Kris: From Lawson Media, this is Building A Unicorn the show exploring what it takes to build a business that has global impact. I’m Kristofor Lawson.
Kris: If you’re anything like me, you’ve probably found yourself kicking back on a lazy Sunday afternoon - surfing the internet to see what’s trending. And you come across this great video on YouTube and it has this really interesting music. In fact if you’ve noticed any trends on YouTube the past couple of years you’ve probably seen a lot of vloggers raving about this great music that they’ve found to use in their productions. And more often than not that music will come from a Swedish company called Epidemic Sound which is on a mission to soundtrack the internet.
Kris: Oscar Höglund is the CEO and co-founder of Epidemic Sound and is someone who thinks very deeply about the impact that music can have on our experience with the Internet.
Oscar Höglund: Prior to starting Epidemic, I had done a tonne of different stuff and I found myself going, "Well, I was a management consultant and we did optimization of churn of customers and finance companies and that wasn't very exciting." For a while, we did television, and that did carry a lot of cultural clout for me in a while, especially in a country like Sweden where content creation is a core part of our DNA. People watch television. We have the most single households in Europe. We're agnostics. We're not religious, so the stuff that people spoke about around the coffee machines were the TV shows that we were making.
Oscar Höglund: TV eventually became less dynamic and everything has moved more and more to the Internet. And so we, as co-founders, landed very much in a scenario. We said, "We want to be able to tell our grandchildren that the biggest contribution our generation was the Internet. We soundtracked it and this is how it went down." And out come all the stories about how that happened.
Kris: Now we’ll get in to what that all means shortly. But from my conversation with Oscar it’s very clear that he thinks differently about the world to your average entrepreneur - and that’s likely because of his upbringing. Oscar’s parents are both Swedish - his mother works on helping companies set up new offices around the world, and his father worked in banking. And in the 70s they decided to make a move to London.
Oscar Höglund: They were supposed to stay for a year. 15 years later, they had three kids, a dog, a Volvo, a house. Then we eventually moved back to Sweden. Growing up in the UK, I think was fantastic in the sense that you're technically outside of your comfort zone. I didn't speak at all until I was three, which is quite late, but then I started speaking both Swedish and English simultaneously.
Oscar Höglund: Growing up in the UK, it was good for a tonne of reasons. There is an anecdote, however. My nickname in Swedish is Pig-ya, which means wide awake. The true story behind that is when I was born in Westminster, I was a massive baby. I had jaundice, so I was yellow, which is quite common, so I had to lie under light bulbs quite a bit and I had red hair. I was twice the size of all the English kids. People would come up and look at all these tiny babies who were crying, eating and doing the thing in their diaper and there was this one massive baby who's just bigger than everyone else, completely yellow, red hair all over the place and just a bundle of joy according to my parents.
Oscar Höglund: I was really wide awake and very, very happy, that's why I got the nickname, Pig-ya, which in Swedish means wide awake and happy. Fast forward five, six, seven, eight years, you have this Swedish guy. My last name is Höglund. In English, my name was Piggy Hogland, and I was a non-Brit growing up in London.
Oscar Höglund: That was a bit of a challenge to be honest. I think that ultimately helped me get a bit tougher, but also I understood what it's like to acclimatise and get to know different people.
Oscar Höglund: We then moved to Sweden in '90. I was 12. Back then I hated Sweden. I was very much identifying myself as a Brit even though I spoke semi-Swedish English in both directions.
Kris: Why was that?
Oscar Höglund: Growing up in London, my Swedish was struggling because I only had Swedish adults around me. If you imagine a 10-year-old kid that doesn't speak any slang, only what their parents and grandparents talk like. I would say that, “We have fine weather today” and it's an... “How are you feeling? Outstanding.”
Oscar Höglund: I would use a language designed for old people coming out from a kid's mouth. The same would apply to both Swedish and English. That, I think, also helped me to understand being same but also being different and there's some kind of value in that.
Oscar Höglund: Moving to Sweden was very inclusive, very grey. I remember seeing my school for the first time. I started crying because I thought it looked like a jail. Eventually, I understood that everything that Sweden stands for is the stuff that I'm now really proud of. The inclusiveness, the close proximity to everyone both physically but also within society. I'm almost at a point where I think paying a lot of taxes is cool. I like the concept of building a society where everyone gets to participate where the strong take care of the weak.
Oscar Höglund: I've also come to a little bit when I meet people, especially who live in metropolitan cities, there's a sense of... not entitlement, but this is London or New York and “We've seen everything, we know everything.” You scratch the surface and typically they haven't because they hang out at the same bar, do the same thing and they don't really utilise a plethora of opportunity.
Kris: Right. They've just this very closed picture of the world, which is just the things that they say on a day-to-day basis. No real understand about what happens elsewhere.
Oscar Höglund: Exactly. That's totally true. Also the whole thing. Coming from Sweden, we're an insignificant country close to the polar circle. We speak a ridiculous language that nobody understands. We all sound like the Swedish Chef in The Muppets and that's true.
Oscar Höglund: I think having that in our DNA makes us very aware that we immediately need to ask more questions than we give answers. We need to listen to others to understand. Everything we do from get-go needs to be global and international, because we don't have a whole market to save our business. It has to scale globally.
Kris: When Oscar finished school he went and studied Business at university - although he wasn’t that interested in the finance side of things so he decided to focus specifically on organisation and entrepreneurship.
Oscar Höglund: I got teased by my friends. Lovingly but there were some part of it obviously that stung. They said that we would sit in a ring with an orange because it was about organisation. I go, "My name is Oscar. What's your name?" Roll the orange to the other person, because they were more into balance sheets and numbers and finance and that kind of stuff.
Oscar Höglund: I just simply wasn't into that. That didn't excite me. I read about entrepreneurship, I read about organisation, about structure. But when push came to shove and I left business school, I very much did the ordinary thing from that perspective and I became a management consultant. So I worked for a big American firm called Boston Consulting Group.
Oscar Höglund: And I worked as a consultant for almost two years. They were brilliant in many aspects. Very, very smart people. Taught me a lot in terms of what it takes globally to be successful. How incredibly talented and hungry people are and you really need to apply yourself to have any kind of chance.
