Though Epidemic Sound has been making waves for years, it’s been a sluggish street to profitability for the Sweden-based music manufacturing home.
That story appears lastly to be turning round, as the corporate introduced on Tuesday (April 25) that it swung to a constructive EBITDA – albeit a small one – final 12 months.
Nevertheless, the corporate’s working revenue (EBIT) was nonetheless within the purple.
In its annual report for 2022, Epidemic clocked an EBITDA of SEK 2.818 million (USD $278k) on internet gross sales of SEK 1.181 billion ($116.7m).
That compares to a adverse EBITDA of SEK -54.819 million (-$6.4m) on internet gross sales of SEK 694.2 million ($80.9m) the 12 months earlier than.
Epidemic posted an working loss (EBIT) of SEK 491.566 million ($48.6m) in 2022, widening 21% on the working loss it posted within the prior 12 months (see under).
Epidemic’s strong achieve in internet gross sales in 2022 was made on “considerably stronger streaming revenues,” the corporate stated in a statement.
The corporate’s partnership gross sales phase, which incorporates streaming income, noticed a 117% YoY improve, to SEK 435m ($43.0m).
And its attain continues to develop: The brand new annual report reveals that Epidemic’s music is heard 2 billion occasions a day on YouTube (up from 1.5 billion in 2020) and 14 billion occasions monthly on TikTok.
Inside the report, co-founder and CEO Oscar Hoglund predicts Epidemic’s music will quickly be heard 2.5 billion occasions a day on YouTube.
Epidemic’s worth proposition is straightforward: It gives companies and content material creators entry to rights-cleared audio content material they will customise nevertheless they need. In different phrases, it’s a one-stop store for enterprises that don’t have the assets, or time, to license costlier, copyrighted music.
Epidemic’s enterprise mannequin revolves round producing giant quantities of audio content material, together with music and sound results, which it then licenses to companies, or offers to content material creators (resembling on YouTube and TikTok) for a subscription payment.
It additionally generates royalties from streaming (its tracks can be found on all main streaming platforms) and shares recorded music royalty income 50-50 with the monitor’s creators.
It boasts a music catalog of 40,000 tracks, together with 90,000 sound results.
In 2022 Epidemic acquired A-P Data, a Swedish label centered on temper music.
“By the acquisition, [Epidemic] strengthens its place throughout the temper music enviornment by boosting its capabilities to soundtrack folks’s lives by way of music streaming platforms and by including the chance to work with world class temper musicians from a document label,” the corporate said at the time.
“The worldwide demand for restriction-free music continues to develop strongly, regardless of a extra demanding financial backdrop, and our 2022 full-year outcomes is a powerful proof level of that.”
Oscar Hoglund, Epidemic
Epidemic’s enterprise mannequin has induced the corporate to come back below fireplace from some quarters within the business.
Some have criticized its roster of “pretend artists” – that means artists whose music seems below pseudonyms – and in 2019, the corporate took criticism from the European Composer and Songwriter Alliance for “utilizing 100% buy-out contracts – the place music creators promote their rights to a bit of music in trade for a lump sum.”
Whereas Epidemic does pay 50% of royalties from streaming to creators, that’s not the case when its music is commissioned to be used in commercials (the corporate boasts that its sounds have appeared in adverts for lululemon, Walmart, and Estée Lauder) or by social media creators.
Nonetheless, the controversy swirling in some corners of the business hasn’t stopped Epidemic from attracting some big-name buyers, together with Blackstone, the world’s largest different asset supervisor, with round $900 billion in belongings below administration.
Blackstone joined Epidemic’s most up-to-date funding spherical, in 2021, which gave the corporate a valuation of $1.4 billion.
In keeping with Epidemic’s newest report, Blackstone owns 18% of the corporate by means of its fund Blackstone Progress (see under).
That makes Blackstone the second-largest single shareholder, behind Sweden-based funding group EQT, which holds 32%.
In all, Epidemic has introduced in additional than $500 million over 5 funding rounds.
In a press release, Hoglund stated: “The worldwide demand for restriction-free music continues to develop strongly, regardless of a extra demanding financial backdrop, and our 2022 full-year outcomes is a powerful proof level of that. The purpose of Epidemic Sound is to facilitate each artists and clients to realize artistic and business success. Throughout 2022 we have now subsequently been working relentlessly to remove any friction that’s standing in the best way of that success, by means of improved software program performance and product options.”
Hoglund continued: “By our strong steadiness sheet, assist of our shareholders and Board of Administrators, along with a number of key recruitments, we have now each the monetary power and the crew in place to proceed on our development journey and scaling up of our enterprise.”
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