Epidemic Sound Removes Rights and Royalties From the Equation

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This week on the New Music Business podcast, Ari sits down with Oscar Höglund, the co-founder and CEO of Epidemic Sound. Epidemic Sound is a leading music and soundtracking platform for content creators. They have garnered attention for its digital rights model and soundtracking tools that help creators to elevate their content with music, while simultaneously supporting artists financially. Oscar shares insights from his journey launching Epidemic after working with Sweden’s renowned Zodiak Television.

In their episode, Ari and Oscar unpack critical issues impacting independent artists, including royalty structures, streaming economics, and the evolving landscape of music licensing. They explore Epidemic Sound’s unique approach to artist compensation, discuss how digital streaming has pushed music toward playlist-driven consumption, and tackle the creative tension artists face when making commercially viable music. This episode offers an in-depth look at one of the industry’s most influential platforms shaping the future of music in content creation.

Chapters
00:00 The Changing Landscape of Music Royalties
06:00 Epidemic Sound: A New Model for Music Distribution
12:14 Artist Compensation and Ownership Rights
17:46 Innovative Approaches to Music Licensing
24:09 The Impact of Epidemic Sound on Independent Artists
29:53 Future of Music in the Digital Age
42:16 The Evolution of Music Consumption
46:21 Negotiating with DSPs and Licensing Rates
49:52 The Rise of Epidemic Sound
55:31 The Artist’s Identity Crisis
01:08:01 Future Innovations and AI in Music
01:21:12 Becoming a Full-Service Music Platform

Edited and mixed by Ari Davids
Music by Brassroots District
Produced by the team at Ari’s Take

Order the THIRD EDITION of How to Make It in the New Music Business: https://book.aristake.com

Transcript

Ari Herstand
We’re not being prioritized like you are in the epidemic, in these these official Spotify editorial playlists, because you’ve now struck these direct deals, these licensing deals with the DSPS, where you will accept a lower royalty rate because they’re going to juice up your place and so on a massive scale. This works beautifully for you, because you’re you’re doing a big numbers game. But this is my concern for the rest of the music industry, especially independent artists, who are not with Epidemic Sound is now we are suffering the consequences of those actions because we are not being juiced up and prioritized because we don’t want to accept the lower royalty rate from Spotify, but you’re okay to do that. So can you speak to that a little bit? I would love to

Ari Herstand
what’s going on. Welcome to the new music business. I’m your host, Ari Herstand, author of How to Make It in the New Music Business, the book, Third Edition is out now everywhere, all formats, audiobook, ebook, hardcover, however you like books, you can find it today. My guest is the CEO and founder of Epidemic Sound, Oscar Hoglund. He’s based in Sweden, and Epidemic Sound has been around 16 years. And you may not have heard of the company the name Epidemic Sound, but you definitely have heard some of their music, because they have now heard over 3 billion times every single day across YouTube and Tiktok, their music is and so they have a very interesting dare. I call it innovative. It’s a unique model of how they are working with their artists and structuring their copyright and ownership. It’s very different from how the music industry has worked up until this point. They work on a complete ownership model. They do have royalty splits, they have equity participation. I’ll let him explain a little bit more of this. But essentially, what they do is they for a subscription fee, any creator, YouTube, Tiktok, whatever, can go pay a subscription. They have access to the quarter of a million songs that are an epidemic sound, and they can use their music in their videos, essentially royalty free, so they don’t have to worry about copyright strikes or anything like that, and then those creators can still earn those videos without having to share that that revenue or give up the revenue. I should say to the music rights holders. Now, as you can imagine, I’m always looking out for the artists. I’m always looking out for. How can artists make more money from their music? And I had some visceral gut reactions to a lot of what he brought up. I also brought up the fake artist scandal. This, of course, was how everybody noticed years ago there were all of these fake artist profiles on Spotify, and a lot of times the music was lean back music, kind of functional music, sleep, deep focus, you know, mood music, that kind of stuff. And these artists, they had fake profiles. Well, they profiles with only a couple songs and AI generated artwork and all of that. And they weren’t like real working artists. As the profile was created yesterday, song was released today, and for some reason, it got added to all of these official Spotify editorial playlists and got millions of streams, and everyone’s like, How is this possible? We talk about it Epidemic Sound is a big reason for that, and I pressed him on it pretty hard, and credit to Oscar for hanging with me as I flung a lot of these questions at him. We got existential in some of the discussion of, is this good for the music industry? Is this good for artists? Are these good for artists who are not part of epidemics roster? And he, he brought up some interesting points. So I would encourage you to listen to the very end of this, where we really get into that discussion. And I brought up a few of the artists that are epidemic artists who were interviewed by Liz Pelly for her book, Mood Machine, which kind of broke open this whole fake artist, ghost artist scandal with the perfect fit content, PFC content on Spotify. If you don’t know what I’m talking about, go listen. I interview on this show with Liz Pelly. We had her on a couple months ago, or go read her book on it. And so some of the questions kind of came from that, but epidemic is doing very innovative things in the industry. It’s going to turn a lot of heads. It’s going to make a lot of people uncomfortable and a lot of people angry, because it’s challenging the status quo. And you know, I’ll let you listen to this and decide for yourself what you feel about their model, anyone that’s listening from a performing arts organization, neighboring rights organization, probably a label or a publishing company is not going to be too thrilled with their model, but it is innovative, and it needs to be understood of what’s happening. We all know that the music industry is completely broken. So anyone that is offering a pathway forward, even if you. It is dramatically different from everything we understand they and they are wildly successful at this mind you, they’re valued at over a billion dollars as a company, and like I said, their videos are 3 million times a day. So there’s a lot of value to this conversation. I think you’re really going to appreciate it. You can find Epidemic Sound on their website. That’s probably the best place. Epidemicsound.com. You can find Oscar on LinkedIn. We’ll link you to his profile if you’d like to connect deeper with him. You can find all of us that make the show happen at Ari’s Take on the socials. You can find me at Ari her stand on Instagram. But right now, if you wouldn’t mind, just pause this leave us a five star review on Apple podcast, Spotify. However you’re listening to this, give us the thumbs up on YouTube. Hit the subscribe button, hit the follow button if you want more of these episodes in your feed, and then visit aristake.com and get on our email list. That’s actually the best way to stay in touch with us. Aristake.com sign up for that email list. All right, let’s kick into the

Speaker 1
show. Oscar Hoglund, welcome to the show.

Oscar Hoglund
Hey, Ari, thank you for having me absolutely.

Ari Herstand
So I know you’re in Sweden right now, and it is. It’s late there, and I know Epidemic Sound you kind of started it there, but for those of you, and I know that you’re getting like, I mean, you touch so many aspects of the music industry, and so many people are familiar and have heard the music that has come from Epidemic Sound. But I don’t think a lot of people actually know what Epidemic Sound is. Even though you’re valued at over a billion dollars, I read that you had 2.5 billion times a day around the globe, your music is is is heard or experienced, which is quite a feat. You know, that’s like, that’s like, major label levels of

Speaker 1
just experience and but, but talk to me about what Epidemic Sound is, and kind of how you arrived here, where you’re at cool well,

