Epidemic Sound’s royalty-free music is played 2.5bn times per day on YouTube and TikTok, but company still struggles to turn a profit

Sound of diseasemusic production company has been controversial for years over how it pays its artists (not to mention question is asked about its relationship with Spotify) is getting closer and closer to turning a real profit – but it's not there yet.

The Stockholm-based royalty-free soundtrack provider reported positive EBITDA for the second consecutive year in 2023 – amounting to 24.8 million SEK (2.34 million USD at the average exchange rate for 2023). That's a nearly nine-fold increase in EBITDA compared to 2022.

However, the company's operating profit (EBIT) continued to be in the red. In SEK -486 million SEK (-45.8 million USD), it was only a small improvement over the previous year.

That's despite net sales soaring 25% by yearARRIVE 1.477 billion SEK (139.3 million USD). Pestilence attributed the continued lack of profits to “depreciated fixed assets,” which counted as lost profits. SEK 486 million (45.8 million USD) in value throughout the year.

Eliminating the impact of depreciation, Epidemia will achieve an operating profit of SEK 25 million (2.36 million USD), the company said in its earnings report issued April 10.

However, Epidemia's content consumption continues to skyrocket. The company said its music has been received 2.5 billion plays daily above YouTube And TikTok in 2023. (In which 2022 reportit calculates 1.5 billion daily views on YouTube, not including TikTok.)

Available now 26 million videos on YouTube and TikTok videos featuring Epidemic Sound music, and the company reports that its tracks receive 40 million plays every day on music streaming platforms.

Epidemic said they have a category 40,000 songs And 90,000 sound effectsand said it has added an average of 10 new tracks a day since 2021.

It's easy to understand the appeal of Epidemia's music, at least from the content creators' perspective. Epidemia gives businesses and content creators access to rights-licensed audio content that they can customize however they want, making its music appealing to those who Creatives and businesses don't have the resources to license more expensive, copyrighted music.

However, over the years its business model has come in for a lot of criticism from music executives. complain about Epidemia's use of its creator's pseudonym for the musicians' union protest Epidemic's business is to buy all the music rights of composers and creators for a fixed fee.

The company has previously said that while it pays a flat fee to music creators, royalties from Spotify are split 50/50 equally between creators.

“We expect our growth to be further underpinned by the expectation that the creative economy will almost double in size by 2027 and the fact that we are well-positioned to take advantage of extension of artificial intelligence.”

Oscar HoglundSound of disease

The company appears to be sensitive to these criticisms, referring to its payment model as “unique and generous” in its latest annual report, while also highlighting the agreements it has signed with famous musician. include with the Grammy-nominated multi-platinum artist Jordan Sparks.

In the annual report, co-founder and CEO Oscar Hoglund describes Pestilence as “one of the best locations [companies] to explore building a comprehensive support system for artists and content creators, harnessing the capabilities of AI while preserving authenticity, artistic integrity, and compensation Fairness is the core.”

Indeed, AI appears to be a key part of Epidemia's business model, as the company highlights the AI ​​tools it has developed for its content creator customers.

Among those tools are: Combine sounds, launching in July 2023, uses AI to analyze images in videos and translate them into keywords to search for music selections. It then gives content creators recommendations for music from the Epidemic category.

Company annual report cited its own research Shows 93% Content creators are now using AI-powered tools in some way in their creative process.

“We expect our growth to be further underpinned by the expectation that the creative economy will almost double in size by 2027 and the fact that we are well positioned,” said Höglund. to take advantage of the scalable capabilities of artificial intelligence.” One Goldman Sachs report from 2023.

“While our AI experts focus on solving the technical needs of content creators, we also have the world's largest unrestricted catalog of original, quality music top and has great data insights into how that music performs online. ”

The epidemic broke out strongly in 2021 when the investment giant Slat joined one 450 million USD funding roundhas valued the company at 1.4 billion USD. Blackstone remains a major investor, with 17% share about the epidemic, according to the annual report.

The company's largest investor, at 32%To be EQTa private equity firm also have invested in talent agency UTA and currently are part of the corporation Bidding to buy a French digital music company Trust private.

Another major investor, at twelfth%To be Creanduman early-stage venture capital firm based in Stockholm also known for investing in Spotify.

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