The rise of streamed video has seen the
market for licensing streamed music boom in the last few years, with not only
consumers using video as a medium to listen to tracks but video creators also
extensively using music as part of their own productions. Today, a startup that
has built a platform to capitalise on the latter of those two uses is expanding
its business.
Epidemic Sound,
a startup out of Sweden that lets video producers — creators for social media
platforms, advertising folks, film producers and more — search for music and
then license it to use as soundtracks on their videos, has raised $20 million
in funding at what we understand is a $370 million valuation.
Its music licensing customers include people broadcasting on a lot of
popular social platforms, from YouTubers and creators on Instagram, TikTok and
the rest, to big agencies, and popular premium streaming video destinations
like Netflix.
On the musician side, however, this is not the place to find a Taylor
Swift track (not yet, at least): it’s a lot of mostly anonymous names who are
professional jobbing musicians who are either doing this for supplementary
income until they do hit the big time, or as an end in itself, with the biggest
creators making “tens of thousands of dollars per month” on Epidemic, said
Oscar Hoglund, Epidemic’s co-founder and CEO.
(Epidemic itself has been growing revenues 100% year-over-year, Hoglund
told me.)
Investors in this round include Korean firm DS Asset Management and
Skandinaviska Enskilda Banken AB (SEB), a Swedish financial group that is
providing debt financing. Other investors in Epidemic include Creandum, EQT
Mid-Market and Atwater Capital. (Creandum, the Swedish VC firm that recently closed
a new fund, is a notable investor in the Swedish music tech world,
with its portfolio also
including Spotify, Soundtrack Your Brand, which used to be called Spotify for
Business, and headphone maker Jays.)
DS Asset Management’s investment is strategic here: Epidemic plans to
use the funding to move into Asia specifically by setting up shop in Korea,
which Hoglund (who co-founded the startup with Peer Åström, David Stenmarck,
Hjalmar Winbladh and Jan Zachrisson) notes is something of a lynchpin for video
creation in the region, fuelled by the huge popularity for K-Pop and other
trends.
“South Korea is the cultural hotspot right now for the region,” he said
in an interview. “It’s a net exporter for content. Music is consumed and played
there, but licensing to creators there means it will travel elsewhere in the
region, too.”
The “music wars” that marked the growth of digital music — where tracks
were used, shared and downloaded across various platforms with little thought
or ability of paying royalties or licensing fees — are becoming increasingly
rare, with a number of technologies and businesses (such as another Swedish
entity, Kobalt)
emerging that have been built to help track usage and to collect money for
that, and platforms themselves increasingly reluctant to face labels and other
rights holders both in the court of law,
and the court of public
opinion.
Epidemic has arisen as one of the benefactors of that wave by making it
easier for creators to find the legal content that they need. Those who are in
need of a particular kind of music for their soundtracks go to Epidemic’s
search engine and select what they want to use by genre, mood, energy level and
beats per minute (for faster or slower-paced tunes). You can listen to each
item and then quickly pick out what you want to use and download it. Those who
use the platform regularly will in turn get more accurate results attuned to
their general tastes, not unlike how many music-streaming platforms learn your
tastes.
But this isn’t a massive, scale-wins-all marketplace, Hoglund points
out. While any and all creators are welcome to join and use the music (payments
for them are in two tiers, depending on whether you are a creator or
a professional,
and how much you stream the music) — and there are now millions of them using
Epidemic — on the content side, Epidemic intentionally curates the mix of music
and number of tracks so that the quality remains consistent, and its algorithm
doesn’t get too overwhelmed and stays accurate in what it provides in search
results.
The music creatives, meanwhile, receive an upfront payment for each
track Epidemic buys, with payment varying depending on the track. Subsequent to
that, it splits the revenue from music streaming platforms where the music
might later alongside its use in the video tracks (Spotify, Apple, Deezer,
etc.) 50/50 with musicians.
“The way we see it and our mission is that we are looking for create
success all music, both for those who make it and have a need for it,” said
Hoglund. “We’re not a marketplace in the sense that YouTube is one, where
anyone can upload and consume something. We’re more like Netflix, where we have
a more curated and selective approach.” This means that the number of artists
on Epidemic numbers in the thousands, he said, “not the hundreds of thousands.”
The company has a lot of competition in the market, from the likes of
other companies that have made a business out of providing soundtrack music,
such as Muzak, through to platforms providing music themselves (for example
YouTube), and potentially music streaming platforms that you could imagine
would want to make a move into an area like this as another way to help music
makers monetise their work. I asked about whether Epidemic had ever been
approached by Spotify, for example, Hoglund told me with a short laugh that he
would decline to answer but that this wasn’t something that was being pursued
or even considered by Epidemic.
One of the reasons is because, by being platform-agnostic, it has the
option of working with everyone with no strings attached. He said that
currently Epidemic’s music is played for 250 million hours/month on YouTube on
average, making it the most popular platform, with numbers two and three
Instagram (owned by Facebook) and Facebook itself, with a growing amount of
traction also now on TikTok. While premium streaming customers will be less
prolific users of Epidemic, they bring in much larger revenues per user
typically.
Prior to this round, 10 year-old Epidemic Sound had
only disclosed about $6 million in funding, at about a $45 million valuation,
according to Pitchbook data.
Hoglund said that there was another “small round” in addition to that (which
might have been the €40 million it raised last year reportedly
at a €100 million valuation), making this new round and valuation a mark of
what investors expect of this company and its tech.
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