Oscar Höglund: But ultimately, I had an aha moment. I realised at some point that there was nobody who I was reporting to who was in the organisation who I wanted my life to be like in 10 years. I looked five and two years. When I got to that point where I didn't have a role model who I could try and replicate, I went up to my managing director and said, "I have to quit."
Oscar Höglund: My parents were really worried because they were like, "Oscar, you can't leave a job. You have to go to a job and this is going to look back on your CV. You need to have a plan my son." I'm like, "No Dad. Mom, I'm not happy. I need to go."
Kris: After his time at Boston Consulting Group - Oscar looked around for the opportunity that would give him that satisfaction he deeply craved. And in the end decided to make a move into TV - working for a company called Zodiak Television.
Oscar Höglund: And they made TV shows all around the world. So, Girl with the Dragon Tattoo, Bear Grylls, Man vs. Wild, Wallander. Tonne of, like, very compelling stuff.
Oscar Höglund: And I met, my eventually my partner in crime, his name is Zach and he was the chief creative officer of Zodiac. He founded the largest commercial TV broadcaster in the Nordics a couple years before that. He's 15 years my senior. He's a punk rocker from the North of Sweden and I was this nerdy number guy coming in with a suit and very nervous.
Oscar Höglund: I immediately wanted to impress him. I just had a very strong feeling that I want Zach to think that I'm good. I would apply myself like crazy in the meetings where he was present. And for some odd reason, I can't explain it till this day, he was the same. He wanted to make sure that he delivered value in our meetings and that we really, umm, we clicked around that.
Oscar Höglund: I immediately felt that if my life is anything like his life in 15 years, I'd be a very, very happy person. He took his job very seriously, but he didn't take himself. He has the highest IQ of anyone I know. As in, sorry, in EQ and sort of IQ. He's passionate about sales and stuff. And that sort of helped me find, sort of, that was my first role model.
Oscar Höglund: The second part of the story is TV production was great because one of the challenges where I came from was that everyone was exactly the same. In terms of trying to add value and protect my mojo, it was difficult because we had all been to prestigious business schools. We all worked 80 hour weeks. We did the same. We had the lack of sunlight. We had lack of private lives. Everyone was a cyborg who's very much the same.
Oscar Höglund: When I came into TV production, it was totally different. I remember vividly being put in a room with the development team and they were trying to hash out a new idea about a TV show. And suddenly, somebody cracks this great idea. I'm like, "Wow, that's crazy, but okay, fine." Somebody says that this is how we're going to shoot it, this is how we're going to cast it and this is where it's going to play out, and this is how we're going to market it.
Oscar Höglund: And the question gets thrown into the rooms. "Can anybody create a budget around this?" People cringe and look as though someone has died. Obviously, it's difficult for people to relate to numbers.
Kris: No one loves having to deal with the numbers. It takes a particular sort of person.
Oscar Höglund: It does. In that context, nobody did, but that was perfect for me, so I raised my hand and I go, "I'm actually pretty good with numbers, so give me a while and I'll see what I can track up." And it's 5 o’clock everyone leaves. I go back to my office desk and I put on some great music and I open Excel and I crack out, I build a model and I'm done by 9. Send, email it out to everyone, come home to my wife at 9 and she's like, "Wow, you're home already?" Because at my old work, I would work all nighters. Ah come into work next day at maybe 8, nobody is there. 9, nobody is there. 10, people start dropping in because different pace in that industry.
Oscar Höglund: Then one after one, they swing by my desk and they go. "So Oscar, we had this meeting last night." I go, "Yeah, you mean last afternoon?" "Yeah, yeah, yeah. We decided and all this stuff and you're supposed to do the budget. This morning, there was this email in my inbox where you'd already done everything. When did you do that?" And I go, "Well, I did it last night." "You worked during the night?" I'm like, "Yeah, in the evening. It wasn't that bad."
Oscar Höglund: And that's when it dawned on me that, sort of, I was the outlier. I could add something different. My contribution in this context was valued and the people around me were so good at what they did. So creating that context and really owning your own happiness was like a key learning for me in that process.
Oscar Höglund: So making sure that you're in a context where what you know is different and what people bring to the table compliments you. That makes you ultimately a much happier person. And so as soon as you hit that point, you become a much more successful person. That's how I dropped into the whole entrepreneurship by first not being an entrepreneur. Not coming from that. Trying out the old way. Realising this is not for me. I've being put in a context where I realised that if I surround myself with people where everything is different, magical things happen.
Kris: For anyone that’s worked in television, video, or even podcast production you’ll know that sourcing great music can be one of the most frustrating parts of the job. The traditional TV model involves film producers going to music production companies, you get access to production music, and then once you find that perfect track you have to keep logs of exactly how much of it you’ve used. Then you have to clear that music by paying a fee to the licensing body in whichever market you intend to distribute. It’s a very complicated system that involves many, many players, and one that Oscar was growing tired with. So along with some other producers they decided to explore the idea of building their own company which would fix all those issues and make the whole process simple.
Kris: But before the team could really sink their teeth into fixing music - Oscar wanted to understand the entire industry better. The team had sold Zodiac Television and were in a transition period where they were dreaming up what would eventually become Epidemic Sound. And while they waited, in 2008, they decided to work on creating a TV program called ‘Made in Sweden’ and placed two relatively unknown artists in a house along with three experts and then over a 6 week period tried to turn them into stars.
Oscar Höglund: It was a super cool project, because the world was literally burning at the time. Lehman was crashing. Everything was chaos. We were trying to launch this completely new way of consuming music. It was quite dramatic. We were able to pull it off. But I think for us, the major learning was we understood firsthand exactly how we wanted to use the benefits and the strengths of the different value chains that we were involved in and use that in some part to help build what eventually would become Epidemic.
Kris: The more the team immersed themselves in the music industry the more things started to pull together. And eventually the five co-founders decided to put all their learnings about making a successful piece of music, and how to make money from it - and turn that into a company.
Oscar Höglund: The way it happened is we're five co-founders and two of us come from television, two of us come from music and the fifth one is serial entrepreneur who's more of an online focus person.
