming Platforms’ Royalty Systems

Podcast: Bloomberg Businessweek
Hosts: Carol Massar & Tim Stenovec
Guest: Michael Huppy, President & CEO of SoundExchange
Date: June 12, 2026

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Episode Overview

In this episode, Bloomberg Businessweek dives into the complex and rapidly evolving issue of AI-generated music and its effects on streaming royalties and the music industry at large. Hosts Carol Massar and Tim Stenovec speak with Michael Huppy, President & CEO of SoundExchange, a company at the forefront of royalty distribution, about the challenges, opportunities, and regulatory limbo facing AI-generated content. The conversation offers a clear-eyed look at streaming fraud, the legal status of AI compositions, the scale of the problem, and what’s being done to protect human creators in an age of digital disruption.

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Key Discussion Points & Insights

1. SoundExchange’s Role in the Music Ecosystem

[03:17–04:15]

• Michael Huppy explains SoundExchange's function as the central hub for distributing digital performance royalties from non-interactive streaming services (e.g., Pandora, SiriusXM, iHeart Online) to artists and labels.
• Notably, SoundExchange does not deal with Spotify, which is considered interactive streaming.
• The platform manages payouts related to over 800,000 music creators, regularly distributing over $1 billion in royalties each year—a dramatic increase from $25 million 15–20 years ago.

“SoundExchange is a company that represents the entire recording music industry. All artists, all record labels... We help pay out all of the royalties... to the whole record.”
— Michael Huppy [03:17]

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2. How Streaming Royalties Are Calculated

[04:42–05:22]

• Streaming royalties vary based on the platform:
  • Satellite radio uses revenue sharing models.
  • Webcasters pay fractions of a penny per stream to rights holders.
• Despite small per-play amounts, total payouts are significant, composing over 12% of U.S. recorded music revenue.

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3. The Scope and Growth of AI-generated Music

[06:07–06:28]

• Streaming platforms now see upwards of 75,000 new recordings uploaded daily, with over 80% reportedly using AI in creation.
• While some AI music reaches mainstream platforms, the problem is growing and estimated to represent 1–10% of content on certain services.

“There are services now that are reporting 75,000 uploads a day, a day of new recordings. 80% or plus of them are AI music.”
— Michael Huppy [06:12]

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4. Streaming Fraud: How AI is Exploiting Royalties

[06:32–07:11]

• Fraudsters use AI-generated tracks and bots to siphon royalties away from real artists and labels.
• Michael Huppy labels this "straight up fraud," referencing recent high-profile federal prosecutions.

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5. Legal and Ethical Challenges of AI Music

[07:40–07:51; 07:51–08:16]

• Under U.S. law, works wholly created by AI are not copyrightable.
• This means AI-generated tracks do not qualify for royalty payments through SoundExchange or similar organizations.
• The main concern is not about diminishing payouts for SoundExchange, but about protecting human creativity and ensuring AI companies don’t profit at the expense of artists whose works are used for training.

“AI-created songs... actually don't merit a payment because they're not protectable under the law. Under U.S. Law, if something is wholly AI created, it's literally not copyrightable.”
— Michael Huppy [07:40–07:51]

“Part of that business model is built on the backs of artists and labels when they scraped their content.”
— Michael Huppy [08:16]

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6. Industry Response and the Path Forward

[08:36–09:07]

• The music industry is more proactive compared to the early 2000s “Napster days.”
• Record labels and AI companies are engaged in licensing negotiations and working together to establish frameworks for the ethical use of music in AI training and release mechanisms.
• While highlighting risks, Huppy also emphasizes AI's huge potential to drive new revenue and innovation if managed responsibly.

“AI has this risk, but it also has a lot of potential to grow the industry, grow revenue. And one thing about what's happening now compared to say the Napster days... the recording industry is leaning in.”
— Michael Huppy [08:36–09:07]

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7. The Evolution of Music-Making: Tech Then and Now

[09:07–09:16]

• Hosts and guests draw comparisons to past technological shifts (e.g., using Fruity Loops, AutoTune) and emphasize the music industry’s history of adapting to new tools.
• The modern challenge is balancing opportunity with protection for human artists.

