Passion Economy Unicorn Epidemic Sound’s Founder On How They’re Soundtracking The Internet

“I envision someday getting an ice cream with my granddaughter. And she says, ‘So your generation basically invented the Internet. What was your contribution?” -Oscar Höglund, Epidemic Sound Co-founder

The moment you walk into the Epidemic Sounds studio, you know it’s a special place. Like a music studio, it hums with creativity; but there’s something unique about it. Maybe it’s the feeling of a large group of creatives working together. Maybe it’s just the attitude that pervades the place, clearly displayed in lights that spell out, “Bad music kills good video.”

It’s an apt way to sum up the role of Epidemic Sound, an innovative Swedish-based music platform driven by one exciting vision: to soundtrack the Internet. It is this vision which has made Epidemic Sound a tech unicorn and one of the original trailblazers of the passion economy.

Epidemic Sound serves as a marketplace connecting stories with the music that can bring them to life. According to co-founder Oscar Höglund, driving their work is the belief that "music and stories are tied together in exactly the same way as flavor is tied to food". Music is the language of emotions. It brings up memories and moments in our lives as nothing else can. And it’s precisely this power that Epidemic Sound harnesses for the use of content creators.

Oscar continues to explain that Epidemic Sound exists in that sweet spot where the passion of creativity and the pragmatism of business intersect. This is the intersection in which musicians and other creatives can earn a living by doing what they love.

Epidemic Sound solves the two major problems of the music industry: the logistical difficulty of adding music to stories, and the obstacles that musicians face in securing their fair share of royalties. These problems date back to the year 2008 when Epidemic Sound was in its infancy, linear television was the main channel for creators, and an Internet suite had to be plugged into your computer.

The platform has disrupted the industry by purchasing the rights for music content, and then sharing it with a huge pool of distributors, content creators, and potential fans. Musicians are then allocated a share of the payout.

In contrast to the historic infrastructure of the music industry, Epidemic Sound has the ability to acquire a huge catalog of music to share with end users. They can also connect musicians with billions of storytellers. The compensation for musicians is obviously another important aspect of this industry disruption. A subset of music gets picked up by fans, and Epidemic Sound splits the royalties evenly 50/50 with music creators. They pay an upfront fee of USD 1,200-6,000 per track when acquiring the rights to a track, and their creators earn over $50,000 on average per year with top earners making more than $200,000 annually. Additionally, there is a bonus pool that is distributed proportionally among creators based on the popularity among users. In 2022, the bonus is set at $2 million but will grow as the business grows.

This model is unique in an industry which traditionally split royalties in a multitude of directions, awarding a share of the profit to every individual who participated in the music’s creation and production. Leaving music creators with only a small fragment of royalties for themselves.

But with this new model, all that is changing.

Gustaf Lundberg Toresson: I guess you could say that Epidemic Sound has been around since the Dark Ages of the Passion Economy, the very beginning. But even before that, how did you get started?

Oscar Höglund: Well, I often joke that I’m probably the least musical person at the office. You could say that I play the guitar in self-defense. I think that’s important, because we all have different skill sets. We’re good at different things. You need to be good at the trade before you dive in; it’s almost a prerequisite. One thing I learned by working as a management consultant is that it’s incredibly powerful to have a pool of different people with different skills and backgrounds. If you bring something unique to the table, it really makes you feel good, it gives your brain a shot of endorphins. My work with an American management firm was pivotal, because I got a look at the level of ambition out there. I learned what the world expects in order to succeed on a global scale. But I also saw the challenges. We were all pretty much the same.

I saw the value of a culture of ferocious learning which was important. But I was looking for progress and evolution, and consultancy seemed like more of the same. I took a lot of the learning with me, and did some soul-searching. I met with tons of people in different industries, and eventually ran into a punk rocker from the north of Sweden. We were quite different. He was running a TV production company, so I joined him. I took a huge salary cut, but I stumbled upon something I really loved: the passion economy. I was the only person in the room who was good with numbers, while everyone around me was ten times more creative than I was. I stumbled onto the world of storytelling, and just fell in love with it. We did a lot of shows which were incredibly popular, and suddenly I was working in a context that mattered, stitching together stories. All of these experiences helped me along the way.

Lundberg Toresson: After helping the punk rocker, what did you do next?

Höglund: In the early days, there was a term that people used back then: “multimedia.” So when people asked me what I did, I would say, “I’m responsible for multimedia.” And that pretty much meant everything that wasn’t linear TV media. It really didn’t exist back then, and it was my role to kind of figure out the future of storytelling. That started out small, but I immediately fell in love with it. There’s something alluring about it. At the heart of the passion economy is the understanding of financial structures, which mixes with the other side of the equation: cultural ambiguity and success, the idea of fandom. All bets are off; things go viral and then everything changes. Everything inverts. That was very appealing to me. When we started Epidemic Sound, back in 2008, the Internet was very text-centric. And we stumbled upon problems that needed to be solved. There were five co-founders, all from different backgrounds, but we all gravitated to storytelling. We knew the importance of adding music to content, but the whole system was broken. It was horrendous. The historic infrastructure just wasn’t working. We’ve solved this problem by taking an opposing view to the current system, putting together a catalog that works for end users.