Oscar Höglund: Early on, we wanted to solve for two big questions. So the macro vision was Internet is going to be video eventually. So this is pre-YouTube being big. Remember, this is pre-Instagram, so images hadn't sort of become a thing. It was still about text and slow websites and Internet, which was at best so-so.
Oscar Höglund: But we wanted to solve for two things. On the one hand, we wanted to see how can we make sure the musicians start making tonnes of money off music. How can we make sure that they can make a living? Because back then, the music industry, arguably it still is, was very much optimised around the middleman.
Oscar Höglund: So the number one question for us was, "How can we make sure the musicians get distribution and start making money?" The other question we wanted to solve for was from the creator perspective. If I'm a storyteller, back then adding music to my video was the worst part of the entire creative process.
Oscar Höglund: And we sincerely felt it ought to be the other way around. If I have this labour of love, I'm making a documentary about yourself or about an industry or something that I'm passionate about, when I get to the point where I want to add music, that's when you should be dotting your Is and crossing your Ts. That's when you should be bringing your creative process to a climax because you add emotion, you add feeling. There should be a creative surge.
Kris: And it was at this point - in 2009 - that Epidemic Sound was born. It was the brainchild of the five co-founders who all had their own skillset to bring to the table.
Oscar Höglund: The names are somewhat to difficult to pronounce even for a Swede. This one person, his name is Hjalmar Winbladh. He's the serial entrepreneur. There's the second person called David Stenmarck who's a music producer. Number three is Peer Åström. Number four is Jan Zachrisson who's known as Zach, and the last one is myself.
Kris: And the name ‘Epidemic’ came about because the team was thinking about how the music could spread globally.
Oscar Höglund: I would say that the name is on one of the co-founders called David. Names are interesting, right, because one in the music industry, you'd be surprised about the amount of names that already are registered. So finding a cool music name is difficult. I think one of the reasons why we really like Epidemic, and I'm the first to acknowledge that in English-speaking countries, there's an association which is different from non-English speaking countries because there's epidemic, pandemic, there's a medical effect to it.
Oscar Höglund: The way we see it is that our music, what we do, is very catchy. It's something that spreads. The nature of music, vibes. One person hears something, recommends it. Music gets played and YouTube it gets spread. It spreads very much as an epidemic around the world. It's also a case of something that sticks out, that's a bit punchy. That there is that dual meaning in the name. It's like, "Hmm, epidemic, that's a good thing, right? Or is it a bad thing?" It sticks. It makes people talk about it.
Oscar Höglund: Obviously, if you're an incumbent and words making life difficult for you, they have a very clear opinion on what epidemic means to them. If you're a YouTuber or somebody who has a story to tell or if you're a musician, ultimately you want two things as a musician. You, A, want to make sure that you can sustain your life and so you make money from your music. But arguably more important than that, if you're a creator, you have something, you a story you want to tell, be it music, be it content, be it vectors, be it graphs, whatever it is. You want to spread, as many people as possible. You want them to hear your message what you have to say.
Oscar Höglund: And that's very much at the core of what we do. Sort of, we help musicians in that we're an epidemic. Our music gets played, I think, about 40 billion times every single month across YouTube and Facebook alone. We sign up customers, I mean, tens of thousands every single month. We're growing at a rate now. We've never grown as fast as we're doing now. We're 10 years old and our business is growing more than 100% year over year. So we're accelerating as we grow. So we very much try and live up to our name.
Kris: That’s quite a few people to be starting up a company with. How did you sort of, like, figure out things like, equity splits and how did you figure out who does what in the business?
Oscar Höglund: Let's go equity first. Equity is very easy in the sense that, let's remember that for a very long time, we've been a socialist country. I think around the last 70 years, 50 years of being socialists. When we started building this company, we've all built a couple of companies previously to that, and so we had a very fair split. Everyone owns the same amount. So five people, 100 spilt by five, 20% each.
Oscar Höglund: And that was an important guiding principle, very much we felt secure in that because we knew that we were going to complement each other. I see myself as the mule, in the sense of imagine this mule with satchels on the sides where you put ridiculous amounts of bricks into it arguably wearing a sombrero. I'm this machine that never takes any, I just get shit done. That's my, sort of, special skill. That's what I add and that's what I bring to the table.
Oscar Höglund: Some of the people around me have had incredible commercial success and creative success and they have networks, ideas, brains that work completely different to mine and that's what they bring to the table. Some of them have experiences in scaling up companies and doing stuff that way. And again, we very much engineered how we built this company based on the different skill sets we could bring to the table. So we were very, very different and that's worked fantastically to our favour.
Oscar Höglund: Arguably, it's one of the things that I'm most proud of is that within the founder group, we've never had any major issues. We keep each other very updated. We have a very open environment. I like to think that, that's the way how Epidemic works as well, but over-investing and communication and empathy and understanding each other's point of view has very much helped us supercharged the business.
Oscar Höglund: Because building a business, as you know, is incredibly difficult. And the last thing you want to do is do it's internal fighting and there's never been that case. So it was a very socialistic approach, if you will. In terms of who gets to do what, again, I'm going to give you the honest truth. Nobody wanted to be a CEO. The luxury is to be focused. I love being the CEO now. Sometimes I joke and say I'm like a glorified janitor because I get to do everything.
Oscar Höglund: As soon as something goes south, it's always on me. I'm very happy to take responsibility. As soon as something is hyper-successful, I always moonwalk out of the way and make sure somebody else gets credit for it. We looked at each other in terms of who has the best skill set to be the CEO. It fell on me. It wasn't because I threw my hat into the ring, it was because I said, "Okay. If somebody needs to do it, I'm a numbers guy, I can probably, sort of, do this."
Oscar Höglund: Over time, I think I've grown. I’ve, I think, from day one I've been very open about what I know and especially what I don't know. I'm not afraid to apologise. I'm not afraid to make decisions and then remake decisions and be quite iterative and agile, if you will, in that process.
Oscar Höglund: Ultimately, I think that helps build a lot of self-assurance. People felt comfortable because they know that I'm going to be vocal if I have a strong belief, if I don't know something I'm going to let them know and they can inform me and we create the decision around that.
