It was with great excitement that the latest investment from the Creandum funds was announced yesterday; The Swedish music industry disrupter Epidemic Sound. Creandum likes to invest in companies that target existing markets with a new business model,like Spotify. We would like to share some insights into why Creandum made the investment and why Epidemic Sound is so fascinating.
To understand why we find Epidemic Sound’s business so interesting, it is important to understand the big problem with using production music in any form of broadcasting today:
The problem for the creator of a video: When background music is selected, the owner of the music needs to get paid based on, which platform the video will be showed, where it will be showed and for how long time it will be showed. As these questions are often unknown at the time of production, a license will often have to be updated or extended.
The problem for the broadcaster of the video: The broadcaster needs to pay the owner of the production music a royalty every time the video is broadcasted/shown. The broadcaster will need to count and report the number of times the video is broadcasted to a collection society (e.g., Stim in Sweden) based on an initial specified period, geography and platform the video will be shown on. In addition, it is close to impossible to estimate at the time of production, what the total royalty cost will be.
Epidemic Sound wants to solve these problems. They have created the first professional quality music library that visual content creators can use in any country, on any platform, forever. Yes forever! And, unlike every other production music libraries, no additional charges, reporting or restrictions are ever required of anyone.
To summarize the primary reason why Creandum invested in Epidemic sound: A business disrupting a huge market that has not changed the last +20 years backed by a team with the precise mix of capabilities.
Epidemic Sound: A unique and disruptive business model
It is very seldom Creandum is presented to a business idea where it is not possible to find a single direct competitor. This was one of them. Even though a number of production music libraries claim to have license free music – in practice they have only solved part of the license problem. However, seeing such a unique business always has two effects;
1) We become excited as there is a head start from competitors and an opportunity to ‘own’ the market.
2) On the other hand we ask ourselves, why has no one else done this? After having talked to a number of large broadcasters using Epidemic Sound (e.g., SVT and TV4 in Sweden) the extent of the problem was however confirmed – including how long time Epidemic Sound has spent on solving it. To quote: “Epidemic Sound is solving the single biggest pain in the video broadcasting industry”.
The need for flexible video broadcasting is increasing
An external factor that is increasing the need for Epidemic Sound is video broadcasting moving rapidly away from ‘linear’ broadcasting through TV’s to online broadcasting through subscription platforms as Netflix, HBO, Viaplay etc. and into video sharing platforms as Youtube and Vimeo. This transition to multi platform support works very poorly with the traditional usage of production music.
A $10B market that is expanding
Epidemic Sound is offering their production music to 4 attractive business segments, segments that in themselves would be interesting markets;
1. Television broadcasters and their corresponding large production companies
2. Independent video production companies (e.g., advertising agencies)
3. Shops that are seeking cheap and easy in-store-radio (as Epidemic Sound also has high quality vocal tracks)
4. Online platforms and Multi Channel Networks (MCNs) that want to allow their video contributors to use production music without fearing a subsequent large bill from a collection society
A well equipped team that is ready to disrupt the market and compete head-to-head with major labels
The most important factor in an investment decision is the team – and here Epidemic Sound has an unique mix of talent;
1) Entrepreneurial experience with more than 15 started companies under their belt
2) Capabilities to create world class music quality with founders having produced music for Madonna, Celine Dion and Enrique Iglesias to name a few
3) Close relationship to broadcasters and MCNs through previous startups, founding Zodiak Media Group and the MCN United Screen
It is with a very warm welcome that Epidemic Sound joins the Creandum portfolio and we look forward to once again disrupting the music industry together with the team