Oscar Hoglund
First off, thank you for having me. We are, I’d say epidemic is like an overnight success that took 16 years to build, and so I think that we’re maybe just a bit slower than most, right? But kidding aside, we’ve been around for a long period of time because we’ve been very diligent and try to be methodical in terms of how we go about things on the highest level of abstraction. Epidemic Sound is a company on a mission with one specific purpose, which is we want to try and see if we can help soundtrack the internet. That’s where we get up in the morning. That’s why we spent the last decade and a half trying to really perfect that because we think that’s important. We think that future generations may or may not look back on our generation and say, Guys inventing the internet was your biggest feat as a generation like that’s once in a generation. And if that’s the case. You need to ask yourself, like, how am I going to contribute if that’s going to be my generation’s defining achievement? Like, what’s my role in that? And we kind of figure out earlier than most people that the internet ultimately was going to be what you and I are doing now, it’s going to be video centric. Like, it’s all going to come down to video. We knew it was bound to start with text, and then after a while, we said, there’s probably going to be pictures, but ultimately it’s all going to come down to video, because humans prefer much more connecting and sharing information and emotion and entertainment through video. And so the bigger bet was we think that the internet is going to be all about video. We want to be the company that soundtracks that that’s difficult. It involves music, it involves technology. It involves business innovation. It evolves, doing a lot of different things, very, very differently. But at its core, that’s what we’re doing. We’re trying to be the best sound tracking platform in the world for both artists and for visual content creators. Great. And so just in practice, what does that mean? Cool. How does it work? So epidemic, I would argue, sits on three major breakthroughs, or three components of value. So at the highest level, like plain English, epidemic is a service that you access online, or you use our mobile app, or you use our API, but you hit up epidemic sound.com if you’re a content creator, like anyone looking to make a video, this might be a YouTuber, a tiktoker, Instagrammer. Might be Netflix production company, ad agency, but also fortune 500 companies, mom and pop stores, or basically anyone wanting to tell a story, and you take out a subscription with us, and that subscription is super valuable because, dissimilar from basically all other services that provide music on the planet, you get access to a our catalog of music, which is, if you ask me, sensational covers, like a quarter of a million pieces of IP, every genre that you want, but there’s like a very particular component. On it, which is all of our music has been curated and commissioned by ourselves, and we’ve not invited the traditional music industry to participate in the sense that we don’t work through pros. We do it ourselves. We don’t work through neighboring rights organizations, nor through record labels or publishers, not because we take issue with them, but we just came to the conclusion that if we can be a one stop shop, we can provide such an incredible service to our customers, because we can say this seminar from everyone else, we’re a one stop shop. You don’t have to clear publishing separately, public performance, neighboring rights, as long as you pay the epidemic subscription, everything is included. Yeah, and that was like a deal changer. So the first component was reinventing how we acquire music, and in that process, how we compensate artists. And then the second component that we built out over the ensuing decade was turning that into a software company, as in, what are the tools, what are the platforms, what are the recommendation what’s the data set? What are the AIS? How do you find music? How do you adopt it? How do you use it in your content? And then how, how do I distribute that across the YouTubes to TikToks, the Spotify, basically all the platforms around the world. So that’s kind of how it started. And I’ll, yeah, I’ll just pause that, because there are so many more layers to it, right? So there’s a lot there. And you touched on artist compensation, which I do want to get into, but I, but just to, just to clarify, if I to make sure I have this correct.

Ari Herstand
So because there are so many creators right there, everyone is a creator now with the smartphone and with Tiktok and YouTube and all of that. So historically, we all remember, kind of at the onset of YouTube where creators would would upload videos that they would make at home, and it’s slap a song on it, and then it wasn’t monetized. Initially. Then the labels, the majors, weren’t thrilled with that, because they weren’t getting compensated for their their music being used on these YouTube videos. So then initially, the majors like take it all down. If we can’t get paid, no one’s gonna be able to use this. Then they smartened up, and they’re like, well, all right, let’s figure out a way to come together and monetize this. And so YouTube created content ID, and so it enabled, now this payment structure in place. And so the majors were like, All right, well, if we can get paid, fine, just slap an ad on it. We’ll make some money from it, and that’s been worked out over the years, but now it’s what you’re saying is that creators can now come to pay a pay a subscription, have access to your quarter million songs and use any of those songs without fear. And I guess I should say, the professional creators who are making revenue from this don’t have to worry that a third party is going to come in and issue a copyright strike or take some of that revenue away because they have legally licensed the

Ari Herstand
song from Epidemic and you it’s cleared on YouTube, it’s cleared on Tiktok. No one’s going to come after them, and they know that they can use that music royalty free,

Ari Herstand
or at least in their mind, I should say it’s, it’s, I don’t know what the you define it as, like the legal term, but they’re going to be able to make money from it. And is that, is that more or less correct? Is that how that works?

Ari Herstand
So I think that’s a great summary, and it invites to a few clarifications. So let’s get into it. So the first thing that I would define is, what did we do differently from a music perspective that allowed us to vastly simplify the life of video content creators? Yeah, well, we took a contrarian opinion in terms of music and music ownership. So prior to Epidemic 16 years ago, the way you should think about it, or the way I think about it, is that every single track on the planet Earth was represented by multiple stakeholders. And so think about it the following, like there was an artist that was played a role in putting this track to the world, and as a consequence, they didn’t own that track, but they had a claim. So let’s make up 16% of any future revenue generating from that track. It might be sync, it might be royalty, it might be licensing, like all of the above. Then there was a songwriter, and he or she had, let’s say, 22% claim to any future revenue from that track. But then there was a studio musician, a producer, there was a record label, there was a publisher then, and they all said that we want 7% we want 22% we want 9% so everyone was making a claim in this track, saying that we have some portion of the future value. Like nobody knows what the value is, but whatever it is, we want our share right. Then in came the pros, and they said, Hey, we want to represent you guys to help you collect public performance. So we’re going to take 7% off the top and then take 7% in fees. Then came the neighboring rights organization. Said, Hey, we want to help you as well. So we want to leverage on and so it went. And so ultimately, you had all these people with the best of intentions. They all represented fractions. It’s called fractional rights. And you try and tally up everything, and you would always come to the same outcome. So the tally would always be more than 100% in that everyone tended to overstate their claim, right? So that was problematic, but it got even more complicated, because then the next thing happened, which is they tended not to agree with each other like they were. Well, I’ve sang this song, yeah, but I wrote the song, yeah, but I recorded it. I paid for the recording. I’ve sort of taken the songwriters through their dry spells and the good parts, everyone felt under compensated. So they would fight internally. And then, if anyone wanted to use that track and license it and sync it in a piece of content, whether it was a Super Bowl ad or a YouTube video or anything, the following had to take place. You had to negotiate individually with every single person who had a claim. Why? Well, because they all had a veto right in that, if everyone wasn’t aboard, one person could say, You know what, I’m not happy. I’m going to declare my veto. And nobody can use this track, and nobody would use that track, because, like per the US, there’s statutory damages, right? So anyone who would go against that and infringe, you’d be liable to statutory damages, which is roughly $150,000 per infringement. But that’s the traditional model of music representation. So 16 years ago, along came Epidemic like five founders, ambitious, some would say, naive. And we said, Okay, we want to do one thing better than everyone else. We want to help soundtrack the internet, because it’s all going to be video. Do we agree that fractional ownership isn’t going to help us solve that? And we all said, Yes, like what would and then we said, well, it depends, like, what’s in the best interest of the world’s artists. What do they actually want? And so we dug in, and we came up with two things, like first principle. And we said, the first thing that we believe is, like, really, important is distribution. If you are an artist and you have a voice, you have a specific point of view, you’ve created something you want as many people as possible to hear your music like that’s that’s goal number one. Okay, let’s try and solve for that. We said. And then we said goal number two is we need to help them monetize, because they need to make a living, right? And so these were the two things that we wanted to optimize for. And this is where we placed a huge contrarian bet that a lot of people thought was blasphemy for lack for better work. And we said, in order to help them distribute, in order to help them monetize, we’re going to ask artists to sell us 100% of their rights. So we’re only going to commission tracks through complete buyouts, and when we do those buyouts, we can’t have other people in that transaction, because we want to own 100% so pros, nros, like labels, publishers, we didn’t work through those companies because we said we’ll build what they provide ourselves, it’s more important that we have all the rights in one place so that we can own the entire track right now, initially, musicians asked us, like, Why? Why is that important? Because everyone has taught me like, the DNA from being a kid growing up making music was, if I own my rights, I can always make sure that I can monetize, distribute like that’s my insurance. And we said, Sure, that’s the old world. And if you’re happy with that, by all means, stay here’s what we believe. We said that if you allow us to acquire 100% of the rights, we’ll be in a unique position such that we can start to reach out to content creators, TikTokers, YouTubers, production companies, as it was in the early days, and we would say, hey, Ari, this similar from all other music in the world. We own 100% of our rights as such. We can indemnify, we can warrant that if you pay the Epidemic Sound subscription, you can use our music in all of your content, in all the commercial scenarios you can think of now and in the future, across all platforms, in all jurisdictions, you don’t have to pay to the pros. They don’t represent us. You don’t have to pay to the record labels of the publishers. They don’t represent us. We’ve done a full transaction, and that way, if you start using us, you are free to there’s no looking back, yeah, and that was a game changer, because that that was like product market fit, so everyone started to sign up, yeah, yeah. And that was really important, because when we started to sign up, initially the broadcasters, production companies, the ad agencies, initially people, they. Thought that we were like cute, because they thought that you’re going to help serve music to media companies because they’re the only companies that make content. We would buy it our time. And we say for now, yes, but over time, we think that every single company on planet earth is going to make video, because everyone needs to create compelling content to attract talent, to keep their customers happy to onboard their staff, to help people their software, to promote their products. Like, there’s going to be content everywhere, so everyone is going to need this. But the beautiful thing was that we had this unique proposition because of the legal setup of our IP such that people started to sign up in huge amounts. Like we got to a point where we were signing up 1000s of customers per week, and these people were bringing in millions of viewers. So suddenly we got the point where today, epidemic, 16 years in roughly 70% of all the world’s most prolific storytellers, if it’s Mr. Beast, if it’s Netflix, if it’s sort of content creators, multi channel networks, they all have subscriptions with us because we provide so much value for them. So we got massive distribution.