Oscar Höglund: So that's how it honestly played out. People might engineer stories differently when they talk backward about stuff that went very well and say, "Yeah, it's all on me. I had this vision and I had this plan." Typically, that's not how it pans out. There's a lot of luck, serendipity involved and quite a bit of pragmatism in terms of getting to a good place.
Kris: And after the break - we’ll explore how all that luck had grown Epidemic Sound into a massive force in online music.
Kris: This is Building a Unicorn, I’m Kristofor Lawson.
Kris: Before the break we were speaking with the CEO and Co-Founder of Epidemic Sound Oscar Höglund about the early days of the Stockholm based company.
Kris: And before we go any further, it’s important to talk about Sweden in the context of the music industry. It’s a country with a population of less than 10 million people but it’s really become a superpower in the world of digital music, spawning several big music startups. The biggest of which is streaming music service Spotify, which was founded in 2006 and now has a market cap of more than 26 billion US Dollars. There’s also Soundcloud, known for allowing artists to upload their own content for the purpose of streaming. And then you have a history of great swedish bands like ABBA. There’s clearly a lot of musical talent in Sweden so you’d think that the CEO of a music company like Epidemic Sound might be someone who actually has some musical ability, but you’d be wrong.
Oscar Höglund: Unfortunately, I'm not a very talented guy in any aspect. In particular in music. My one skill there I will say, I play the guitar in self-defence which sounds horrible. Nobody at work is ever going to hear that, as in me playing.
Kris: Right. You haven't been composing music for Epidemic in your spare time?
Oscar Höglund: God no. No, no, no, no, no. Yeah, no, I don't do that. I do love poetry and rhyming and that kind of stuff, so I'm definitely the, I'm a father of three now, so come Christmas, I love the rhymes on presents and getting that working. I can hear a song twice and then I know the entire song by heart. Lyrics stick. I'm one of those people.I think we're like 10% of the population.
Kris: That's amazing.
Oscar Höglund: It's a blessing and also a curse, because when you have small children, my youngest is eight. My oldest is 12. Every single track that gets played on the radio, on a playlist or wherever you consume it, I hear everything that they're saying.
Oscar Höglund: And a lot of songs are, let's say, ambiguous in terms of messaging. Most people just say, "This is a great melody," and they bob their heads. In some cases, I'm hearing what they're actually saying and I'm like, "Yeah. We should maybe listen to something else."
Kris: When you were starting out, you've got this great idea that you're going to make this music process just much easier and simpler and really change the structure of how this all works. What was the reception like from the industry when you come to them with this great idea for how you're going to make their lives easier? What did people say?
Oscar Höglund: Wow. Where to begin? Well, the first thing that happened when we started telling people what we wanted to do was, "Yeah, well that's impossible." One of the things we wanted to achieve was, we wanted to be self-sustaining in a world where all of the music industry, to some extent if you ask me, is like a shotgun wedding.
Oscar Höglund: So you have record labels who have the artist. The songwriters and the actual producers and, sort of, the brains behind the lyrics in the songs. And then you have naming rights organisations who, to some extent, represent the artist, the recording artist. And then you have a number of different rights holders. There's a whole process of finding A&R talent, producing it, distributing it, getting it done.
Oscar Höglund: It's like a massive shotgun wedding where nobody calls the shots. Everyone is dependent on each other in order to get the circle to work out well. They don't really have the same incentives and it doesn't really work out.
Oscar Höglund: So initially, what we wanted to do is said we want to be self-sustaining. We want to build an ecosystem where we're not dependent on everyone. That's going to take a very long time, but we want to understand the end-user. We want to understand the musicians. We want to be able to control A&R. We need to own the datasets. We'll put together the business plans. We'll put together the payment solutions. We'll make sure to take care of the customers and the musicians and create an ecosystem that actually works.
Oscar Höglund: So launching that idea initially was, sort of, everyone, "That's a terrible idea, cause it's going to take a very long time. There are no unit economics. It's not going to work out." But our bigger vision was, "Well, it's a leap of faith. It's a contrarian big bet, but we think that rather than double down in this system which ultimately doesn't work is become truly dispersed and distributed around the world. And as online video becomes a new norm, that system isn't going to scale."
Oscar Höglund: So first one was disbelief. We very much had a strategy in the sense that we knew television and online video wasn't a big thing back then. So we said that, "For the first couple of years, we should double down on television." And well, let’s soundtrack TV. And there are a number of reasons for that.
Oscar Höglund: One, they're very picky buyers. If you talk to production companies and you talk to the editors and the producers of the primetime TV shows in the world in general, in Sweden in particular, they're used to using whatever music they feel like. They are very, very particular in terms of what's good and what's bad.
Oscar Höglund: So we felt that if we could get access to these picky buyers, they could teach us what does great music sound like. If you want to soundtrack the Internet, we first have to soundtrack television. And they gave us a really hard time for a number of years, which was great. That was one part of understanding what people need.
Oscar Höglund: Second one was about building the process around this, so what kind of products do these people want to use. Help us understand the use case. Coming from television we knew of one example, we have something called stems. So every single track, we've decided to record it in separate stems. And the reason behind that was that we had made a lot of TV shows and we knew exactly what it felt like when you had the beginning of, let's say, a Robinson episode. Panorama this island, doom, doom, doom, doom, drums. And then a, sort of, a local national hero who's the host for the show is going to say, "G’day mate. In this week's episode, we're going to do blah-blah-blah."
Oscar Höglund: His voice or her voice is the exact same pitch as the drum or the keyboard or the singing in the song. So we would spend endless hours trying to find a segment of a song which didn't include that instrument, copying it, looping it, trying to recreate a track so that the person could talk, and then we did. It was a nightmare, but it was a use case problem.
Oscar Höglund: And nobody in the music industry wanted to address that, because the impression that we had working in TV production was very much, music was the finer art. Or they felt that they were in comparison to online storytellers or television production in general and reality television in particular.
Oscar Höglund: So the sentiment in the room would be when we met with music companies always that, “You're going to take our beautiful musical art and you're gonna, sort of, to make it foul by incorporating it in this commercial television production.” And in order for us to accept that sort of, plight you're going to have to pay us an arm and a leg and you can't alter anything, and so we're doing you a favour.
