Epidemic Sound Raises $450M at $1.4B Valuation

Epidemic Sound Secures $450 Million to Fuel Expansion

The consumption of video content and streamed audio, such as podcasts, is experiencing rapid growth. Consequently, Epidemic Sound, a startup specializing in providing background music for these media formats, has announced a substantial funding round to support its scaling efforts.

Based in Stockholm, the company has successfully raised $450 million through investments from Blackstone Group and EQT Growth. This equity infusion has resulted in a valuation of $1.4 billion for Epidemic Sound.

Expanding the Music Library and Platform Capabilities

Currently, Epidemic Sound boasts a catalog of approximately 32,000 music tracks and 60,000 sound effects. The newly acquired funds will be strategically allocated to enhance the platform's technology.

This includes developing improved tools for creators to effectively match music with their content, expanding the existing music and sound effect library, and broadening the customer base.

Furthermore, the company intends to extend its global reach by offering more localized services.

Significant Growth and Market Opportunity

The $450 million investment reflects the ambitious vision and impressive performance of Epidemic Sound. While the company may not have been widely recognized until recently, its underlying metrics justify this significant funding.

“This investment is directly linked to the scale of our aspirations,” stated Oscar Höglund, co-founder and CEO, in a recent interview. “Our goal is to provide the soundtrack for the entire internet.”

To illustrate the company’s growth trajectory, Epidemic Sound’s tracks were being streamed for an average of 250 million hours monthly on YouTube alone during its previous funding round in 2019, which totaled $20 million at a $370 million valuation.

Exponential Increase in Streaming Hours

Since 2019, this figure has increased by over 400%, now exceeding 1 billion hours each month. Höglund reports that videos on YouTube utilizing music from Epidemic Sound artists are viewed 1.5 billion times daily.

These numbers do not even account for usage across platforms like TikTok, Facebook, Instagram, and Snapchat.

“The overall trend is experiencing explosive growth,” Höglund added, noting that over 5 million creators currently utilize the platform.

Untapped Potential in a Vast Market

Despite this growth, considerable opportunities remain. With approximately 37 million YouTube channels alone, and numerous other platforms like Twitch, TikTok, and Instagram, the potential customer base is substantial.

“We prioritize large, open-ended markets, and Epidemic Sound is rapidly establishing itself as a leader within this industry,” explained Jon Korngold, global head of Blackstone Growth, who spearheaded the investment.

Epidemic Sound is poised to capitalize on the increasing demand for high-quality background music in the digital age.

A Two-Sided Marketplace for Music

Epidemic Sound functions as a digital marketplace, facilitating connections between musicians who upload their recordings and users seeking music for various projects. The platform allows for searchable music based on criteria like genre, mood, instrumentation, tempo, length, and popularity, with pricing determined by the intended usage rather than frequency of plays.

Subscription options are also available, offering unlimited access for personal use at $15 monthly or commercial use at $49 monthly – the latter being the more popular choice. This model contributed to the company achieving profitability, though current focus on expansion has resulted in a return to operating at a loss.

Origins and Market Gap

Established in 2009 by Höglund and Jan Zachrisson, Epidemic Sound was created to simplify and legitimize the inclusion of music in digital media. At that time, eleven years ago, the music landscape was dominated by downloads, with a staggering 95% of them occurring illegally.

Notably, streaming as a concept received minimal attention in industry reports of that era. Furthermore, there was a distinct lack of accessible marketplaces for both music availability and straightforward licensing.

Addressing Creator Needs

“Epidemic, fundamentally, has always prioritized a restriction-free experience for content creators,” explains Victor Englesson, a partner and investment advisor at EQT Partners. “This was a significant challenge for user-generated content from the very beginning, and Epidemic Sound maintains complete control over the rights to its entire music library.”

Currently, the primary challenge isn’t simply offering easy licensing – that’s now commonplace – but rather responding to substantial demand.

The Rise of Video and Creator Demand

With video becoming increasingly popular among consumers – Cisco previously estimated 80% of internet traffic was video in 2020, a figure likely higher post-pandemic – it has also become a central medium for creators. Consequently, numerous companies have emerged to provide tools for video production and distribution, including music provision.

This has resulted in a competitive landscape for soundtracking platforms, with companies like Artlist, Upbeat, Comma, and Shutterstock also vying for market share.

Beyond dedicated platforms, larger entities like YouTube also offer integrated music tools to creators.

Social Media and Music Discovery

Tracks can achieve viral status and widespread recognition overnight on platforms like TikTok. Snap’s acquisition of Voisy, an app enabling music overlay and editing, demonstrates its potential role in the music creation and distribution ecosystem.

However, Epidemic Sound offers more than just a simple exchange platform.

Strategic Partnerships and Data-Driven Insights

In addition to its own platform, Epidemic Sound collaborates with platforms like Adobe, Canva, Getty, and Lightricks, integrating its music streams into their comprehensive creative suites.

The company also leverages data analysis to understand music usage patterns and audience preferences, creating a “music graph” that informs music sorting, matching, and commissioning new tracks to meet evolving demand.

“We can identify emerging trends, such as a surge in demand for metal lullabies, for instance,” states Höglund. “This allows us to commission more of that type of music, which then gains traction.”

The Evolving Music Landscape

The growth of Spotify and substantial investments by Apple, Google, and Facebook in music streaming highlight a shift from physical music sales to digital consumption, a trend amplified by the cancellation of live concerts and the rise of virtual streaming.

Epidemic Sound presents a unique alternative, focusing on a broad range of independent creators rather than established artists with label deals.

While platforms like Spotify concentrate on artist branding and monetization, Epidemic Sound initially prioritized distribution and reach for musicians.

Musician Compensation and Growth

Musicians receive upfront payments for their tracks, with amounts varying based on the composition. They also share in revenue generated from streaming platforms where their music is played.

The company reports that musicians earn an average of tens of thousands of dollars annually, with some achieving incomes in the hundreds of thousands. “It provides substantial distribution and reach,” he added.

Some musicians have even gained independent recognition, such as Ooyy, Cospe, and Loving Caliber, blurring the lines between Epidemic Sound’s role and those of platforms like Spotify or YouTube. (This also suggests potential future acquisition or partnership opportunities.)

Data as a Core Asset

Combined with its growth and scale, this data-driven approach has fueled Epidemic Sound’s success in a crowded market.

“Ultimately, this is a data business,” emphasizes Korngold at Blackstone Growth.

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