Ari Herstand
Yeah, yeah, okay, I and I know you’re probably going to get to that second point of the artist compensation and monetizing this content, because what, you know, my initial gut reaction when you say you’re, you know, simplifying, or you’re, you’re getting 100% ownership, and you’re, you’re kind of removing all of these organizations that have been set up to help pay artists like that is the reason for performing rights organizations, the reason for neighboring arts organizations, reasons for publishers, all of that is to help get artists and songwriters paid. So if you remove them, my initial gut reaction makes me think, well, artists are just going to be making a lot less now because of this, because now they don’t have the ability to collect you said you you know you can’t. They have to resign from their performing arts organization, or they can’t be part of the Performing Rights Organization. Okay? Well, traditionally, if I got a sink on a big TV show, I would be getting paid. I still get paid. I still get checks from ASCAP, from my pro, from sinks that I got 15 years ago. So, like, where’s that money? Now, if are you like, Are you acting as another pro, or am I just does the deal with epidemic? Is that the trade off that I just have to give up all future royalties if I’m going to work with Epidemic Sound in the belief that what I’m going to get paid up front is going to make up for what the royalties I’m going to make on the back end? Or tell me how, you know, artists can justify

Speaker 1
that. Yeah, so super valid question, and very to the point I love it. Okay, so here’s how we thought about it. Our goal was primarily to soundtrack and still is to soundtrack the internet. So that’s where we beat the majority of our efforts, the majority of our time. That’s what we invested over the past years, hundreds of millions of dollars. And so the world we entered was the following, like YouTube was early to the game, and they established the Creator economy so a content creator can put up content YouTube will find advertisers, and then they find a way to split the advertising revenue between YouTube and the content creator. Here’s the kicker, though, they don’t allow for a three way split, as in, you can’t divvy up the revenue between the music the video creator and the platform itself. It’s a two way split. And so content creators were felt were faced with a problem, like, if I put music in my video, 100% of the revenue, like my entire livelihood, will disappear because the music IP owner, because they have no other recourse, no other way to monetize, will have to take all my revenue. I will be out of business. And so back in the early days, there was something called the value gap. They couldn’t make it work. It was a very difficult equation to solve for. This is when Epidemic came in and we said, Okay, so here’s the thing, if you pay us a fixed subscription fee and you use our music, you are free to keep all of the revenue in relation to the video that you made, because we’re happy with the subscription, we’re guaranteed payment. That way we could solve like, a very big problem for the platforms out there, the YouTubes out there, for the content creators, and we could start to build like a premise or a promise for how artists could get paid. And so here’s what we did in terms of compensation. How does that actually help artists? Well, we said the following. We said that we want to build a world where our compensation towards artists is not only fair. It never stops evolving in the sense that we’re going to constantly be adding new components, or pillars, as we call them, to our compensation towards artists. So we currently hit four pillars, and let me break it down how we got there. So the first thing we did is we said that since we commissioned tracks, we. Like we want to pay money upfront. We want to put our money where our mouth is, because we’re acquiring all the rights, and we acknowledge that on the off chance that this becomes a hit, like we’re going to keep on receiving the subscription revenue and the artist initially isn’t. So we need to do right by the artist. And so throughout the years, like the upfront payment that we provide when we commission a track has been constantly growing to that today, it’s anywhere between two to $8,000 which we pay upfront per track. It’s not recoupable. It’s not alone. It never gets clawed back. If that track gets played zero times, it’s completely on us and the artist keeps the $8,000 before I go to the next pillar. It’s interesting to just recognize the way that we acquire tracks is that we have 10s and 1000s of artists that reach out to epidemic every single quarter because they really want to write for us. We accept zero point 16, 0.16% you basically have to be a Grammy Award winning writer or music or artist today, in order to surpass our quality bar, because that’s the level we’re at. And so what’s interesting the way we choose who we want to work with, is through data, in the sense that you referenced 2.5 billion, and that was right for a couple of months ago. But today, our music gets played 3 billion times a day, like that’s the equivalent of 20 Super Bowls every single day, 365 days per year. And because it’s music, it leaves the signal, it leaves a trace. And because we own all the IP and we’re a software company, we collect all that signal. So we literally have a dashboard, a command center in Stockholm, Sweden, where we can see what the internet sounds like. We get 3 billion pieces of signal every day. So we see what tracks are being used on YouTube, on Tiktok, on Instagram, what’s being added to Spotify, what’s being skipped in playlist, what’s being added, what’s being liked, what are the comments on YouTube, who’s downloading? What’s the skip rate for different tracks, and so in real time, we can see what the world sounds like. We understand what’s the demand and what’s the supply. And every single day, we ask ourselves the question like, where is there insufficient music? What is the world looking more of? And that gives us signal how we commission tracks. We do an editorial selection as well, but we get all of that data, so that tells us this is what we should be commissioning. So that’s pillar number one. We get to pillar number true two, which is something we call a soundtrack bonus. So here’s what we did. We said that, how can we help artists be more interested in the art of sound tracking, because in the early days, like they didn’t care, like, this is my song, take it or leave it. It’s amazing. And we said, Yes, sorry, it’s a great song, but we’re in the business of sound tracking, so your song needs to be super relevant. It needs to strike a chord with a content creator who wants to use that track to help tell their story. Like, element, elevate an emotion, strike fear in the hearts of men. Desire like, turn something into scary, turn something mundane into something epic. Because the way we think about it is video without music is like food without taste. It’s like it’s dead calories. It’s like human fuel. It’s not memorable. It’s not unforgettable. But if you add flavor, if you add umami, it becomes great. So we needed to find a way to sort of inspire and incentivize artists to really care about I wonder why everyone loves my intros. Why does nobody love my drops? Like, what’s wrong with my vocals? What do you mean? I can’t program drums because we had all that data. And so we created something which we call the soundtrack bonus, which is we set aside a part of our revenue, which is now several million dollars. And we created something called the soundtrack bonus, where we said that every year, every month, every week, like the proportion of tracks that get downloaded that come from you. Ari, let’s say that you account for 5% of all the tracks that get downloaded from epidemic, which would be an epic amount, given the size of our library, but you would then receive 5% of our soundtrack bonus, which is several million dollars per year. Because we wanted to help you understand we created a dashboard where you could see what tracks are being downloaded, what parts of my tracks are being used. The most people love my bills, but they hate my vocals. Okay, I’ll try and redo them. What do you mean? Too much reverb? Not enough? What do you mean my endings are too slow? We would play back all that data such that artists became incentivized. So there was this soundtrack bonus based on, if your music gets downloaded, you’ll make even more money. So it’s based on your pro rata model and streaming services where you make the percentage of the revenue that DSPs pay out based on the market share of streams that you’ve received, is that similar? Is that how that works? And what’s the percentage that you’re paying out? Then loosely similar. So it’s loosely similar, so it’s a single percentage of our total revenue. But. But this is still just a second pillar. So this is where things get really interesting, right? So the third pillar is a kicker. So a few years ago, when we realized that our our footprint in online video is huge, and all of our customers are telling us, like guys, and these are content creators in general, and YouTube creators in particular, so the Mr. Beast of the world says, reaching out and saying, You know what our number one comment is on many of our videos. And we go, No, and they say, We love the music you guys are using. Like the music in all of your shows. Your content like is so compelling, it’s so good, we really want to listen to it on Spotify YouTube music. These are Apple take your pick, but we can’t find it. And so content creators were reaching out, being super frustrated, and saying, how can you help my listeners who enjoy my content fall in love with your music? They want to find your Music. What’s Up? And so we took a step back, and we said, okay, perhaps we’ve inadvertently created the world’s most efficient launch platform for new artists and discovering music like we soundtrack content like no one else. What if we take all of our music across our entire catalog, and as soon as we publish it on epidemic, soon as we commission and we green light the new track, we’ll parallel publish it across all other music streaming platforms in the world because we think that a proportion of all viewers are going to be encouraged to be listeners. We use Shazam, we use links, we use technology. We have, like, a myriad of different ways to drive that. And we got to work. Initially, it was off to a slow start, and then it exploded. And so today, our music is played more than 20 billion times across DSPs around the world right now, we collect 100% of all the royalty that they generate, the master side, the publishing, the neighboring rights, everything. There’s no middlemen. So we get 100% in that revenue. And so here’s where our third pillar came into play. We took a long, hard look at the traditional music industry, and we said, how much of all the royalty that accrues does typically get paid out to artists? And the answer was, historically, not that much. There were minimum guarantees, there were recoups, there were some different setups. And so we took it over. Yeah,