Oscar Höglund: We completely re-engineered everything behind that and said, "Listen, we'd be honoured if you want to use our music in your storytelling and we'll take it one step further. Every track we make, we'll split it into stems so you immediately can pull them all into your timeline and you retract the drums, you retract whatever, you add the voices and you can build music in layers to accompany and highlight the story you're trying to tell."
Oscar Höglund: It might seem like a small thing, but it was a completely different way of thinking and being customer-centric and putting our users before us. Hence, of getting into that whole TV business was really, really important for us because we needed to understand the trade.
Oscar Höglund: We eventually got traction. There was this point in time when I was looking at television in Sweden and I flick between every single TV channel in Sweden. We don't have that many, it's 12 I think. And they were playing our music, at the same time, in every single TV channel.
Oscar Höglund: And so I sent an email to my co-founders and I said, "Hey, I think we have product market fit. We should probably scale and move into more countries and eventually start looking at our bigger vision, which is soundtracking the Internet."
Kris: Not only did Oscar and the team have to work on getting TV production companies on board they also had to convince musicians that this was actually a good idea that was going to work. So one of the strategies they took from the start was to pay musicians up-front for their music. So rather than the traditional model where musicians would create the music and wait around for years to get royalties, they’d actually have a guaranteed payment for their work, which is a much more attractive offering.
Kris: I know you've got a model where you buy the tracks directly from the musicians for a particular fee. When you're starting out as a startup, like, that becomes very capital-intensive to do that and you don't know what people are going to use, et cetera. So what was it like initially getting musicians on board with your vision?
Oscar Höglund: I have tonnes to say about this, I'm very happy you asked this question. Let me bring you back to 10 years. We took a strategic decision in the sense that do we go public and talk about what we do, which is a very American way of doing things. Sort of, let the world know this is what we're doing and then eventually do it. Or do we go more Swedish and be very secretive, don't say stuff, keep our heads down because strategically, there's a lot of value in building a company, sort of, making a lot of mistakes and understanding how stuff is actually going to work.
Oscar Höglund: And once you hit a certain point, when you hit a certain scale, it's going to be very difficult for somebody else to replicate or play catch up. We opted for the latter, so we didn't give interviews. We didn't talk that much. We rely completely on word of mouth and we had a very low profile out of strategic reasons. We can get back to this later on, because the jury is still out whether or not that was a good move or not because, people tried to hijack our brand. There was a lot of talk about us and we didn't want to go out and comment, because we wanted to keep a low profile.
Oscar Höglund: So initially, what we did is we used word of mouth. So through our founder collective and being Swedes, it was, there's a lot of talent in Sweden. And we're very well connected as a music nation. And so initially, we started reaching out to people. And I think in the early days, we might have had, maximum 100 people a month who would apply.
Oscar Höglund: We started out very small scale. And the pitch to musicians in the earlier days was quite simple. I'm going to use a football comparison. We would go, "Hey, you're a fantastic music creator. We'd very much like to work with you. Here's how we work. We'd like to commission music from you and pay upfront."
Oscar Höglund: This is the exact opposite of the rest of the music industry, because traditionally, as a composer or a producer, you would be asked to create music. You wouldn't get paid, but there would be this vague promise that this might be a hit, there might be a pot of gold at the end of the rainbow, it's called royalty. And if for some bizarre reason the accounting is right and the reporting is right, in two and a half years, you might make some money of this.
Oscar Höglund: We went the exact opposite direction. We said, "No, no, no. We'd like to commission this track of you. I'll pay you $1000 if you do this. This is what it should sound like, but there isn't going to be any royalty, but there is a guaranteed fee. On top of that, we'd like you to work together with us."
Oscar Höglund: So within o****ur collective network of people who are the Epidemic, there are 15 people who have done what you've done for 10, 15 years, the best in the world at their game and they can coach you. They can teach you. So arguably, it was a bit like saying to somebody who plays football, "Listen, we have this. How would you like to practise with David Beckham and we would pay you to show up for practise."
Oscar Höglund: So once com****posers got that message out, people were really, really interested. People started to sign up and we started to screen a lot of people. I think to date, we've had tens of thousands of musicians apply. I think we work with 0.6%. So we're very selective. It's difficult to work for Epidemic because we have very high standards.
Kris: Wh****at makes a good Epidemic musician?
Oscar Höglund: I'd argue t****here's a number of things. One of the most important one is your ability to talk about the creative process, be in it, but also take yourselves out of it. A lot of what we do is we're really good at creating music and ultimately creating emotion. So understanding what you're trying to achieve. Taking feedback. Working in a collaborative process is very, very important.
Oscar Höglund: There's ski****llset and there's experience and there's all that. That's a given. But I think being able to see your role and how you can learn and adapt and take feedback and be progressive and productive in that process, that's, I think, that’s a challenge for a lot of people. But ultimately, the ones who are really successful are really good at embracing that experience.
Kris: I ****mean, you talked about this point where you saw that all of these television channels were using your music. And as you started distributing your music out onto other platforms, was there a point where you realised that what you're doing is actually going to be really big and really impactful?
Oscar Höglund: On the one hand, I've always known. I've always known that Epidemic is the one.
Oscar Höglund: I think I've been fortunate enough to be a part of building eight different companies. They've always been about storytelling from a game perspective, television, online video, music pods. I'm passionate about all that, but I've always known that Epidemic is the one.
Oscar Höglund: I can't really put my finger on it. It's a feeling. When you go to bed at night, it's interesting because the last 10 seconds before you sleep is when you're really honest towards yourself. It's almost like all the layers of yourself and my role as a father and a husband and a boss and a son, everything just falls off and it's just you with yourself.
Oscar Höglund: It's the last thing that leaves my mind. It gets me excited. That weird sense has always been around me. Another way I'm answering the question I guess would be, there would be tonnes of points in time, when, when we've known that this is going to work out.
