Epidemic Sound gives its side of the Spotify ‘fake artists’ controversy

“We were on our summer break, because we’re Swedes and nobody works for two months in July and August. But that’s when the whole fake-artists thing hit, so we were surprised, but mostly offended. Granted, we hadn’t been telling the story that much, but there was nothing fake about this…”

The summer of 2017 is a fast-receding memory, but July’s controversy around ‘fake artists’ on Spotify playlists is still niggling at Oscar Hoglund, CEO of Swedish production-music firm Epidemic Sound. That’s why he’s sitting opposite Music Ally in November during a visit to London, telling that story.

To recap: the very first story on this was published by industry site MBW in August 2016, claiming that Spotify was commissioning producers to create tracks “which fit certain genres and themes, including jazz, chill and peaceful piano playing” and then placing them within some of its popular mood playlists.

The ‘fake artists’ controversy kicked off on the same site in July 2017, though, when MBW published a list of 50 “fictional” artists whose songs had racked up more than 520m streams from their inclusion on Spotify playlists like Peaceful Piano, Deep Focus, Ambient Chill and Music for Concentration.

A few days later, a number of those artists were linked to Epidemic Sound, which at that time was best known as a production-music library serving TV producers, multi-channel networks and YouTubers. It paid its composers upfront for their tracks to assume 100% of the rights, sitting outside the industry system of publishers and collecting societies.

Epidemic launched in 2009, focusing on TV before later moving into the world of digital video, via deals with MCNs that enabled their networks of YouTubers to use its music.

“We currently have 300,000 or 400,000 YouTubers who use our music. We cover about 85% of all the world’s MCNs, and maybe 20 of the top 100 YouTubers use our music,” says Hoglund. “We now have 20bn streams a month across YouTube and Facebook, where our music gets played. It’s a massive footprint.”

How do we get from that business to ‘fake artists’ on Spotify? In 2016, Epidemic Sound decided to experiment with putting some of its catalogue on streaming services, with its composers getting 50% of the revenues generated on those platforms, on top of their original fee.

“We got in contact with all of the streaming services, and the one that was quickest was Spotify. There was nothing exclusive about it: they were just fast, and we uploaded our music. No special deal, no back door, no nothing. We just uploaded our music,” says Hoglund.

Some of those tracks were subsequently picked up by Spotify’s in-house curators for inclusion on mood playlists, boosting their streams to a level that made Epidemic Sound think it was worth expanding its experiment into a fully-fledged non-B2B part of its business.

Hoglund cites three main motivations behind all this. First, its desire to help its composers’ music reach more people, earn more money and, in some cases, to help establish them as artists in their own right.

The second factor in Epidemic’s move beyond B2B was the sense of an untapped demand from YouTube viewers of the videos that used the company’s music.

“We saw that 20bn views a month is quite significant, and the number one comment across these hundreds of thousands of YouTube channels, from PewDiePie all the way down to the smallest, was ‘I love the music you’re using, where can I find it? Why can’t I find it on SoundCloud? Why can’t I find it on Spotify? I can’t find it anywhere, what’s up with this music?’” says Hoglund.

“We ignored that for a long time, but eventually we felt that the demand was so big, so let’s try and take a few tracks and then upload them.”

The third factor was the emergence of those mood-focused playlists on Spotify, which seemed like a perfect fit for some of the tracks that had been originally created for TV and YouTubers. The response of Spotify’s playlisters to the first swathe of tracks uploaded by Epidemic Sound supported this, according to Hoglund.

Fast forward to July, when Epidemic’s team had entered their summer break feeling excited about its new streaming business, including going beyond Spotify – the company’s music is already on a streaming service in South Korea, with Hoglund saying that “five to ten more” will be up and running by January 2018.

But this summer, the ‘fake artists’ controversy blew up, and with hindsight it’s clear that existing tensions between Spotify and labels – witness the quote from one anonymous label executive that it was an example of Spotify “watering down our beer” in terms of payouts – were one reason for the negative reactions.

Hoglund is keen to express his bafflement at the controversy, setting out Epidemic’s view of itself as “democratising A&R” by commissioning musicians to produce work, making it available to hundreds of thousands of online creators, and then using the response from their viewers to help it decide which songs to put on streaming services.

“In our mind, this added to the confusion and frustration, because we were everything but fake. We were the other way around: we were putting the music out there immediately and saying ‘this is what it is’,” he says.

Why were people upset? Hoglund admits that the lack of ‘backstories’ – online footprints – for the artists raised suspicions. “People asked ‘Why can’t we find them on social media?’ Because they’d been making production music for 10 years with us!” – as well as the provenance of the tracks.

“Some of it might have been that the traditional music industry weren’t involved with this, and that was scary: if it doesn’t have a traditional label stamp, that would make it ‘fake’ for the industry,” he says.

“Some people, I think, thought that maybe this wasn’t actual people making the music. Maybe it was AI or something worse! Which again wasn’t the case: it was very much hundreds of people working just as hard as they always have. People had a lot of different questions and jumped to a lot of different conclusions.”

One suspicion raised at the time was that Spotify was essentially a B2B client of Epidemic Sound, actively commissioning tracks from the company for inclusion in its mood playlists. Music Ally puts the question to Hoglund.

“I can tell you that they’ve never, ever commissioned a track from us. I can’t speak for other labels, but I think we have a very similar, standardised approach in that everyone has the opportunity to upload music to Spotify, and there are teams of curators who sit with all these different playlists,” he says.