Ari Herstand
that if you’re looking at a traditional major label artist, that’s true, but, but now we’re not in that era where Spotify said over half the money that it pay out goes to Indie labels. Independent artists have about a 35% market share of the global revenue and self released DIY artists that release their music through a DIY distributor, you know, like a district kid or two loss or something like that. They have, now about, we have 6% of the market share, which so, so artists do get 100% of that. So, yes, I mean, I do want to clarify. You’re talking a historic model from 30 years ago, but it has shifted quite a bit. So okay, but do continue, definitely,

Oscar Hoglund
right? And so here’s how we reason. So we said the following, okay, so we’ve we’ve commissioned the track, we’ve paid for it upfront. We own the rights we’ve marketed to the world, but we think that if we are in true partnership with the artists that we work with, we want to share all of the royalty that we generate straight down the middle, like a 50/50, split, okay? And we said we want to do it in perpetuity, such that if you stop working with us and you start doing other things, you join pros or record labels or publishers do other things, we’re going to keep on paying that in perpetuity. One, because it’s the right thing to do. And two, we think it’s an incredible strong signal to show that, like we’re very confident in our model. So we started doing that, and we started racking up 10s of millions of dollars every single quarter, we started paying out 50/50 splits to all of our artists. And so suddenly word started to spread that, okay, if you start writing for Epidemic, you get guaranteed payments upfront. You get free marketing across the world, like people see you work, you get distribution, you get something called a soundtrack bonus. You get 50/50 splits in perpetuity. And then the final component is, we said that as we look to our employees over time, we encourage them, we try and make them shareholders and Epidemic because they contribute to the long term value of Epidemic. And we said, why wouldn’t we do the exact same thing with artists? If you work with us for a specific set of time, we want to allow them to become shareholders such that we create long term incentives. So to date, we’ve come up with four different pillars for compensation. So guaranteed upfront payments, soundtrack owners, 50/50 splits, and then they become shareholders in epidemic. So on average, an average content creator at epidemic makes between 60 to $80,000 per year. People who tend to make more, they make hundreds of 1000s of dollars. So we don’t have the extreme outliers like the 10s of millions or the millions of dollars, but we’re very happy in that we want to help create a sustainable, large group of super talented artists that get some. Predictable revenue that they are guaranteed for every track they put through and marketing and 50/50, splits.

Ari Herstand
And how many artists did you say you have working with Epidemic?

Oscar Hoglund
So it varies. I’d say that in over the years, we’ve worked with 10s of 1000s of artists, right? Because some of them come and go, some of them stick around. They go out touring, and some have sustained for a very long period of time. In any given month, we commission and we release hundreds and hundreds of tracks, and so in any given month, we’re working with hundreds, sometimes 1000s, of artists on a monthly basis. But they can vary in terms of who gets commission, who has time, who’s touring, who’s doing other things in parallel? Because a key component of how we work is it’s non exclusive. We don’t believe in locking people in, like we if it were up to us, we would love for artists to be part of other pros, labels and other things. But the devil’s in the details, because if you look at the agreements you sign, if you want to join a pro or something, you have to agree to. Everything I put out there has to be under your dominion, and that makes it impossible for us to acquire 100% of the rights, because they no longer control all the rights. They’ve receded those rights. And so that’s the only reason why artists, do you have, oh, I can get back with a specific number. I can give you the result, but it’s something that we’ve done over the years. So we have,

Ari Herstand
yeah, so All right, so you’ve had 10s of 1000s of artists that you work with, hundreds, maybe 1000s a month that are regularly released in music with Epidemic Sound. You have certain number of shareholders that have been with you long enough where they now are equity participants with epidemic but, you know, I still am kind of getting back to you like, Yes, I will be the first to say that the traditional monetization model of the music industry is tremendously flawed. It was set up over 100 years ago, long before the internet. A lot of the these publishing and songwriter royalty rates were based off of player pianos back in the day, and that’s whether you get the mechanical royalty right. And all of this is is tremendously flawed. There’s no argument there. It’s way too complicated. I appreciate that you have simplified this structure.

Ari Herstand
My my worry, I guess, is that as you as epidemic starts to take up more and more market share of the recorded music industry. And like, yes, you started with SYNC, but you said you moved into streaming, and it’s very clear what you’ve you know,

Ari Herstand
the footprint that epidemic has now had in streaming, when it comes to especially the lean back playlists. And I know that you said it inspired. It was inspired initially by people on Mr. Beast videos commenting, What song is this? And we’re just gonna put the song out there and like, yeah, they can go find the song. It’s not as innocuous as that. It’s not as innocent as that, because, you know, it is epidemic has now leaned in with DSP, specifically Spotify, in getting kind of the front loaded on a lot of their lean back playlists, their functional music playlists. And, you know, Spotify will, of course, they have a lot of these, like study or meditation or chill beats or Lo Fi beats or whatever. We all know these tons of playlists, and oftentimes, epidemic has a large proportion of the songs in those playlists. And you know, there was a book that came out not too long ago by Liz Pelley, and where she talks about, you know, how a lot of the these playlists used to be from self releasing artists, and those artists kind of got removed, and now they’ve been flooded with Epidemic Sound artists and songs and recordings and stuff like that. But the trade off is, is that Spotify will prioritize these, these, your songs, into these playlists. But the trade off is they’re going to pay you a lot more. Lot less than the going royalty rate. And so now artists, especially self releasing artists that aren’t working with epidemic, because you said that threshold is so high, no artist is going to be able to work with Epidemic. Fine. Appreciate you. Keep the quality up for your customers. But now all of us are having to compete with Epidemic, with your massive catalog of, you know, quarter of a million songs where you’re like saying to Spotify, yeah, keep that royalty rate low for us, which then now hurts kind of the rest of the music industry, and is making us kind of try to take, making us take lower and lower royalty rates, except we’re not being prioritized like you are in the Epidemic, in these these official Spotify editorial playlists, because you’ve now struck these direct deals, these licensing deals with the DSPs, where you will accept the lower royalty rate because they’re going to juice up your place and so. On a massive scale. This works beautifully for you, because you’re you’re doing a big numbers game. But this is my concern for the rest of the music industry, especially independent artists, who are not with Epidemic Sound is now we are suffering the consequences of those actions because we are not being juiced up and prioritized because we don’t want to accept the lower royalty rate from Spotify. But you’re okay to do that. So can you speak to that a little bit?

Oscar Hoglund
I would love to.

