Epidemic Sound, the controversial Swedish manufacturing music firm, noticed its revenues bounce considerably in 2019 – but additionally posted a hefty eight-figure annual operating loss.
That’s based on the yearly monetary report of the corporate’s guardian, Epidemic Sound Holding AB, posted this summer time in Sweden, and now obtained by MBW.
Epidemic Sound AB posted net revenues of 375.3m SEK in the 2019 calendar 12 months, equal to $42.1m at present change charges.
Yet the agency noticed annual operating prices greater than double year-on-year, hitting 605.0m SEK ($67.9m). These operating prices included 263.3m SEK ($29.6m) spent on salaries and different employees bills.
As a outcome, Epidemic Sound posted an operating loss of 206.7m SEK ($23.2m) in 2019, greater than double the scale of operating loss it posted in the prior 12 months interval (81.9m SEK).
The firm’s loss earlier than tax in 2019 weighed in at 216.4m SEK ($24.3m).
Epidemic Sound’s FY 2019 net revenues had been up by 66% on the 225.9m SEK it generated in net gross sales throughout FY 2018 (which, for accounting functions, coated the 13 months from November 23, 2017 till the tip of December 2018).
In May this 12 months, Epidemic Sound laid off nearly a fifth (19%) of its 419-strong worldwide workforce.
At the time, the corporate’s founder and CEO, Oscar Oscar Höglund, instructed Music Ally that the redundancies had been being made as a part of a “realignment” of Epidemic Sound’s enterprise mannequin. He additional urged that Covid-19 had “supercharged” the agency’s transition into a digital-first enterprise.
Epidemic Sound’s enterprise mannequin has two tiers: (i) licensing its library of rights-cleared manufacturing music to broadcasters, airways and lodges; and (ii) producing royalties from this music on streaming companies reminiscent of Spotify and YouTube, in addition to licensing it to platforms like Netflix and Twitch.
Many in the business – MBW included – have raised questions over the huge quantity of Epidemic Sound music showing on Spotify playlists reminiscent of Deep Focus, Sleep and Peaceful Piano, which share tens of millions of followers (and billions of streams) between them.
A very controversial ingredient of Epidemic Sound’s enterprise is that the composers and artists it really works with are barred from registering their songs with performing rights assortment societies.
Epidemic absolutely acquires the rights to those composers’ music (each recorded and publishing) through a one-off upfront fee. The firm then commits to sharing streaming revenues 50/50 with the songwriters/artists in query.
In the FAQs of Epidemic Sound’s website, it tells musicians: “We created a free-flowing distribution of our music for all our customers by being the sole owner of the financial rights to our music, which is not possible for us if the Music Creator is affiliated to a collecting society, due to their exclusive affiliation agreements.”
It provides: “Thus, 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.”
This clearly calls into query what, if any, performing rights royalties the likes of Spotify could be required to pay out when Epidemic Sound’s music is streamed on such platforms.
Late final 12 months, widespread controversy erupted over Netflix and Discovery each in search of to make use of royalty-free music content material in order to keep away from paying efficiency royalties to composers.
“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.”
Discussing why it requires full possession of its composers’ copyrights, Epidemic explains on its web site: “We partner with Music Creators who value distribution over ownership so they can benefit from their music flowing freely via our powerful distribution network along with the up-front payments and 50/50 split on received streaming revenue.”
Epidemic’s FY 2019 submitting reveals that Netherlands-based personal fairness home EQT owned 38% of shares in Epidemic Sound Holding AB, as of the shut of final 12 months.
Twenty % of the corporate is owned by “two senior executives and other personnel within the Epidemic Sound Group”, with 41% owned by unnamed shareholders.
In June this 12 months, Epidemic Sound announced a deal to provide copyright-free music to the media library of Adobe, greatest identified for its inventive software program and inventory pictures.
Epidemic Sound expanded into the US market late final 12 months, appointing Kate Vale as its Managing Director in North America. Vale is the previous MD of Spotify in Australia and New Zealand (ANZ).
You can learn the most recent full annual accounts of Epidemic Sound Holdings AB through here.Music Business Worldwide