Lundberg Toresson: Let’s say I was a passionate music creator with a guitar or turntables, but without the connections and not being well-known. Would I have been able to live on that income in 2009?

Höglund: The short answer is no. In 2008 or 2009, the industry wasn’t set up to support a large base of music creators. The world was more binary back then. Your song was a hit or it wasn’t. There were also massive shifts taking place, like the rise of streaming services, playlists becoming more important, and the demise of physical albums.

Around this time, you had many music creators who weren’t being paid upfront, were being promised royalties, and albums were less relevant. This situation was difficult to navigate. When we entered the scene, no one was paying upfront. Music creators often didn’t have colleagues and worked in isolation.

That’s something we set out to address. The way we did it was wildly provocative at the time because of the understanding back that creators should hold on to their rights for dear life. To many creators, your rights represented a precursor for the success you wanted. We analyzed that and came up with different logic. We think music creators have two fundamental desires.

One, you want to spread your music to as many people as possible. You want to create things so people enjoy them, and distribution is important to that goal. Second, you want to be able to support yourself. If your songs achieve commercial success, you should be rewarded.

Lundberg Toresson: Many people probably haven’t heard of ES. But let’s say that if you’re a Youtuber, you might use Epidemic Sound in every video?

Höglund: Yes. We soundtrack over 1.5 billion streams daily on Youtube.

Lundberg Toresson: On top of that you add other medias, e.g. Tiktok?

Höglund: Tiktok, Facebook, television broadcasts, physical locations etc. We’re very serious about trying to soundtrack the entire world. The first job is to soundtrack the Internet, because that’s the “unlock.” That’s the big problem to solve, because building a cultural infrastructure and reimagining the business model for storytellers and creators. Getting all of that right is important.

We can’t rely on historic cultural infrastructure because it was built for a different time. The Internet offers a more decentralized way to interact and distribute content, so we’ve had to re-engineer everything. We’re twelve years in! We’re an overnight success that has taken a decade to build.

Lundberg Toresson: I’ve heard it said that if you want to work in music tech, move to Stockholm. It’s been compared to the Silicon Valley of the music tech industry. What is your personal feeling about that?

Höglund: I think it’s accurate. We have a lot of music history in Sweden; it’s as if we have superpowers in a few specific areas. There’s a huge sense of camaraderie there, and a sense that people want to pay it forward. You can share knowledge online, get help, get recommendations. The companies that succeed quickly become very large, and they want to help others. I’ve been helped many times simply by calling people who have done this ahead of me. We all hire from and recommend to one another. Being a Swede definitely opens doors. All the data points and signals point to the fact that if you’re a Swede, you will do well.

Lundberg Toresson: So if I’m a creator, how much money can I make?

Höglund: Once you get to scale, something incredible happens. For example, if you soundtrack 70% of YouTubers, in addition to Facebook, TikTok, and other platforms, you leave a huge footprint. It spreads, and we can see the download metrics. If you’re a creator, you’d send us a few samples. Of course, we do get tens of thousands of tracks, and the tolerance for variance with music is very low. With photos, all you have to do is swipe right or swipe left, but music has to be much more precise. If you’re talented, we give you a commission up front to write a track. Then a subset of viewers will find it and say, “That’s amazing.” So you get multiple revenue streams, and potentially could make thousands, tens of thousands, or hundreds of thousands.

Lundberg Toresson: In 2021, you raised $450 million at a $1.4 billion valuation and reached unicorn status. What are you going to use that money for?

Höglund: To sum it up in one word - friction. We’re dedicated to soundtracking the entire world, and starting off with the Internet gives us a very clear target. There’s a lot of friction involved: technical friction, commercial friction, payment friction, language friction, and cultural friction. We’ve done an excellent job of tracking the Western hemisphere.

But now it’s about reducing friction across all these disciplines. We’ll have to use our entire toolbox to get there. There are new product questions, content questions, distribution questions, leverage questions, etc.

We raised a lot of money, but we’ve forged relationships we trust with people who know the space, positioned to help us, challenge our thinking, and support us as necessary. The money will help us scale and address these friction questions, but our partners also help us see the bigger picture.

Lundberg Toresson: So what’s next?

Höglund: Our vision is to soundtrack the Internet, and it’s huge. Right now, we’re only serving about one-third of the world’s population. Everything has been launched in English, but only one-third of the world’s population speaks English. We just launched in Spain, and we’re upping our roster every quarter. We know we have to keep doing what got us here, but we also have to do more. We’re driving the passion economy, and that’s the canvas of a really interesting ecosystem.

The conversation has been edited and condensed for clarity.

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