Oscar Hoglund
Okay, so there’s a lot to unpack here. The way we the way I think about it, is the following. Seven years ago, I was asked to come talk at my youngest son’s school, and the kids knew that I was into music, so everyone was anticipating that I would go off and start saying, Well, I work in music. Well, I didn’t. My opening phrase was, Hey everyone. I’m Seth, dad. My name is Oscar, and I work with emotions. Like, that’s what I do, because we’re in the SoundTracking business. And ultimately what SoundTracking is and what music is in the SoundTracking context is the voice of emotion. Like we help create emotion, and over the years, we’ve become incredibly good at doing exactly that. And so we started to build a rapport. We build a knowledge. We build a great sense of pride in how do you characterize, how do you capture, how do you amplify emotion in visual content storytelling? And the answer is, you do it by practicing. And so we put our heart and soul into doing that, and over time, we were really, really good at it. And the first foray into streaming was exactly how I attribute it. So it was driven by our content creators who said that everyone wants to listen to this content. There’s huge demand. You should upload it to everywhere. And granted, the first stop was our friends at Spotify, because their office is less than, like, a couple of miles from downtown Stockholm. As we said, here’s what we believed, so we uploaded it, and sort of there was traction. There was something there. But over time, to your point, it evolved into something else. And the word I would use, I’m not sure what your word use, I think you said conspicuous or something. I would say it’s much more structured, because what happened in parallel is as the album construct, in terms of consumption, started to disappear, and it shifted and moved much more into playlisting, there was this pent up demand in terms of people wanted music that was fit for purpose. And so as all platforms experimented and Spotify, I think definitely led that charge, because they’re ferocious learners. They were sort of ahead of of the product game. They started to realize that people want music specifically for studying or for running or for working or for vacuum cleaning or for dog walking, for sleeping. Like it turned out, there were a ton of different circumstances where the feeling, the emotion, the overarching vibe was incredibly important, that it was consistent, that it was diverse enough to make it interesting, but still could appeal to a distinct group of listeners. And so we started to say that we’re really good at this, and this is where I think that people need to be either flexible. I’m not going to say honest. I’ll just share my opinion. My opinion was, when we moved into this space initially, and we started doing this, we were shunned. We were ridiculed. People call us fake artists. They call us Muzak. They call us like lesser tier artists, which was deeply insulting, not to me, because I’m a grown up, but sort of, I would say to the incredible artists that we work with, because historically, like that was frowned upon. Like bar Brian Eno, this was a place where, like, you wouldn’t put your music in background because you would. It was called Musa. Let me just finish, because, like, the variety in these playlists, initially, when we started, was minuscule. It was all like back catalog from traditional major labels, like nobody would write specifically, nobody was to write towards understanding. What were the different emotions? How was this evolving? And so we So, I have friends in in the gaming industry, and I think that this is like an apt analogy, like, in the gaming industry for the longest time ever, like everyone wanted to do shoot ’em up games. And if you weren’t doing a shoot ’em up game, like, kind of like do ’em or sort of Final Fantasy game or something like that, basically you weren’t respected. And then, sort of suddenly, somebody stumbled upon these casual games which were more geared to women, there was virtual candy being made, and it was everything but the cool, sort of killer more games. And a select group of companies like really said that we’re going to take huge pride in doing this. The rest of the industry is saying that this is sort of less valuable. This is not where the cool kids and the cool players should be. But we’re going to take this with a huge. Amount of pride. And so that’s exactly what we did. And so we lent in. And so for the first couple of years, there was like zero respect, there was zero tolerance. But I think that that entire part of the music industry now, I think the assumption is that it’s something like 2% of the music industry, approaching three, four, and can probably grow to five, six. So there’s, like, a huge demand, the amount of music now coming into all DSPs, not just Spotify, like we get a fraction, a fraction of what we get, what we produce gets placed because there’s fierce competition. We do not have, like, any specials of treatment like there is a lot of incredible music constantly being pushed and pitched to these playlists. And to the best of my knowledge, you have to talk to DSPs. They live and die by if their customers are getting the right kind of music. So it’s plays, it’s likes, it’s Listen, it’s skip rates. So that’s the determinant. So these companies can’t afford to have any other sort of prerequisite. I don’t know the exact splits, but sort of, I know there’s a we get super fairly paid. I think we should get more. I think all music IP owners think that they should get more. But sort of, we have, like, a very fair and a super transparent setup with all the different DSPs. So I’ll pause there, but that’s how I see the space evolving.

Ari Herstand
I’m curious. I mean, was that part of the negotiations with your friends at Spotify down the road, when you said we have all this great functional music, and they said, Okay, we’re gonna, here’s gonna, this is the licensing rate. And can you speak to what that licensing royalty rate is because it is documented that it is well below the market rate. So I’m just curious, why did you license your catalog at such a lower rate than what the going rate for labels and distributors are with Spotify?

Oscar Hoglund
So our music is on. I think it’s 41 or maybe 42 DSPs, of which Spotify is one. I think the rates that we have with all different DSPs varies. Some are higher, some are lower. I don’t disclose exactly which one is where, but it’s very much like a band with which in they all move. I think nowadays on all platforms. For me, I think that if I look at the marquee programs, if I look at so there are tons of different programs across all the different DSPs, where there are different ways to promote, sort of your my music, your music and other people’s music. To my knowledge, that’s a super fair like transactional field, like willing buyer, willing seller. You can sort of get placements in different places. You can get recommendations. Ultimately, it’s about music marketing, and so I I’m very careful about speaking on other companies behalf. I don’t know what other people’s bits are. I don’t know what the setups are, but so I find that it’s a super like in general, competitive space. I think it’s an area where, like, there’s like, general, if not price increasement. I think that the latest thing, if anything, is Spotify made alterations to their terms in terms of how many streams you need to get played a certain length. There were these updates made which were across the board. And so I can’t speak to anything preferential. Rather, it’s a space that’s constantly changing.

Ari Herstand
I’m just I’m familiar with everything you’re speaking about. You’re talking about discovery mode, where artists give up 30% of the royalties and they’re gonna get prioritized in these radio and other playlists. And you’re speaking about the new policy last year where they implemented that’s songs that get less than 1000 streams in a year aren’t going to get paid. I’m asking more specifically, the licensing rates that you struck with Spotify. And let’s just speak to Spotify, not the other DSPs, because they’re the biggest right now, and they’ve been, you know, reported on the most, if it was in those initial conversations, as as saying, you know, it’s, going to we’re going to give you this. You give us this. So it’s essentially, we’re going to put you in a lot of these playlists. We need to help. We need to fill these playlists, and we’re going to pay you this, which is a lot less than what we’re going to pay other labels.

Oscar Hoglund
Yeah. So I want to unequivocally say there was nothing of that tit for tat. You do this, you get that. That just simply didn’t happen.

Ari Herstand
So why did they prioritize your tracks? Because it is reported, and a lot of artists have have shown their royalty statements that say, when I when I get paid from Epidemic Sound, and I compare it, you know, apples to apples here, the royalty rate is, is a lot less than if I were to just go straight from, you know, through a DIY distributor, even understanding Epidemic’s 50/50, split. So, so they have, you know, and I know these rates aren’t like public because of under NDAs and whatever, but artists have shown these rates. And so I’m just curious, why did Epidemic get prioritized in a lot of these lean back functional music playlists? Early on, and why did they replace all of the other artists and prioritize epidemic songs in there initially? We’re talking 567, years ago, when you started where you kind of took over the market, you took over that space.

