Epidemic Sound is a production music company headquartered in Stockholm.
The firm was co-founded in 2009 by its CEO, and ex-professional songwriter, Oscar Höglund.
Epidemic Sound’s early investors included Creandum, who also invested in Spotify.
In July 2019, Epidemic Sound raised $20 million at a $370 million valuation. Investors in that $20 million round included DS Asset Management from Korea and Skandinaviska Enskilda Banken AB (SEB), a Swedish financial group.
In addition to Creandum, Epidemic Sound’s financial backers over the years have included EQT – which bought a 40% stake in the firm 2017 – and Atwater Capital.
Business model and Spotify controversy
Epidemic Sound has drawn criticism from some songwriter groups for its business model.
Epidemic Sound’s business model has two tiers: (i) licensing its library of rights-cleared production music to broadcasters, airlines and hotels; and (ii) generating royalties from this music on streaming services such as Spotify and YouTube, as well as licensing it to platforms like Netflix and Twitch.
With either option, Epidemic fully acquires the rights to its composers’ music (both masters and publishing) via one-off upfront payments.
However, the company still pays through 50% of streaming revenue to the composers’ whose music it’s acquired.
In the FAQs of Epidemic Sound’s website, it tells musicians: “[None] of our Music Creators can be affiliated with any PROs/NROs or collecting societies (ASCAP, BMI, SESAC, SoundExchange, STIM, SAMI, etc.), while working for Epidemic.”
These artists had no online or social media presence, but were continually selected for inclusion by Spotify on first-party mood-based playlists ahead of ‘real’ artists, racking up millions of streams as a result.
Said Höglund: “It is correct that some of the composers on your list work with Epidemic Sound. The music that they produce was not commissioned by Spotify and these are certainly not ‘fake artists’ – that term is offensive.
“These are professional composers, who earn a living by creating quality music. As is often the case with songwriters and indeed mainstream pop artists, some composers choose to work under their real names whilst some prefer to use pseudonyms.”
A yearly financial report of Epidemic Sound’s parent, Epidemic Sound Holding AB, posted during Sweden 2020, revealed the firm’s financial results for the calendar year of 2019.
The filing, obtained by Music Business Worldwide, showed that Epidemic Sound posted net revenues of 375.3m SEK in the 2019 calendar year, equivalent to approximately $42m.
Yet the firm saw annual operating costs more than double year-on-year, hitting 605.0m SEK ($68m).
Those operating costs included 263.3m SEK ($29.6m) spent on salaries and other staff expenses.Music Business Worldwide