Epidemic Sound raises $20M at a $370M valuation for its soundtrack music discovery and licensing platform

in #epidemic5 years ago

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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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