Speaker 1
So I think that there are two, maybe three things that come to mind. I’d say that the first thing that comes to mind is, I think that the reason we were successful in the beginning and still are, is, I we took it incredibly seriously, as in, we have 600 employees, half of them are engineers. We work with 1000s of artists, and dissimilar from many other companies, we said that we put a huge amount of pride in what we do. We’re going to put out hundreds and hundreds of tracks per week. We’re going to listen to everything. We’re going to see how our music performs, how what the comments are, how playlists change, how their update, what the new releases are. We’re going to throw everything we have, and we’re never going to apologize. We’re never going to take a position that this is something that we’re not proud of, that this is a lesser art form, on the contrary, like we want to be best at this. And so I think by doing that over time, we earned, like, a lot of following, a lot of understanding, a lot of knowledge. And we got to work with, like, more and more artists, more and more talented, both songwriters, producers and the and artists in themselves. And so we started to accumulate a lot of knowledge. Now, the second thing that I will say is, again, I’m not going to speak on behalf of anyone other than ourselves, but we did not take over, as in, like we put out so much more music across all platforms than got placed and in many cases, and it still is like a black box. We do not understand what gets picked or what doesn’t, and so it’s very much like a competitive field, whether it’s Apple or Amazon or if it’s Spotify or any of the other bigger players they do either algo or editorial or algatorial. Different platforms have different approaches. Some use machines, some use humans. Some use a combination. Some are feeder playlists, bigger ones. I think it’s very much a meritocracy, right? And so, because there’s so many different suppliers in there, I think that that’s what merit said to your final point in terms of remuneration and compensation. You’re right. We don’t talk about that, similar to people typically don’t disclose their salaries. We don’t talk about their private negotiations. But what I can talk to is, if you look at what we do structurally, when we strike deals with DSPs, we typically don’t use pros. We typically don’t have majors or sub publisher or distribution deals, because if you tally all of these up. There’s 7% fees here, there’s 6% there. There’s loss of data here. There’s one year delays in some payments. There’s quarterly adjustments. There are transaction fees for switching US currency to European currency to Swedish and vice versa. There are so many steps Ari, if you tally all of them up, I would not be surprised if that number is high double digits in terms of the total initial royalty payouts. The huge difference with Epidemic is that we provide the service of all of them within one entity, such that the efficiency gains are significant. So again, I can’t speak to what everyone else makes, but I can speak to if you compare, and I’m not privy to what you’re talking to, but if you look at the amounts that people are making, like it is significant, like we are incredibly proud of the setup, and how so much more is flowing back to artists. Yes, granted, not through the traditional outlets. But I want to make it super clear, I have no intention of casting any shame on anyone else in the industry. Nor do I want a monopoly like on the contrary, when we launched Epidemic 16 years ago, we were deeply troubled, because it used to be the case that the best of our generation, the coolest people we knew, they wanted to be artists. They wanted to express themselves. They wanted to be like on the barricades. But music, back then, was stricken by piracy. It was non transparent. It didn’t work like it didn’t sit at top of the cultural pyramid. So our number one concern was like, how do we make artistry cool again? How do we make being music like something which is both sustainable but also aspirational? I look at where the world is now, and part of me is happy, part of me is worried, because previously, the number one desired, uh. Job if you were growing up as a kid in the US for 50 years, has apparently been astronaut, and for the last five years, it’s changed. Everyone wants to be an influencer. And I’m slightly undecided. On the one hand, I think it’s great, because if everyone has a voice and they want to influence and they want to participate in the world, that’s great, but if all of that is just passing commentary on other people doing other stuff, and you’re not really applying yourself, then I’m deeply worried. Yeah, and so, like, we want to try and help usher in, like, the best version of the Creator economy that we can

Ari Herstand
Yeah, and I and that those are all fair points. And I, I’m curious, you know, you spoke to a bit ago, when you said you first got into this, you got a lot of shade, because people are calling you fake artists and stuff like that. But, and I do want to speak to that for a second, because where the fake artist label actually came from was not that it came because nobody cared who the label was, that was Epidemic Sound or whatever they didn’t care about that. It was that in which still exists is that you go to the Spotify profile of the song that’s getting millions of streams on the playlist, and you see that this artist doesn’t exist. They’re a fake artist. And everybody you know Spotify argues, and you probably argue, Well, those are real human beings behind it. It’s not, you know, but they’re not. But there’s no social presence. That name was made up yesterday. It’s aI generated artwork. There’s no bio, or maybe there’s like an AI generated bio. So that’s what they meant by fake artists. It was that it was clearly someone or an organization or multiple people, whatever, essentially trying to game the system and and and trick people, essentially in that these are real artists, working artists, which they’re not. It’s like they’re trying to, you know, it’s on the same platform as Beyonce, but they’re not touring, they’re not releasing albums, they’re releasing singles. And it’s to fill this very specific need, like you said, and the need was for these lean, back, functional music playlists that people want. It listeners actually wanted. And so, you know, it’s the shade was, because it people felt duped. And it was the, you know, the fake artist was, because you look at hundreds of 1000s of profiles now, they have a few songs. The name is made up. There’s no bio, there’s no social they’re not real working artists, as we would understand what an artist is, and so, and I know, you know, epidemic saw that, and I believe that then you asked your artists, or maybe required some of them, to release this music that they were creating on their own profiles. So they’re saying, no, we want to get around this fake artist thing and put them on their own profiles. But then, you know, because I know, like you said, you’ve studied these playlists, and you created music for it, and you became really, good at that, and that’s that makes a lot of sense, why you kind of took over there. But I’m curious if these artists, then, if they’re initially making music for epidemic and the opportunities you’re bringing them to be background and soundtrack the you know, soundtrack the brand, soundtrack the videos, and now soundtrack these playlists, but now they’re having an identity crisis, because they’re like, Well, I have to, I’m making this money. They’re buying these songs outright. I don’t really stand by the music as a under my artistic, creative vision, but I still want the paycheck. But it doesn’t feel right putting it on my own, my own artist profile. I would really, actually love to put it on a fake artist profile, and so I that’s where I guess, you know this creativity and this creative vision, this is where I see that some artists might struggle with

Oscar Hoglund
that. Yeah. So first off, I love the way how you’re asking these questions, like it’s it’s head on, which is amazing. Like, thank you so much. Now, let me tell you exactly how we got to where we are today, and then I’ll let you and or your listeners, be the judge of whether your narrative or what I’m telling you is what resonates with them. Going back to the foundation of Epidemic. We said, like, specifically, we want to be the best sound tracking platform in the world. As such, we’re looking for versatile artists, musicians who are willing to take direction from us. We’ll give you feedback, and we have a specific purpose. You need to be an amazing artist, but make no mistake, like this is in the service of emotion, and your music needs to be of such predisposition and quality, such that it’s sinkable, such that people want to use it to tell a story, to emphasize something. And off we went. And we started to sign up 10s of artists, Hundreds 1000s, 10s of 1000s, the common denominator were that they tended to be multi talented individuals who had a knack for taking direction. As to my point, here’s the data. We need much more. Polka now. Ari, now we need something which is vital. Funk like this is like we’re doing. An orchestral work, didn’t you used to play classical guitar, not just electric. And you said, Hell yes. And so we would ask them, like, put out all these different kinds of music under different genres. And the more they put out, the more talented they become at adopting different genres. Eventually, we started to upload all of our music, as I said before, to all the different DSPs and like, we get to a point where our artists were telling us not the other way around. Like, so guys, I’ve come across as a schizophrenic. Like people think that I’ve had a stroke. I put a Polka one day, and the next day I put out an R&B track. Then I go into like, full on yodeling, and the next day I’m putting together a best of sound effects medley. Like, I cannot put all of this under my name. I’m just like any like, I’m like any actor, they would say, like, if I see Daniel Craig, he played bond in one movie, but he played someone else with in a different film, and he did someone else in a different film. I have different artistic expression. Like Pharrell, put some stuff out under nerd, some under Pharrell. Like Taylor writes under a certain name, she performs under a second. Like, we all know that Sting wasn’t born sting like Reginald Dwight is Elton John. Like, there’s a long tradition of having alternative names tied to different projects if the music merits it, because it’s that different. And so they started asking us, like, we’re going to put this out under different names, because my listeners are kind of burning up. It doesn’t make sense anymore. And we said, Fine, like, if you want to do that, we’ll accommodate it. So the diamond drew out. There was a lot of this happening. Nobody was putting out social media because we were full, like, steam ahead on. We didn’t have the traditional artist services. There was no media. Like, if you asked me, like the traditional music industry, historically, was more fake, like you would engineer a group like Backstreet Boys, or like something, like people who didn’t know each other. You would put them together, you would style them up. You would put them in context that wasn’t really them. We did nothing of that. Like, stay true to you are make great music. So the the, like, the amount of music that came up got to a certain point where, yes, like, we felt that this is now, like, this is too much, even though you’re putting out a lot of music. What you’re saying, Ari, is, I’m not saying it’s not true, but the way we got there was not some like, let’s engineer and fool people. That’s what I take issue with. We got to a point where, like, this is now at such a scale, like, we need to pull this back. We want to have fewer sort of people like you need to produce under definitely your own name. You can do one or two other things, but we need to bring it back, because we’ve gotten to a scale where this isn’t helping you, it isn’t helping the listeners identify. This is nerd. This is Pharrell. This is something else. It was. It was too much, and so that’s how we sort of it went back. But there was nothing like dishonest, illegitimate. It wasn’t construed on our end. We didn’t push everything. This was follow the artists. Follow their artistic direction, their desire to experiment and create a ton of different things. It got to a point where that needed to sort of be sort of pulled back and much more regulated across all platforms. So that’s how we got to where we are today, which is a bit different from how you characterize it.