Oscar Höglund: To take you through chronologically, one was the point when, I mentioned it briefly previously, sitting at home, watching television at that time, I knew every single track in our library by heart. We were up in a thousands already then. I could see that, sort of, on every single channel Sweden, they were playing our music. Sitting down and writing that email, I knew that, "Wow, this is not common. This is something special."
Oscar Höglund: Fast forward, I remember vividly started to fly back and forth to San Francisco, sorry, California, to San Bruno, to the headquarters of YouTube. Sat down and had a couple of meetings with the CEO of the time and realising that soundtracking YouTube, getting to that point where we understood that, "Okay, we're doing something unique here that's going to help solve a tonne of issues for music creators, for online storytellers, from the big global digital platforms. Our piece of the puzzle really fits. This is going to scale and have a big impact." That was another big one.
Oscar Höglund: A third big one was, I remember when I flew home from a summer vacation and landed in Sweden, I had 40 missed calls. And it was the same day when it became public that our music was now on music streaming platforms around the world. Suddenly Epidemic Sound have gone from a well-kept secret and very much everyone in the online space knew exactly who we were, but in the traditional B2C music consumption base, nobody knew.
Oscar Höglund: And I had missed calls from the BBC, the New York Times, The Verge, every single big publication out there wanted to know who we were because this was, "Wow, who are you guys?" That was a third moment when I felt like, "Wow. This okay, we're at this phase now. This is interesting."
Oscar Höglund: Another vivid memory I have is, I remember when I started signing checks that we would send out on a monthly basis to our musicians where they were making hundreds of thousands. When we paid out our first million to our first creator, that was a huge moment, because I really felt that we're changing people's lives. We're helping them build their livelihood and this is a big deal. This can be something.
Oscar Höglund: I remember when our turnover hit 100 million SEK. That's like 10 million US dollars. I cried because that took eight years to get there. We've never turned a profit. We've financed this through the other companies that we've built. It's been a long-term vision. We know that over time, this is going to work.
Oscar Höglund: When we got to that point, that was very emotional because this is past the point of being a traditional startup that can fail. We're now in the next phase where we're scaling up. We know this is going to work, but how big is this going to be?
Oscar Höglund: I can remember hearing certain tracks for the first time when I go, "This is going to be our first hit." The hairs on my arm just rose when I heard, sort of, "Wow, this is going to be the first one." So there are tonnes of different small, micro instances when you feel that this is not normal. This is something spectacular. And something, I'm super privileged to be in that position, but something that not everyone gets to experience.
Kris: Coming up after the break, how Oscar and the Epidemic Team were able to scale their music and take over the internet.
Kris: W****elcome back to Building A Unicorn, I’m Kristofor Lawson.
Kris: Fo****r the first several years, the five co-founders of Epidemic Sound kept fueling their dream from their own pockets, from the nest-eggs they’d made from their previous business ventures and they never took anything out.
Oscar Höglund: So every si****ngle month, none of us would get a paycheck, we would get a bill to pay, so the company needs more money. Please send more. Please send more. And for almost five years, that's how it worked. So I had zero salary. Nobody else had any salary. We lived off of what historically had been achieved. We would just send more money. Please send more would be the constant message.
Kris: Bu****t eventually the founders reached a point where they all couldn’t afford to keep putting cash in, so they decided it was time to raise capital and start scaling.
Oscar Höglund: We eventual****ly got to a point where we couldn't all defend our different shares equally, because we want all in the exact same position, obviously. And that's when we decided to take on some external capital. We spoke to this Swedish VC company called Creandum. And we told them about our vision, told them about what we wanted to do. And we were able to excite them. They were the first investors in Spotify, so they knew the industry well and they understood the macro trends, and they also had the belief that there was big change about to come.
Oscar Höglund: They became**** a shareholder in Epidemic, a fairly small one. We still retain the vast majority of the company and we kept them building for a number of years. And then fast forward to about a year ago, we got to the point where we realised that, "Wow, we're highly professional when it comes to building our business, when it comes to scaling our operations, how view the role of music, the role of storytelling."
Oscar Höglund: We were hap****py with where we were. Where we felt we could improve was arguably in the boardroom, like from an owner perspective. We were still five individuals who held more than 80% of the company. We weren't that well known. We were, sort of, taking the next step into the global scene. We had huge ambitions. We wanted to grow fast when need be. We wanted to be swift and nimble. And we wanted to elevate our game across all levels.
Oscar Höglund: And so we i****nteracted with a couple of investors who we appreciated and who we felt really understood,not only our vision in terms of what we wanted to do, but I'd really like to highlight we interacted with people who enjoyed. There's this test called the, airplane or, the airport test. If I miss a flight and I have to spend two hours with this woman or this man in the airport, would I want to kill myself or would I really enjoy having a beer or talking about stuff with this person?
Oscar Höglund: The persona****l aspect was really, really important for us. And we decided to allow the Swedish private equity firm called EQT to invest, and we're now split. So there are three different parties. The founders own some shares. EQT own some shares and Creandum own some shares. And then on top of all of that, every single person in Epidemic Sound is also a shareholder as well.
Kris: So**** then they feel ownership over what they're doing and the vision you're creating, like they feel that, that's part of their mission as well.
Oscar Höglund: Exactly. Ex****actly, so. I think we fundamentally believe that there's something that happens, arguably, there's something that happens around the dinner table if you will. When you go from saying that, "I work at this company." To say, sort of, "Yes, and I'm owner. I'm one of the owners." We like to think the people are very, very proud about what we do, the place where they work, how what we do affects so many people. It's like a very visual. It's a very emotional product.
Kris: Ep****idemic’s focus on making sure musicians are rewarded for their music up front helped it build a large collection of digital music. And as the company had already reached a point where every TV station in Sweden was using their tracks they started to make content easier for other creators to access.
Oscar Höglund: An interest****ing thing occurs, because we were still a very small company at the time, and even though they were super excited when we met them, they were like really thrilled because they saw the value, they saw how this could supercharge the ecosystem. Something happens. If you picture an elephant trying to dance with a fly, even though they're eager to dance, every time the elephant tapes a step, the fly is about to get squished and killed. That's a pretty good mental image in terms of what it's like to try as a startup to work with these really huge, behemoth global companies.
