Swedish Startup Space

Epidemic Sound’s focuses on expansion to USA as growth skyrockets

Written by on October 26, 2015

The Swedish music company has built a platform with music aimed at production companies and sites. Now they entering the US market.

The music industry is a complex industry. Artists, composers and record companies all want their share of the royalty cake – but it is often unclear who actually owns the rights to different songs. Especially for production companies and PR agencies who wish to use music in their productions, according to Oscar Höglund, CEO and co-founder of Epidemic Sound.

He used to work at production company Zodiak, behind movies such as Wallander and Millennium.

“It is hysterically complex. When I worked in the production business, music was always the major question mark. In 99 percent of the cases we used the same music from some American catalogue”, he says.

But his hope is that Epidemic Sound will change that. By acquiring and producing music and sound clips which are then distributed through their digital platform, they are delivering music to thousands of sites, production companies and stores around the world today. At present there are 30,000 songs in 180 different genres.

“We work with all the major Swedish media companies as well as American giants like Discovery for example”, he says and states that they have had 100.000 composers apply to release music through their platform.

“Most of them are non-established artists, but also established who have a hard time making ends meet in the traditional music world will start to release through us. We will most certainly be a stepladder to stardom for artists in the future.”

And it seems like there has been a demand for their setup. According to Oscar Höglund, the company went from 3.000 paying customers at the beginning of 2014, to have some 100.000 customers at the end of 2015. In other words, it’s user base has grown by 3.000 percent the past two years.

The increase has in turn had effect on the company’s turnover, which last year ended at $2.7 million. The company did, however, still not turn a profit.

“Turnover is skyrocketing, just like the user base. But there is a huge gap between the highest and lowest paying customers. Some pay tens of thousands of dollars per month, while some Youtubers only pay 10 dollar”, he says.

Most of the company revenue at this stage comes from a subscription model, which is reminiscent Spotify’s:

Pay a monthly fee and consume as much music as you wish, regardless of how many people listen to the end production.

The other revenue part is based on customers being able to extract the seconds they want to use from a sound clip and then only pay for the number of seconds they have used. 56 seconds equals 56 euro.

“We will not join the old music industry. We order and buy all our music and pay every creator in advance and through royalty based on downloads”, he says.

Apart from Oscar Höglund, a number of well known names are backing the company. Former TV4 profile Jan Zachrisson, Hjalmar Winbladh from venture capital firm EQT and music producers Peer Åström with David Stenmarck are all co-founders and investors in the company.

Last year, the company added further to their funds. Venture capital firm Creandum entered the company with an equivalent of $5 million, which was used to add to the musical library, improve the platform and to expand the business.

“When we noticed how much traction we got in the US, we wanted to take the next step. Creandum felt like the right choice. We have recently started our USA venture and have three people there. We are also looking into opening a US office. I fly over there every month”, Oscar Höglund says.

“It is also working out quite well being a Swede in USA, working with music. After Spotify, Soundcloud and Max Martin’s success, rumor has spread.”

After raising capital, the company started selling music to stores, which basically means that they are a direct competitor to Spotify’s company-aimed sales, which at present is made through the company Soundtrack Your Brand.

“It is an area which has exploded. An already very famous song which a customer hears at a store will never be tied to a specific brand. Our music, however, can create a strong bond since it is not connected to anything else. But I would not call it competing. Spotify does not own the music.”

Are a new sort of record label, considering that you are both producing and distributing?

“In a way we are a bit like a record label. We finance the recordings, we have an A&R business (talent agency) and we are also a publisher. We make sure that proceed from the music is received by the producer. One can say that we have eliminated several middle hands and bundled them.”

What happens if you produce a hit?

“It is obviously something we will have to think about. We really do not have incentive to not release it. The most important for all of us is that the model works well. We already have a lot of people who sit and listen to the music on our platform.”

But would you say that you are a competitor to the record companies today?

“No, not really. We are still doing different things. We know the record companies well and they know us. They create artists, develop them and push them. They run a completely different kind of business.”

Correction: In a previous version of the article we misquoted Oscar Höglund as saying that his company are working with all the major Swedish labels. This was a mistranslation from the Swedish version of the article on Breakit.se and has been corrected to “all the major Swedish media companies”. We apologize for the mistake.

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