Ari Herstand
Yeah, no, that makes sense. But I’m assuming you get back to the original problem that the artist presented to you was, I’m schizophrenic, and if I’m talented enough as a producer to create 17 different genres. All those genres won’t, won’t fit on my artist profile, and so I’m not going to build a fan base if you make me put Polka and electronic on the same profile, that’s not going to make any sense to this audience that I’m trying to build.

Oscar Hoglund
Yeah. And so the way we communicate work and interact with artists is like, it’s super clear to us that every single time we work with an artist, it’s always on their terms, as in, we reach out and say, Hey, Ari, this is what we would love to produce. We think that you’re the best suited person to do it. These are the three tracks in this month that would generate $24,000 Would you be up for it? And then you say, Yeah, I’m feeling these two tracks, but definitely not that third one, like I’ve just come back from Rio by the funk. Yeah, I’m totally down for that. But no, I don’t want to do more yodeling. I hate that shit. I’m totally done with it. And so it’s always the artist saying that, do I want to do this? Or not or not. So there’s no coercion, there’s no commitment. You have to do X, you have to do Y. Artists can, they can leave at their own accord at any time, like we have less than one month, just so we can pay out the last of money that we’re due. The royalties keep on paying sort of in perpetuity, right? And so it’s always very much on the premise of the. Artist and so, like, it’s, it’s always down to them. So they determine what kind of music do I want to put out, to what extent, what part of my catalog do I want to do? A lot of the times they say, no, like, I’m not feeling it. I’m writing something else now. I’m doing a code live with someone else or, I mean, the last example is, I have so many different examples. So last week, like something that really popped up, that blew up with which is an example of somebody who’s been like, just pursuing one specific kind of music. So the big talk of the town last week in Youtube world was this OG YouTube channel called outdoor boys, and they’ve been around for 11 years. They put out more than 1000 videos. And last week, the guy who’s the original creator, decided to call it quits. He’s like, it’s been an incredible ride. His channel has exploded, like he has 16 million followers now, 15.2 or something. And he got to a point where he said, It’s too much. I get so much attention. There are so many fans, people reaching out to me, my wife, my kids. I’ve loved this journey, but I’m going to call it quits. And so he put out this farewell video. It’s called outer boys go and have a look at it. And it went absolutely viral. And so it’s amassed, I think, 16 million views in the last four to five days. And the final track that he uses to sync his entire memory, where he puts together this incredible piece of content like 11 years in the making, is an epidemic artist, because outer boys have been customers of ours for many years. And this is guy called Mattias tell incredible singer, song writer who’s like been has a very distinct sound, and they use one of his tracks, and it immediately goes viral. And so you can pull it up if you want to, or we can put the links so people can go have a look. And so what happens is, in less than 42 hours, he gets almost 50,000 shazams. His Instagram gets a million hits within the first week, his Spotify streams grow not 600 but 6,000% like he’s off the charts on Apple. So he starts climbing charts. He starts being added all over the place like the epidemic effect is like, super beneficial for artists. So there are we want to provide different ways. So some people, they want to do one kind of music, one craft, and it’s 100% their prerogative. Matthias tell is a great example of that. Some people have more of a like, a versatile approach. They sort of, they don’t want to tour, they don’t want us to do something specific. They want to do different versions. And so that’s what they do. We try to be very clear in terms of, it’s your prerogative, like we want to be an enabler. We don’t tell people exactly. We don’t commission that way. We’re saying this is an option that you have no that makes Yeah, it makes perfect sense. Where do you go from here? I know that you recently acquired song sleuth, which helps kind of track down royalties and just like make sense of how remixes are used and different samples and stuff like that, cover recordings, live recordings like that. I mean, AI is kind of the everyone is wondering, what’s going to happen with AI music moving forward. Are you planning to integrate, I guess, generative AI music in terms of in terms of your process? So the two things that I’m most excited about which we have just around the corner are things where we think that we’re 16 years young, and for the first couple of years, I would say that we were a feature in the sense that we were close to a one trick pony, like, if you can evolve from a feature, you become a product. And so a product is a must have. And so over the last 10 years, I think it’s fair to say that we evolved to a product. We have an incredible roster of artists. We’ve built out a reputation, we built out infrastructure, we’ve built out software. We have plugins, we have toolings like we’ve provided the sort of the perfect platform if you want to soundtrack, if you’re an artist, or if you are a storyteller and you want to meet. We believe that we built the best product and the best infrastructure for that to materialize. So where do you go from there? Well, the next step after feature after product is, if you can become a platform, if you can become a platform, you’re more resilient, you can make a bigger dent in the universe. You can help solve more and bigger problems for more people. And so we’re now trying to embark on, how do we become a platform? And we think that there are two important ways of doing that. We. So the first thing that we’re doing is from a pure technical perspective, and so no other comparison, because Amazon is a juggernaut of a company. But many years ago, they decided internally, we need to really invest in creating the internal infrastructure such that we can scale our business, grow the size, grow the compute, grow the logistics, like grow the infrastructure of the business. And so they started to deploy people and passion and content and software and data, and then AI and all of the above, and they built this incredible infrastructure that helped them scale. Somebody, at some point, I think, said that, wait a second, why do we only run this as an internal tool? I think that this is the best scaling tool in the market. Let’s open this up for the wider ecosystem and turn this into an external product. So they opened the kimono. Outcome came AWS and the rest is history. Like Cloud Storage sort of really took off, and Google follow Azure, and they built that industry. I think that’s where the comparison ends. But our version of that is that for the last 16 years, we said that this similar from everyone else. We don’t want to go into pictures or editing or color grading, we only want to work with audio, and we want to try and become the most sophisticated company on the planet in terms of understanding, how does audio fit in the Creator economy? How does it help augment stories and video and DSPS and what’s the connection? What’s the data, what’s the tooling, what’s the software? How do you monetize it? How do you distribute? How do you make sure that people don’t pirate your content, but still you want to spread it. How do you get distribution without forsaking monetization, like all of that? And for 16 years, we built the most sophisticated infrastructure there is on the planet. And three weeks ago, we said that, why do we only use this for our own IP? Why can’t we open this up such that everyone who’s an artist, everyone who has IP or content or songs can, like, reap the benefits of what we built. So two weeks ago, we opened what we’re calling antidote. So yes, it’s a pun epidemic, but like, we want to help you the cure for, like, music marketing and for artists. We don’t just want to help ourselves. We want to help other artists that you were referencing before. Ari. Like, how do we unlock YouTube, Tiktok, other platforms. What’s the date you need to have in place? What are the tools? How does Content ID work? How do you man these different CMSs? How do you make sure that you release claims? What if your money ends up in escrow? How do you collect that? How do you make sure that there aren’t five different people along the way who levy attacks and take money before they pay what’s owed to you, directly to you. How did these tracks get found by Shazam? How did they end up on playlists? How do you make sure that they get published across all DSPs, not just some DSPs? So we’re opening up that entire platform, and we’re saying we can help more than just ourselves. So initially now we started to go off, go after and identify people like who have IP where we really think that we can showcase this is what we’re doing. Because it’s not lost on us that for the first 10 years, we didn’t do interviews, and now, yes, some people know us, but it’s been in the context of some of the