Oscar Höglund: Because you**** would get stuff like, "Yes, this is fantastic. We're going to try and incorporate something with you guys in a roadmap in next quarter," which is code for, "This is never going to happen.” And it took a while before we understood that, because there's so many different priorities. There's so many people involved. There were so many layers. Large organisations can't be quick even though they're excited, because there's so much structure and politics in the way.
Oscar Höglund: So we tried dancing directly with all of these platforms for a very long time and it just didn't work out. We were a fly, they were elephant, the dance was awkward and it was just off. We needed something that was an intermediary. Fortunately for us, there was this one point where I was at a carpark in LA and there was this sign and it said Disney. It was crossed over and it said, "Full-screen beneath."
Oscar Höglund: I heard that name before. I didn't really understand what they did, but they were so called multi-channel network. They were rolling up lots of channels into a system of, if you will of, it's like a network. Almost like a record label but for online YouTubers. The MCNs would try and add value to all these different channels by providing them with monetization tools, advertising opportunities, tutorials, context, just sort of helping them out adding services.
Oscar Höglund: Then the idea dawned on us and we were like, "These are perfect intermediaries for us, because if the big platforms are too difficult to get to, these companies have some of them thousands, some of them tens of thousands and arguably some of them hundreds of thousands of creators who are the end-users that we currently want to reach."
Oscar Höglund: And they were much smaller, much younger, much more nimble, so it would be a great idea to make sure that these entities know about Epidemic Sound. And so we started reaching out to them. The biggest one at the time was Maker Studios. I don't know how many times I flew back over to LA to meet with their CEO at the time. I think his name was Courtney.
Oscar Höglund: And eventually I, sort of, I broke him down and I said, "This is what we want to do. This is why this is great and it's fantastic for all of your channels." Again, the thing you should picture, sometimes it's to our benefit, that we're a Swedish company. Because people go, "Sweden music, ABBA, Robyn, Swedish House Mafia, Spotify, SoundCloud. What's with you guys? It makes sense."
Oscar Höglund: The flip side of that is also, I was this enthusiastic guy coming, "Hello. My name is Oscar. We're from Sweden. We want to do music for you guys." And ,the distance is so far. Hence, I had to fly over and physically corner him at a conference and tell him, "This is what we're doing," and have him use the product and test it on a couple of channels. Once a few channels tested it, they loved it.
Kris: Epidemic Sound eventually moved past the multi-channel networks, offering affordable subscription plans that allowed YouTube creators to use music in their productions for a small monthly fee. And then as those creators used their music people would comment on videos asking where they got the track they just heard. The Epidemic Sound team would then reply to the comment, tag the song, and gradually they started building their own social profile, leveraging the power of those communities.
Oscar Höglund: And our vision and one of our strategies has been very much we want to educate the entire next generation of storytellers. This is how music ought to work for everyone. It ought to be, like a super fun, inclusive process where you add stuff in your online content and we're now seeing that we're growing with these content creators. We turned 10 on the 20th of April this year as a company and we're seeing that this is very much materialising.
Oscar Höglund: People are moving on from first being a YouTube customer of ours, then being a small production freelancer. Then they're now production companies and the whole nature of the content business works to our favour because it's a freelance business.
Oscar Höglund: One person can work for five different companies, and every time they switch, first thing they do with a new job is we need to get our stuff in order. We need Epidemic because that music scales, it's great, I know exactly how that works. And they bring us along on that journey.
Kris: And at one point around 2016, the company decided that there was so much demand for their music on platforms like YouTube that they started distributing the tracks to streaming services like Spotify. And this proved to be incredibly successful. However it didn’t come without some controversy. Existing music labels and artists started questioning who this new music was coming from, with some critics even accusing Spotify of covertly hiring Epidemic Sound to fill their platform with so-called ‘fake artists’.
Kris: Can you talk a little bit about that decision to go onto the streaming platforms and how you dealt with that sort of blow back from other musicians, et cetera who were concerned that you were stepping into their territory, particularly on their streaming platforms?
Oscar Höglund: So, let me bring you back to what sparked that move on our part. So we were seeing that there were hundreds of thousands of online creators who, on a regular basis for years had been using our music, and it was soundtracking and the stories that they were sharing with their hundreds of millions of followers across the different video streaming platforms.
Oscar Höglund: So at that point, we were arguably very well known in the online community, because our music we're soundtracking the content creators that they followed and respected. There were more and more comments popping up around these videos saying that, "I love the music you use. I want to listen to that when I study or when I cook or when I go out running. I just really like the music, but I can't find it anywhere."
Oscar Höglund: But those comments again became so vocal, so frequent, so we felt that, " Let's see what happens if we take our music and we upload it to a bunch of online streaming platforms so people can consume the music standalone."
Oscar Höglund: So again, it wasn't driven so much because we're incredible entrepreneurs and we're so super smart, more but we really listened to our end-users and to our customers. We took a couple of thousand tracks. We uploaded them to multiple streaming platforms where Spotify is the biggest one. We happen to be Swedish as do they.
Oscar Höglund: And our tracks got traction. Step one was that they got traffic from online radio platforms, started flowing onto the different streaming platforms. The different streaming platforms started seeing that these tracks were being listened to a lot, so they got included in all different kinds of playlists all over the place.
Oscar Höglund: And because for 10 years, we've been very focused on doing one thing. We create music, which is perfect for capturing emotions, because that's what our storytellers want us for. Hence, when we saw the proliferation of different playlist, tens of thousands of them who had specific purposes. They said like chill music, or peaceful, or studying, or running, or yoga, or getting up in the morning, specific purposes. Our music was ideal for that, because we've been doing that for 10 years time.
Oscar Höglund: What then happened was I think that the rest of the world, which wasn't online, who wasn't consuming our music, they hadn't heard to us in any kind of extent at all. And so when we suddenly started seeing all this traction online, we left the music industry baffled and bewildered in the sense of, "Who is this company? Who are these artists? Who is all this music?"
Oscar Höglund: And so taking them on that educational journey, it was super exciting, but it was also very intense, because we came, again, if you don't understand something, you fear it. So there was a lot of controversy because we don't know who the artists are, we don't know where this music come from. There wasn't any understanding.
