Having turned over $27m in 2018, Epidemic Sound is roasted by songwriter group for buy-out deals

Epidemic Sound is a name that will be well-known to MBW readers: the Swedish production music company is behind many of the ‘fake artists’ on Spotify whose presence tends to agitate record labels.

Those ‘fake artists’ are, of course, actually composers signed to Epidemic Sound, whose work is uploaded to Spotify under pseudonymous monikers. Nothing wrong with that, and Epidemic has previously explained that these clients get handed a 50/50 split of royalty payouts from Spotify (and other streaming services) when their tracks are played on the platform.

The real reason said ‘fake artists’ annoy record labels – actually, the central point of the ‘fake artist’ scandal that is all-too-often missed – is because of their suspiciously commonplace/regular appearance on key Spotify mood and genre-based playlists, with millions of followers, in slots that could potentially go to more established acts.

Whether or not, as some finger-pointing execs argue, Epidemic and Spotify have a cut-price deal in place, economically incentivising the latter to use the former’s music – an unproven accusation – is a continually nagging question.

What we know for certain, however, is this: for composers to become Epidemic Sound clients in the first place, the company requires them to refuse to sign up to any recognized PROs around the world.

This, in turn, means that performance royalties from Spotify that would ordinarily be collected by the likes of ASCAP, BMI, PRS For Music etc. remain untouched by these organizations, frustrating traditional elements of the music business (not to mention the associated traditional money flow).

And it’s here, connected to this fact, that the latest controversy to hit Epidemic Sound begins to make sense.

The European Composer and Songwriter Alliance (ECSA) represents over 30,000 professional composers and songwriters in 27 European countries.

Yesterday (December 17), the body spoke out against Epidemic Sound publicly for a number of reasons, most pointedly for “using 100% buy-out contracts – where music creators sell their rights to a piece of music in exchange for a lump sum”.

This is true: Epidemic Sound fully owns the music in its catalog, which it buys outright from composers. On streaming services, it elects to pay these composers half of the royalties it collects, but this isn’t the case when its production music is commissioned (and paid for) by the creators of content broadcast on TV stations, or via video-on-demand platforms.

On these channels, it’s understood, Epidemic’s production music catalog is naturally royalty-free.

Epidemic therefore becomes a potentially cash-saving option for broadcasters/digital TV services, who are becoming increasingly less keen, it seems, on their profits being reduced by the continual royalties they pay to music rightsholders for use of their tracks over TV credits and key scenes.

(Just this month, widespread controversy has erupted over Netflix and Discovery both seeking out royalty-free / buy-out deals for music content in order to avoid paying performance royalties to composers.)

Back to ECSA: in addition to its uncomfortableness with Epidemic’s buy-out model, the body has another, more specific bugbear, which it says adds to “harmful developments for the treatment of composers and songwriters in Sweden”.

“We note with great disappointment that the Swedish Public Service TV (SVT) agreed to regularly feature Epidemic Sound in the music credits after a program instead of the creator’s names,” says ECSA. “As a result, SVT is – with Swedish tax-payers’ resources – promoting Epidemic Sound through credits and giving it substantial financial value, to the detriment of composers and songwriters.”

“ECSA strongly condemns these malpractices and their detrimental impact on authors’ rights.”

ECSA statement

ECSA, which claims this ‘right of attribution’ is being jointly abused by SVT and Epidemic, continues: “The right of attribution does not only constitute a direct link between the author and his or her work but also secures the public’s interest in ensuring that our society knows, trusts and honors the creator. In times of fake news, hoaxes, disinformation for entertainment or political purposes, this right of attribution is more important than ever and should be fully respected, especially by public service entities.”

As well as slamming any broadcasters which decline to show the names of composers behind music in their programs, ECSA calls on songwriters to refrain from signing buy-out deals en masse in the first place.

“All our fellow music authors should refrain from signing any agreement which results in giving up all their economic rights forever, while not even being given credit according to his/her right by law,” it says.

Interestingly, the evidence suggests that songwriters clearly aren’t refraining from signing such deals right now.

ECSA itself notes that Epidemic Sound’s revenues more than doubled last year, from 100 million SEK ($12m) in 2017 to 234 million SEK ($27m) in 2018.

Earlier this year, Epidemic – which shares an investor with Spotify in Sweden-based Creandum – raised $20m, giving the company a $370m valuation.

Speaking to MBW in response to ECSA’s accusations, Epidemic Sound CEO and cofounder, Oscar Hoglund, said: “We were surprised to find out that ECSA has publicly condemned Epidemic without engaging with us – or to our knowledge – any of our musicians. But it is not so surprising that they took this viewpoint as they come from a more traditional part of the industry, which we’re disrupting.”

“it is not so surprising that ECSA took this viewpoint as they come from a more traditional part of the industry, which we’re disrupting.”

Oscar Hoglund, Epidemic Sound (pictured, main)

He added: “Our door is always open and we’re happy to sit down with ESCA to bring them up to speed on how our model is perfectly suited to the distribution of music in the digital age, and for them to hear first-hand from our musicians about how our team and business model supports them both financially and creatively.”

ECSA goes one further on the buy-out story, however: suggesting that the new EU Copyright Directive (hitherto best known for its challenge to the so-called YouTube ‘value gap’) may actually outlaw buy-out deals entirely.

“As the Copyright Directive is now in the process of being implemented, we also urge all EU Member States to engage in an ambitious implementation of its Articles 18 to 23 to prevent those buy-out practices and ensure that those malpractices from another age cannot longer occur in the 21st century.”

Time will tell on that one. Sources suggest that Epidemic Sound feels confident that the Directive will not pose a threat to its business model.

Epidemic Sound recently expanded into the United States, hiring former Spotify exec, Kate Vale, as MD, North America.

Vale will responsible for driving the company’s expansion plans in the States.

Epidemic is backed by Creandum, EQT Mid-Market and Atwater Capital.

The company has offices in nine major cities across the globe: Stockholm, New York City, Los Angeles, Hamburg, Amsterdam, Madrid, Helsinki, Toronto and Sydney.Music Business Worldwide

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