“You can send up music centrally to Spotify and put it out there on a regular basis, but you never know whether or not any track is going to get picked up… We’re sending it in to a huge black hole which is the streaming world, and we pitch in the same way a label would.”

This is a point worth further discussion: the idea that the boundaries are blurring between the worlds of ‘commercial’ recorded music – released by backstoried artists through traditional labels or distributors – and ‘production’ music commissioned by a library and licensed out for B2B use.

British firm Audio Network is another example of a company from the production-music world exploring the potential here, working with artists on original music that is uploaded to streaming services as well as licensed for soundtrack and online-video use.

Hoglund stresses that Epidemic’s streaming growth is about more than Spotify’s playlists. Some of the YouTube channels that use its music have been important too. Jessica Bravura, who runs a games channel called Aphmau with 3.1 million subscribers, adopted ‘Faster Car’ by Loving Caliber – an Epidemic track – as her channel anthem.

Her backing has helped Epidemic’s official video for the track reach 5.5m views, plus 4.5m streams on Spotify. That said, Aphmau videos using the track have generated more than 50m views so far as well.

Yoga-focused YouTube channel Blogilates, which has 3.9 million subscribers, has also been using the company’s music, and fronted a ‘Summer Sweat Mix’ streaming compilation on Spotify. Epidemic Sound may be in a position to do more of these kinds of partnerships as it builds its streaming business, rather than simply relying on Spotify curators.

The fact remains that Epidemic’s move into the mainstream music industry is ruffling feathers. Among the objections: that its 100% rights-ownership model is not good for musicians; that its low licensing prices are devaluing music; and mutterings about soundalike tracks and low-quality music that (in fairness to Epidemic) are often targeted at the production-music sector as a whole, rather than just this one company.

Hoglund has plenty to say in response to these thoughts, starting with the rights model.

“When we use music in an audio-visual context, we look at the average usage of music and we pay all that up front: so we will pay you £1,500 or £2,000 for the assumption of how much this will get used. And then we added streaming and said let’s add 50/50 on top of that,” he says.

“So you get paid twice, and 50/50 is obviously uncapped, so if the music does really well, you do really well. We now have many composers who make five-digit pound amounts of money every single month.”

Hoglund also has a punchy response to criticism from collecting societies and songwriter bodies about the way companies like Epidemic Sound go about their business: particularly around the impact on musicians.

“I still haven’t heard one decent argument that would substantiate that point of view. They tend to come out guns blazing with that kind of opinion, but then we go ‘This is exactly how we do it: this is what we do in audio-visual, this is what we do in streaming, and 50/50 is our model’,” he says.

“How does YOUR model work? And you get this ‘Well, it’s complicated, it depends, there’s this black box and this data and we don’t know really…’ response. How much does the label take? ‘Well, we don’t want to talk about that really because it varies a lot…’”

Hoglund does try to strike a diplomatic note, suggesting that Epidemic shares some core values with collecting societies and authors’ rights organisations.

“There’s one thing that unites us all. We’re just as passionate about a solid and strong copyright system as they are. We just believe there are different ways of getting that,” he says.

“Second, we both fundamentally believe that it’s important to be artist-centric. We need to have a music industry which has their best interests at heart, and not the middlemen, not the intermediaries between. Our view is that the old model has been much more geared towards the middlemen.”

“There are black boxes, you attribute revenue because it’s difficult to track according to radio play, stuff like that. You collectively decide what’s good for a few should be good for everyone, and it’s a massive compromise. We think it needs to be much more fine-tuned, and the technology enables that.”

Hoglund compares the music ecosystem to the world of telcos, where someone travelling overseas can get a bill breaking down which country they called from, what numbers they called, how many seconds those calls lasted, and how much the charges were.

“Don’t tell me it’s impossible to do that exact kind of stuff now when it comes to music. The streaming platforms are getting there, the online-video platforms are getting there… We need to have ecosystems that work, not monopolies that dictate,” he says.

“So we share those two core values, but we have fundamentally different ideas of how we best make sure that copyright remains strong and dynamic, and that composers are the winners, not the middlemen or intermediary people.”

Hoglund also makes the case for companies like Epidemic Sound creating more value for the music industry (if not for collecting societies and publishers) through its model and its customer base in the online-video world.

In fact, he mirrors arguments made recently at Music Ally’s Sandbox Summit by AEI Media’s Diluk Dias, about the potential to create new, non-cannibalistic revenue streams from platforms like YouTube by being pro-active, even with the ‘value gap’ arguments around these services.

“We’ve been just as frustrated as the rest of the music industry, but rather than sit around and moan, we’ve created a highly-scalable and super-interesting model by looking at the creator side of things,” says Hoglund.

“The people who use our music and benefit from our music in their stories pay us 10, 15, 100 dollars a month to use our music. We generate enormous amounts of revenue from that kind of business, and from our other business lines, which we then funnel into the creative community,” he continues.

“It’s one thing to sit on the sidelines and say ‘things aren’t going great’. Our opinion is ‘Yeah? So do something about it’. We’ve created opportunity. we’ve created more money, new money into the system. and as we’re growing we’re constantly evolving, constantly making sure that we tweak our business.”

On a roll, he says that Epidemic is trying to create “an ecosystem that works in a pennies business as opposed to a dollars business”, but comes back to the musicians creating the tracks that propels all this.

“We don’t have any legacy, we’ve come from a new world, and we’re creating a new premise for how we think it should work,” he says.

“We’re utilising all the latest technological advances and services out there to make something super-efficient in terms of getting music out there, and getting people paid. If you compare that to the old world, it’s like night and day. And there is nothing fake about it.”

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