Oscar Hoglund
authors and people and the context you mentioned before. So we want to really showcase that this is what we built. This is the tool we have. The way we think that we should price this is that we’re not going to charge for anything unless we create value. So you have the baseline of your tracks and how they work and how they perform. Allow us to try and help you. If we can’t create any marginal upside, it’s free because then obviously we have no value to but if we can create value, we’ll come up with a smart way, like, what seems fair, like, first you capture the value, and then we see how we share that between us. And so this is something that we’re rolling out. And we were, like, very, very bullish, because we think that this is ultimately what all the platforms want. Like, help with connecting more people, getting them online. This is what artists want. This is what labels want. This is what publishers want, the content creators. Content creators want access to more music, more variety, like much more content out there. So we want to help, basically challenge ourselves, as in help sort of platform others and basically let the best content win. So that’s like our technical play. It’s called antidote. It’s currently invite only, so yeah, that’s something that people can reach out. And the second one is, dare I see say, like, even more innovative, and it’s actually being launched tomorrow. And so this is kind of like an exclusive and so this more takes a cultural approach. And so here’s our thinking, where’s my thinking? And then the companies have taken this idea and made it infinitely better. So I feel that as I look to the music industry over the last couple of years, I think that artists, traditional music artists, have created a lot of value, but I would argue that there’s an infrastructure that helps. Of them, because they get royalties. They have record labels. They can go touring. There are clear rules of engagement that can work in your benefit. So I think that they’re well served. They’re struggling, but they’re well served. I then look at the traditional infrastructure. So the record label, the publishers, the majors, and I too, think that they are well served because they’re well positioned. They have a market share, sometimes minimum guarantees. There’s royalty rates, it’s it’s like a level playing field. And I think that they’re well served. I will make the argument that I think that the people who’ve made the most interesting content for the last five to 10 years have been structurally disadvantaged, and the ones I’m talking about are the producers, the remixers and the DJs. I’m thinking about the Fred agains, the Swedish House Mafias, like the Calvin Harris’s, the Martin Garrix’s, like the Rebecca Fiona’s, the people who take other people’s IP, apply their incredible talent, remix other IP and take one on one and turn it into three. The reason why I think that they’ve been between a rock and a hard place is the following, typically, when they get a commission from a label, it’s a last minute thing, they’re asked to do a remix of a track that they have no particular affinity for. It’s more of a gig, and more often than not, because we’ve interviewed a huge proportion of these super talented individuals, they don’t get paid that well. And the counter argument they typically get is, well, you’re going to be remixing this artist, and he or she is culturally much more renowned than you are, so the mere association is going to be worth so much for you that I’m only going to pay you, like, $1,000 or something. And so instead, you do that because you know, and so too does the industry, that if you are a DJ or producer, as long as you have the hit of the summer, as long as there’s a huge amount of appeal for your remix, you will get the call. And the call is somebody who offers you residency. It might be Ishkaya in Ibiza, it might be the Wynn in Las Vegas. It might be Heat, it might be Coachella somewhere where you know you can charge or you’re going to get paid, like a quarter of a million, half a million per set. That’s how you make your money. Because most often, even if you do a super compelling remix, you will get no percentage points on average, you typically don’t, because between the label, the artist, the publisher, the songwriters. If you do a pure remix, you don’t really get a meaningful percentage of the royalty downstream, because you’re basically just working on top of somebody else’s IP. So here’s our thinking. We’ve said the following. One dramatic way of thinking about Epidemic Sound is that we have a quarter of a million pieces of IP we have vocal tracks, instrumental tracks, sound bed and sound effects. We have the provenance of every single sample. Everything has been sort of tailor made. It’s split into stems. So we basically have the most comprehensive sample pack in the entire universe. And so what we’ve done now recently is, over the last six months, we’ve reached out to 10 of them, the most prolific producers and DJs on the planet, and we said the following, I’m going to use you as an example, Ari. So hey, Ari, we’re Epidemic. You might have heard of us. We would love to commission a remix, and we’ll gladly pay you six figures, five or six figures to do the remix. And you go, wow, I normally get like, $1,000 because I’m told that the cultural association is worth a lot. And we’re like, yeah, we know we have a different opinion, like, we really value what you bring to the table, so we’ll pay you, like, a huge upfront fee, not recoupable. It’s not alone. Will pay you for your time. And then you typically go, Okay, do I have to choose a specific track? And we go, No, you can choose whatever tickles your fancy in a quarter of a million pieces of IP, like as long as you use the IP within our catalog, all of that is cleared, all of that can be sampled. There are no restrictions. There’s no limitations. You can be as creative as you like the artist immediately goes like, that’s crazy cool, like, I’m in and we go, no, no, wait a second. So if you make this track, we’re going to put it front and center on Epidemic, and then we’re going to market it to like, millions of content creators. And we know you’re amazing. We know that their demand is amazing, that they’re asking for your kind of music. That’s why we’re having this discussion. So we’re going to market that to millions of content creators, and with a very high likelihood, in a few weeks, you’re going to have hundreds of millions of people all around the world consuming your track through the content of the storytellers that they love the most on this planet. And everyone has said, right? That’s incredible, because that’s you’re basically giving me free marketing like that’s dramatically increasing the likelihood of me having the hit of the summer and such that I get residency. That’s crazy cool. Should we get to work? We say, No, we’re not going to get to work because we’re going to parallel publish all of that music across. All the DSPs? Yes. So Spotify is one of them, because we’ve spoken about them at length. But so too is Apple, so too is Amazon, like YouTube, music, all of the above. And we’re going to collect all the royalty which is associated, because we’re restriction free, we’re not royalty free, so all the master, all the publishing and everything, and we’re going to split that with you in perpetuity. So you’re going to get a share. The artist that you choose is going to get a share, and we’re going to get a share. So suddenly you have passive revenue flowing through like the rest of your career. You get marketing, you get paid up front. We think that this is going to be a complete game changer for producers, remixers, DJs. We think that this might be a smart way to help solve the music marketing problem of today. And we think that sort of the first artist we’re going to launch with is Honey Dijon. She goes live tomorrow, and so this is something that’s going to mark the start of this. So every single month, we’re going to release a new remix, and then we have at least two additional ideas in store for what we think, how this scales, and what might be next. So I’ll stop there. But these are the two things, yeah. That’s yeah. That’s fascinating.

Ari Herstand
So I mean, you’re essentially acting kind of as as a label, and then this, more or less the A&R department that’s putting these artists together to collaborate, but the collaboration is really just that producer that’s kind of using one of your other artists tracks to sample and creating a new remix from it. So yeah,

Oscar Hoglund
I think you’re absolutely we’re basically becoming a label, but we’re also a publisher, because we look after the songwriters. We’re also a PRO like we’re also a marketing department. We’re trying to be a full stack, like a one stop shop, offering up all the things that we think are valuable and needed and difficult to solve for in the current music world.

Ari Herstand
So these artists, these these headline artists that you’re doing these deals with, like Honey Dijon. Are they required to, I mean, can they still work with their pro or, how does that work in your value proposition? Yeah, so, I mean, we can break out the specifics, but so the short answer is yes. Because they’re doing remixes, they’re not creating new IP. Instead, they’re using IP that already exists. The short answer is yes.

Ari Herstand
Interesting, very cool. Well, Oscar, I’ve taken up enough of your time. I appreciate you sticking with me and answering all of my questions. You know I long time. Listeners know I don’t. I don’t throw softballs at people. I don’t. I don’t care who you are. So you’re, you’re one of 200 guests that we’ve had conversations where I appreciate that, that you’ve been so transparent, that you’ve hung with me this whole time as I as I tossed you the questions that we all want to know and that, you know, oftentimes people that just don’t get a chance to to ask these questions, and then the rumor mill starts, and then people, you know, make their own opinion. So I appreciate that you were able to come on and clear a lot of this up and and really pull back the curtain on everything that Epidemic does, because, like you said, you haven’t, you didn’t do a lot of interviews early on, and it’s people have known Epidemic, and they’ve talked about it a lot. Obviously, it’s been, you know, admired for, for everything that you’ve done in the space. So I appreciate that you were able to be

Speaker 1
as open and clear and fielded all of my questions that I flung your way. I have one final question.

Oscar Hoglund
So much for having me. Thank you so much for having me. It’s been an absolute pleasure, and sort of It’s On Us, based in Sweden, we’ve kept to ourselves. That’s going to change that my ambition, our ambition is to be sort of much more vocal and so yeah, but we’re open for questions, open for business.

Ari Herstand
I appreciate that. I’m sure everyone appreciates that. I have one final question that I ask everyone who comes on the show, and that is, what does it mean to you to make it in the new music business?

Oscar Hoglund
Ooh, what does it mean to make it so I referenced Mattias Tell and so he exploded. 72 hours ago. 48 hours ago, we had our spring party, so our company party in Stockholm, where we flew everywhere in from around the world. Like the secret guest that we didn’t mention for anyone was that in the middle of that chaos, we flew in Mattias, and so we had him perform live on stage in front of the entire company, seeing listening to him, seeing him perform, getting the chance to provide, like, a platform For true talent, like true musical talent, and just seeing people react, congregate, come together, be touched by what he put out there that was an emotional moment for me that feels like making it, that feels like we’re making the world a more beautiful and more connected and more interesting place. So. That’s what I think it is to make it

Ari Herstand
Oscar. Thank you so much.

Oscar Hoglund
That’s great. Thanks, Ari.

Ari Herstand
Today’s episode was edited by Ari Davids with music by Brassroots District and produced by all the great people at Ari’s Take.

Transcribed by https://otter.ai