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Notable Quotes & Memorable Moments

• On the threat and opportunity of AI:
  “AI is a fascinating part of the industry coming up. It has a lot of danger but also a lot of potential.”
  — Michael Huppy [05:42]

• On fraud and exploitation:
  “There are cases where people use AI tracks, set up bots around and they siphon away payment from the pipeline that would otherwise go to real artists and real record labels.”
  — Michael Huppy [06:32]

• On industry progress since the Napster era:
  “The recording industry is leaning in. They're working with the AI companies... and they're trying to work together.”
  — Michael Huppy [08:36]

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Key Timestamps

• 03:17 — Michael Huppy explains SoundExchange’s function and scope
• 04:42 — Details on streaming royalty calculation models
• 06:12 — Discussion of the sheer volume of AI-generated music flooding platforms
• 06:32 — Fraud and the siphoning of artist royalties by AI-generated content
• 07:40–08:16 — The legal limbo: AI music is not copyrightable, why it matters
• 08:36–09:07 — Industry’s engagement and learning from the Napster era

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Summary Takeaway

Artificial intelligence is transforming how music is created, monetized, and distributed. While AI offers the potential for explosive growth and creative expansion, it also opens the door for fraud, legal loopholes, and risks undermining human artistry. The music industry, led by organizations like SoundExchange, is urgently working to strike a balance—embracing innovation while erecting guardrails to ensure creators remain at the forefront of the digital music economy.

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Transcript

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You're listening to Bloomberg Business Week with Carol Massar and Tim Stanovec on Bloomberg Radio.

[Carol Massar]

Carol, you'll recall just last week at the Bloomberg Tech Summit we sat down with Hit boy.

[Bloomberg Radio Host]

Was it one week ago today?

[Carol Massar]

It was one week ago today. Three time Grammy Award winning artist producer. He's known for shaping the sounds of Jay Z, Beyonce, Nas, Drake and more. Check out his Instagram for some fun shots from last week. Behind the scenes he was a lot of fun. The topic of our chat was all about AI and using AI to create music. He's actually game. He says that it's music the same way he was using Fruity Loops earlier in his career. It's just you got to adjust with the times. That is not in fact the AI problem with music that Michael Huppy, the President CEO of SoundExchange has identified. SoundExchange is this nonprofit. It's owned by the radio industry. It calls itself the music industry. Excuse me, calls itself the largest global neighboring rights organization in the world. It says it's collected and distributed more than $13 billion in digital performance royalties to date on behalf of more than 800,000 music creators. Michael Huppy joins us here in the Bloomberg Interactive Broker Studio. It has been quite a bit since we've talked to you. I want to get to the AI problem that you've identified before we do that though. SoundExchange, not a. Not a household name for a lot of people, even though every day they're interacting with a product that it touches. Where do you sit? Remind everybody where you sit in sort of the artists get paid when you listen to the radio or when you listen to certain radio.

[IBM Executive]

Sure.

[Michael Huppy]

First off, thanks for having me back. It was always great to be here. SoundExchange is a company that represents the entire recording music industry. All artists, all record labels. We sit between a lot of the streaming radio services, think Sirius XM, Pandora, iHeart Online.

[Carol Massar]

And not Spotify.

[Michael Huppy]

Not Spotify, but a lot of the ones that are non interactive radio. And then on the other side, you have all the labels, all the artists, and we help pay out all of the royalties basically that are created by all these services to the whole record.

[Carol Massar]

So every time somebody listens to Taylor Swift on Pandora, for example, you then handle writing the check to who exactly?

[Michael Huppy]

To Taylor Swift or her management company or whoever may be. And we also send half that money to her record label.

[Carol Massar]

Okay.

[Michael Huppy]

So it's a centralized place, makes it very efficient. You know, thousands of services, over 800,000 accounts we have. And it's one efficient centralized way to get all of that money out to the artists and labels who form the basis of these products.

[Bloomberg Radio Host]

I'm curious, are you paying out more than you were last year? Like is it growing or is there more competition on other.

[Michael Huppy]

Yeah, it's pretty. It's consistently grown. I would say 15, 20 years ago we were paying out 25 million. Now we pay north of a billion dollars a year. It's been pretty consistent growth due to a lot of reasons. Obviously streaming is up and the way people consume music, you know, it's all collapsing onto the phone. So it's been a pretty banner of 15 years.

[Bloomberg Radio Host]

What do people get paid like for an album, a song? I'm always curious. Or does it vary? Like, how is it?

[Michael Huppy]

Well, it varies and it depends on the product. Right. So satellite radio, for instance, a subscription based business, we get a percentage of revenue based on relevant revenue. But when you're talking about webcasting, for instance, typically every stream to every set of ears is A fraction of a penny and it's all set every five years. And you know, that doesn't sound like a lot of money, but as I said, over the course of a year it adds up to over a billion dollars. We are alone, you know, 12 or 12ish percent or so of the whole US recorded music revenue.

