Reinventing The Music Industry -- Again
First of all thanks to Alastair Dryburgh for this article.
There's a lot of noise about how the large technology platforms and newer startups are disrupting the music business. Some say they are changing the game for the better, whilst others say they are taking money away from the creators.
I talked to Oscar Hoglund of Epidemic Sound to understand how they are challenging the norms of the music industry. Their music is played 20 billion times a month via online videos and they reward their creators handsomely using the big platforms like YouTube and Spotify as vehicles for their business model, rather than adversaries.
Alastair Dryburgh: So tell me a little bit, Oscar, about the history of your business so far. Where the original idea came from, and how you developed it.
Oscar Hoglund: I guess that the first thing you should know is that everyone in and around Epidemic Sound is a creator at heart. We love making, shaping and creating things - whether that is music, businesses, videos, TV shows or art. It is what makes us tick.
Operationally, Epidemic Sound is a music company that works with talented musicians to create tracks for a wide range of storytellers. That includes everything from TV productions - we soundtrack 90% of all shows broadcast in Sweden - right through to major international streaming channels. For instance, we recently provided the entire soundtrack for a Netflix show called Drug Lords. On top of this, we also provide music for some of the hottest YouTube stars around, such as iJustine, Peter Mckinnon and Jonathan Morrison (TLD).
With regards to our history, we were founded in 2009 by five Swedes on a mission to re-imagine how you license music. We all had experience of how the music industry worked, and it seemed so outdated and unbalanced in so many ways that there just had to be a better way of doing things. The mission was to make a more transparent, flexible and straightforward process for creating and supplying music to storytellers.
Our founders were from all different walks of life. Two of us came from television, where we had built production companies.
My other two co-founders were music producers. Between them they had sold hundreds of millions of albums, written music for Madonna, Miley Cyrus, Big Sean, and produced all the music for the hit TV show Glee, which was a huge deal. And then the final co-founder is a serial entrepreneur - he was kind of our secret weapon as he’d created and built lots of successful innovative companies before.
Dryburgh: That's interesting. Five of you, and, unless you're very multi-talented, not a techie among you.
Hoglund: Correct! The tech has been an integral part of what we have built, and we’ve worked with some outstanding developers over the years. That being said, it wasn’t something we felt was necessary in our founding team. We’re all quite hands-on with technology anyway, so we felt we had enough understanding of it to be able to direct a developer to deliver our vision.
Dryburgh: How are the large tech platforms such as Spotify, Facebook and YouTube connected to your business? Are you disrupting their models?
Hoglund: That is a super interesting question. Some people assume that to be an innovator, you need to be radical and build something that disrupts the big players. That is one option, but you can also work with these companies and build off the back of their success.
For us, we wanted to use these tech platforms to help us disrupt the music industry as a whole. We’re on a mission to democratize access to music. Our plan was to use the technology players and incorporate them into our model, not oppose them.
Dryburgh: So, exactly how do they feature in your model?
We’ve always soundtracked audio visual pictures aka videos - that was our thing. In 2009, this meant Epidemic’s music featured on TV quite a lot. We kept our heads down and just kept producing great music as we knew that would make clients come back to us time and time again. Then we saw the nature of storytelling change in about 2011/2012, when the explosion of vlogging and online video took off. So we created an offering for these types of storytellers too.
Before we knew it, word had spread amongst the online world and we hit the point where our music was consistently being played 20 billion times a month on videos across YouTube and Facebook. That really helped us in terms of insight. We started to feel that we had a pretty good handle on what kind of music was getting played, and being sought after. We could see in real time what the big storytellers of our time were downloading.
And then we realised that we had organically built a marketing and distribution platform built for the digital age. By having our head down and doing what we did best, we kind of struck gold.
What happened next was another key turning point in Epidemic’s life.
Firstly, we started to look at the YouTubers’ videos that used our music and one of the most popular questions underneath the videos was “I love this song, where can I find this track. Why can’t I find it online?”
This coupled with the rise in popularity of ‘activity based’ playlists on the streaming platforms meant that we could see an opportunity in front of us that we had never had before, and that was to go direct to the end consumer.
Up until that point, we had always been a B2B company who sold music to storytellers and they provided the distribution. Now, we could see an opportunity to be consumer facing too, and broaden our horizons significantly.
So, we contacted all the streaming platforms and set about striking upload agreements with them to make the music that is currently in our B2B music more accessible to the end user.
The first one that we got up and running was Spotify. They were the market leader, they were super fast and efficient, and we placed our music up their platform quickly. And within a very short period of time, we saw excellent results. Not only was our music being played a lot, Spotify themselves picked up our music and they incorporated it into some of their own playlists, which is mega trend within the streaming world.
And our music started doing exceptionally well. It was played all the time.
Dryburgh: How do you explain that success? How much of it is quality of the music and how much of it is your ability to work with Spotify?
Hoglund: The fact that we had 20 billion views on Youtube and Facebook every single month helped us.
Dryburgh: So people are already looking for it?
Hoglund: Yes, it is twofold really. Some of the tracks and musicians we put on streaming platforms, now already have a big fanbase so all we need to do is to point people in the right direction.
But the absolute main reason is the quality of our tracks and the talent of our musicians. There is a common misconception that production music companies and, in particular Epidemic Sound, create ‘muzak’ - background music, if you will. This is of course true in some cases, and was our bread and butter when we first started out.
However, we are now so much more than that and represent a much broader church of musicians. We have both instrumental and vocal music, and a lot of talented musicians who collaborate and work together. My favourite track is a dubstep track mixed with country, for instance. This track is nothing like muzak.
Dryburgh: So, what does this look like from the composers or the performers point of view? Now I guess most of these guys would ideally be making a living doing music, which I think is very, very, very difficult on Spotify because you're getting fractions of a cent per play. What does it look like for the musicians who are working with you?
Hoglund: This was one of the areas of the music industry that we thought was fundamentally flawed. As our founders, the music producers know only too well; there is a disconnect between how hard you work and how talented you are and the financial reward. It was very hit and miss with about 99% of musicians never making it big and with most musicians having to have a day job to pay the bills.
So, we decided to create a more mutually beneficial commercial agreement between musician and us. We make it a more immediate, flexible and transparent.
Our model means that we own the music and pay for each track up front. The more quality music musicians make, the more they are paid. We’ve had really good feedback on our process as our musicians say that it is easier to create and be creative when you remove anxiety around money and the pressure to create a mega hit.
Dryburgh: How much would that fee be?
Hoglund: It can be anywhere between one and two thousand pounds per track. It can be much more, and sometimes it can be a little bit less depending on which part of the 180 different genres the music fits in.
But the real beauty of our system is that we also share revenue from streaming platforms. For example, with Spotify, we have a 50/50 split with all our musicians. Many of our composers now make five figures a month, and we're talking pounds.
Dryburgh: That's very impressive. And you've done it by being good at some fairly traditional things. Being able to tell stories, being able to create emotions.
Hoglund: We've embraced the old in the sense of storytelling . We've selected the new stuff that works. So in essence what we've done is to turn A&R into a crowdsourced model. We take music and put it in the hands of hundreds of thousands of creators. Their views tell us what's great and what's not. What is good, we put that on streaming platforms where we split the revenue with the musicians 50/50.
We’ve embraced and harnessed the power of the large technology platforms to fix what is wrong in the more ‘traditional’ music industry. We’re utilising all the latest technological advances and services out there to make something super-efficient in terms of getting music out there, and using streaming platforms to make sure musicians are rewarded for their talent and hard work. If you compare that to the old world order in the music industry, it’s like night and day.