Oscar Höglund: We were tipping the scales. We were changing something. We were adding something new. As a change agent, you aren't typically cheered. People will go, "Okay, is this a good change or a bad change before they understand what it was?"
Oscar Höglund: Eventually, when they understood, what we're doing is we're democratising distribution. We're making sure the music travels, flows freely from both the online video world into the music consumption world. We're making sure that both distribution and money can flow freely as well. We're splitting our revenues in a completely different way as opposed to everyone and we're doing it open kimono. This is exactly what we're doing.
Oscar Höglund: So what then happened was the massive question mark quickly turned into this huge influx of musicians and talents who immediately wanted to start working for us. And so that put a lot of focus on us again because obviously for musicians, it was great. But for the incumbents, if you're a label or if you're a publisher and you see a lot of my acts, want to go and work for someone else, you're not going to cheer for something like that, arguably, you're going to say, "Wow. We need to step our game up a little bit more.” Hence, that was the macro text of what was going on.
Kris: Was that sort of stressful internally? When you thought you were doing this really great thing for your audience and then suddenly, like particularly around Spotify, it turned into this big thing where, "Oh, no, you're ruining Spotify and you're taking away from these other artists on the platform and things like that." Like did that create a stressful situation for you?
Oscar Höglund: It was more than stressful, because it was surreal. It was surreal in the sense that we were being accused of creating fake artists. And internally, what was happening was that we were saying, "Listen, we're the exact opposite of how the traditional music industry works."
Oscar Höglund: Historically, if you look, I’m going to use Spice Girls as an example. Take five women, they don't know each other. We orchestrate them. We, sort of, create different characters. We say that they know each other but they don't. We give them, we put them together. We create a sound. We create everything and we put them out there.
Oscar Höglund: And if you ask me, that's a fake story behind that. We were the opposite. We've been working with people for 10 years saying that you should do exactly what you do, you're fantastic. If you want to be highlighted, we can do that. If you want to work in seclusion, you can do that. The content is the important part of what you do and you're fantastic at your trade. We're honing on something during almost a decade.
Oscar Höglund: Yet, here we were finding ourselves in a position where people are saying, "No, no, no. We were apparently the fake artists according to the rest of the industry and the other industry, which was like a monopoly where everything was orchestrated and everything was fixed, that disconnect with what was actually going on and how it was portrayed was surreal because there was no merit to it."
Oscar Höglund: So to some extent, it was exciting because we got to tell everyone exactly what we were doing and you could almost see in their eyes when they realised that, “We've got this all wrong. You're telling us it's the other way around?” and we would go, "Yup. It's the other way around."
Oscar Höglund: So when that effect eventually came, it was hugely gratifying, but it was super painful initially like sitting down talking with all our musicians and composers, which is our number one priority where they were saying, "Why are people saying that what we're doing is fake when it's everything but fake?" I work with Epidemic because I get to do what I like. This is me talking as opposed to somebody telling me, "Write the track for her. Write the track for him. Do this. Make it sound more like this." So that disconnect, that was our number one concern and why we decided to be so very vocal about this is what we're doing, this is why we're stepping up.
Kris: How big are you guys now? How many staff?
Oscar Höglund: I think at the end of 2014, we were less than 30 employees. And we jump to 2017, we were about 150. And now, we're well over 300. So, I think arguably, we're growing at a healthy pace.
Kris: What have you learned from growing a team that rapidly? I mean, rapid growth can be really difficult to manage. So how have you managed that rapid growth?
Oscar Höglund: The key secret to success, if you ask me, is to really, I use the term overinvest, but I don't believe you can overinvest. But overinvest in people and in relationship. If you make sure that the people around you feel secure in terms of what's the bigger vision, what are we trying to do, what's my role in this, what's expected from me. Sort of, what are the degrees of freedom within this organisation. Making sure that people feel that they understand and know that. People become autonomous in a way which is fantastic if you're a fast growing company.
Oscar Höglund: You have all these micro-units who, there isn't this need for constant control everywhere because we have a very clear idea of where we're going. And maintaining that sense of us community and in parallel while people feel empowered and they can do stuff, that's been like super important. I think in the last years alone, we have multiple offices in Europe and we opened our office in New York a couple of years ago. We opened our office in Los Angeles, a year and a half ago.
Oscar Höglund: Come two weeks now, we're opening up our first office in Australia, in Sydney. So I think that's, sort of, making sure that's, when we do stuff we tend to do it properly. That's, like, an important part as well I think.
Kris: Great. You're 10 years into this journey now. When you look at what you've achieved, how do you feel?
Oscar Höglund: There's this fantastic Swedish expression which goes something like, "Behind every successful entrepreneur, there's a very surprised mother-in-law." It's something like that. To some extent, I guess you do feel surprised, because a number of years ago, we had this vision. We wanted to soundtrack the Internet. In that process, we've been incredibly blessed by serendipity, luck, hard work, talented people and just this process of growing, growing, growing, sort of, faster and faster.
Oscar Höglund: I felt humble. I feel excited. I feel there's a lot of responsibility from a number of different places. A responsibility towards myself. There's this opportunity. We need to make the most of it, in terms of having an impact on the world. There's the expectations from musicians, from content creators, from employees, from investors.
Oscar Höglund: Ultimately, I think that it's something that's, it’s, it's exciting, because there's this whole risk reward. Either you like risk, and for me, risk is something that you carry with you every single day. It's part of the whole reward. And I enjoy that challenge. I enjoy going to bed feeling that anything is possible. I enjoy, sort of, getting up in the morning and somebody presents an idea and we think it's a brilliant idea and we have the means and the will to completely go after it.
Oscar Höglund: So the feeling I have is one of excitement. Very much is everything is possible. We're still a tiny, tiny company. We've only scratched the surface of what long-term we want to do. So I feel that there's so much left to do and it excites me to start to get that job done.
Kris: Thanks to Oscar and the team at Epidemic Sound for taking the time to speak with us for this episode. And in case you’re wondering - We are an Epidemic customer - so some of the music in this series and in this episode does come from their library. However they’ve played no part in our editorial process.