Epidemic Sound’s royalty-free music is played 2.5bn times per day on YouTube and TikTok, but company still struggles to turn a profit

MBW’s Stat Of The Week is a collection wherein we spotlight an information level that deserves the eye of the worldwide music trade. Stat Of the Week is supported by music information analytics agency Chartmetric.

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Epidemic Sound, the music manufacturing firm that has courted controversy over time for the best way it pays artists (to not point out questions requested over its relationship with Spotify) is getting ever nearer to turning a real revenue – but it surely’s not there but.

The Stockholm-headquartered supplier of royalty-free soundtracks reported a optimistic EBITDA for the second 12 months in a row in 2023 – amounting to SEK 24.8 million (USD $2.34 million on the common trade fee for 2023). That’s an almost nine-fold improve in EBITDA in comparison with 2022.

Nonetheless, the corporate’s working revenue (EBIT) continued to be within the pink. At SEK -486 million (-$45.8 million), it was solely a slight enchancment over the earlier 12 months.

That’s regardless of web gross sales leaping 25% YoY, to SEK 1.477 billion ($139.3 million). Epidemic attributed the persevering with lack of revenue to “a depreciation of mounted belongings,” which it calculated as having misplaced SEK 486 million ($45.8 million) in worth over the course of the 12 months.

Stripping out the results of depreciation, Epidemic would have seen an working revenue of SEK 25 million ($2.36 million), the corporate stated in its earnings report launched April 10.

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Nonetheless, consumption of Epidemic’s content material continues to soar. The corporate stated its music obtained 2.5 billion performs day by day on YouTube and TikTok in 2023. (In its 2022 report, it calculated 1.5 billion views day by day on YouTube, not together with TikTok.)

There at the moment are 26 million movies on YouTube and TikTok movies that includes Epidemic Sound music, and the corporate studies that its tracks obtain 40 million performs day by day on music streaming platforms.

Epidemic says it has a catalog of 40,000 tracks and 90,000 sound results, and says it’s been including a mean of 10 new tracks per day since 2021.

The attraction of Epidemic’s music could be simply understood, no less than from the perspective of content material creators. Epidemic provides companies and content material creators entry to rights-cleared audio content material they will customise nonetheless they need, making its music engaging to creators and enterprises that don’t have the sources to license dearer, copyrighted music.

But its enterprise mannequin has, over time, attracted loads of criticism, from music executives complaining about Epidemic’s use of pseudonyms for its creators to musicians’ unions objecting to Epidemic’s follow of shopping for all of the rights to composers’ and creators’ music for a flat charge.

The corporate has stated prior to now that, whereas it does pay a flat charge to music creators, royalties from Spotify are break up 50/50 with creators all the identical.

“We anticipate our development to be additional bolstered each by the expectation that the creator financial system will virtually double in measurement by 2027, and the truth that we’re well-positioned to make the most of the increasing capabilities of synthetic intelligence.”

Oscar Höglund, Epidemic Sound

The corporate seems to be delicate to these kinds of criticism, referring to its fee mannequin as “distinctive and beneficiant” in its newest annual report, and stressing the offers it has signed with distinguished musicians, together with one with Grammy-nominated multi-Platinum artist Jordin Sparks.

Within the annual report, co-founder and CEO Oscar Höglund described Epidemic as “one of many best-positioned [companies] to discover constructing a system that holistically helps artists and content material creators, harnessing AI’s capabilities whereas retaining creative authenticity, integrity, and honest remuneration on the core.”

Certainly, AI appears to be a key a part of Epidemic’s enterprise mannequin, with the corporate highlighting AI instruments it has developed for its content-creator prospects.

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Amongst these instruments is Soundmatch, launched in July 2023, which makes use of AI to investigate the pictures in a video and translate them into key phrases for a seek for music choices. It then provides content material creators solutions for music from the Epidemic catalog.

The corporate’s annual report cited its personal analysis exhibiting that 93% of content material creators at the moment are utilizing AI-powered instruments in a roundabout way of their creation course of.

“We anticipate our development to be additional bolstered each by the expectation that the creator financial system will virtually double in measurement by 2027, and the truth that we’re well-positioned to make the most of the increasing capabilities of synthetic intelligence,” Höglund stated, citing a Goldman Sachs report from 2023.

“Whereas our AI consultants are laser-focused on addressing the technical wants of content material creators, we additionally personal the world’s largest restriction-free catalog of top-quality, stem-based tracks, and have unparalleled information perception on how that music performs on-line.”

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Epidemic received a serious increase in 2021 when funding large Blackstone joined a $450-million funding spherical, which valued the corporate at $1.4 billion. Blackstone stays a serious investor, with a 17% share of Epidemic, based on the annual report.

The corporate’s largest investor, at 32%, is EQT, a non-public fairness agency which can be invested in expertise company UTA and is at the moment a part of a consortium bidding to take French digital music firm Consider personal.

One other main investor, at 12%, is Creandum, a Stockholm-based early-stage enterprise capital agency additionally recognized for investing in Spotify.

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