[Carol Massar]

I know it's past his bedtime, but Tom Keene, he the host of Bloomberg

[Bloomberg Radio Host]

Studios, I don't think he sleeps.

[Carol Massar]

He has, you know, he has a New England folk album out. I know 1992, searching for Ward in June. So you could ask him about the royalties.

[Michael Huppy]

He should register for SoundExchange because if he gets play on any of those platforms, we have money for him.

[Carol Massar]

I love it.

[Bloomberg Radio Host]

So where does AI fit into all of this?

[Michael Huppy]

AI is a fascinating part of the industry coming up. It's something that has a lot of danger but also a lot of potential. So I think we should all view AI as something that can make really potential revenue growth for the industry, new products for consumers, but it has to be rolled out the right way. And specifically we need to make sure that human creators are protected. There need to be guardrails so that it doesn't steamroll over the whole creative industry.

[Carol Massar]

Well, what's the problem that right now artists are facing when it comes to AI generated music?

[Michael Huppy]

I mean there's a lot of potential problems. One is when you think about the streaming world, there are services now that are reporting 75,000 uploads a day, a day of new recordings. 80% or plus of them are AI music. When you dump all of that.

[Carol Massar]

But does that make it onto Pandora? Does it make it onto SiriusXM?

[Michael Huppy]

It is making it into some of these streaming services. Maybe not at the scale that you would expect yet, but I mean there have been reports of whether it's 1 to 2 or 3%. Sometimes people estimate that it's up to 10%. There's also the ability. Streaming fraud is another big issue. There are cases where people use AI tracks, set up bots around and they siphon away payment from the pipeline that would otherwise go to real artists and real record labels. It's fraud, basically straight up fraud. There are people who are prosecuted. There's a famous case in the Southern District of New York that was prosecuted recently.

[Carol Massar]

What's a bigger issue for AI generated music? Is it the fraud or is it the uploading of AI generated music?

[Michael Huppy]

I mean, it's both. The uploading of, I mean fraud is something that I think we're tackling better as an industry. There are companies dedicated to it. Now I think if you were to talk to a lot of the artists or the labels, they want to make sure that when as AI expands that it doesn't squeeze out the human element, you know, human creativity, human input is critical.

[Bloomberg Radio Host]

But will you get a percentage of AI created songs? Like, it's like, how is that what this like, I'm just curious how you guys are jockeying.

[Michael Huppy]

Well, so, so SoundExchange AI created songs, actually this is gonna be interesting. They actually don't merit a payment because they're not protectable under the law.

[Bloomberg Radio Host]

That's what I'm saying.

[Michael Huppy]

Under US Law, if something is wholly AI created, it's literally not copyrightable. So this isn't about more money coming through SoundExchange or not. It's basically about looking to protect the creative community, protect creators, and make sure that these companies, I mean AI companies are gonna, will make trillions of dollars. And they. Part of that, part of that business model is built on the backs of artists and labels when they scraped their content.

[Carol Massar]

So. But if it's not good, nobody's going to listen to it.

[Michael Huppy]

Well, do you think AI music is good?

[Carol Massar]

I've never known to be. I don't know, I've never listened to it.

[Bloomberg Radio Host]

A few times did like a study like pick the AI generated song and I was pretty impressed at how good it was. But I mean if it, if it sounds like, does it have vocals?

[Carol Massar]

Vocals?

[Bloomberg Radio Host]

I think it did have vocals, yeah.

[Michael Huppy]

AI music has come a long way. I would say when it first started out, you could pretty much tell. But the stuff that AI is putting out now is pretty impressive. But it's great if they do that. I want to be clear, AI has this risk, but it also has a lot of potential to grow the industry, grow revenue. And one thing about what's happening now compared to say the Napster days. You guys remember the Napster days? What's very different now is the recording industry is leaning in. They're working with the AI companies. AI companies are licensing and they're trying to work together to develop these models.

[Bloomberg Radio Host]

I mean computers technology has been part of music for a long time.

[Michael Huppy]

Yeah.

[Bloomberg Radio Host]

What do they call those things? And people can't sing and they auto tune. Auto.

[Michael Huppy]

There you go.

[Bloomberg Radio Host]

Michael Huppy, thank you so much. President CEO of SoundExchange.

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