AsSpotify continues its reign as the worlds biggestconsumer music streaming business, a startup from its backyard in Stockholm (and even backed by Spotify itself) has raised alarge growth round to take a leading place in providing music streaming services tobusinesses.
Soundtrack Your Brand, started by an ex-Spotify executive and one of the co-founders of Beats (now part of Apple), has raised $22 million fundingthat it will be using to expand its business globally and continue building out its tech to select and play licensed music in stores and other retail locations. Think Muzak but much less kitschy and anodyne unless kitsch and lounge music is what the retailer happens to be going for, of course.
The company has already seen some significant growth. ItcountsMcDonalds, TAG Heuer and Toni & Guy among its multinational customers, along with thousands of smaller businesses (which include national operations for huge chains, such as Starbucks in Sweden) across100 countries.
Soundtrack Your Brand also operatesSpotify Business powered by Spotifys network in Sweden, Norway and Finland. It says that overall its revenues and customer base have both grown by over 400 percent. It is not providing specificrevenue or customer numbers.
This latest round is led byBalderton Capital and Swedens Industrifonden, and it brings the total raised by Soundtrack Your Brandto about $40 million. Other investorsin this Series CincludeTelia, Northzone, Creandum, the H&Ms family investment fundHMP, and industry vetJrg Mohaupt.
Previous investors not in this round include two strategics Spotify itself and PlayNetwork as well as Wellington. (Soundtrack Your Brand, you might notice, shares many common investors with Spotify.)
Soundtrack Your Brand was first founded in 2014by Andreas Liffgarden (who used to run Spotifys business development) and Ole Sars (the co-founder of Beats), who had both tried to hire the other at various times in their previous jobs and found that they shared a common philosophy on what they believed was the big opportunity in the world of streamed music. The goal is to fill a specific gapin the market: businesses today are often facedwith a limited, uninspiring, orpotentially illegal set of choices if they want to play music.
Most commonly, businesseswill use their own sets of CDs ormix tapes, or subscribe to services that send these to them, which can be a chore and cost to keep refreshed; or they will play the radio either by satellite or a regular wireless meaning no control over what music theyget. And, if they are usinga streamingservice like Spotify, they are likely breakingthe law, since these services are only licensed for non-commercial, individual usage.
Although its a gap in the market, that doesnt mean there arent others also trying to fill it: competitors include Mood Media (owner of Muzak, and partner to Pandora for its business offering in the US), Play Network (the same one investing in the startup), and local players like ImageSound in the UK.
Soundtrack Your Brand, Liffgarden and Sars say, is differentiating itselfin the market in a fewways.
The first is that its offering a very simple way to sign up and use the service without any additional physical hardware beyond a stores speaker system and internet connection. It charges 34.99 ($37) per location per month.
The second is in the selection of music that its providing, and its plans on that front forthe future. Several consumer streaming companies have coalesced around a figure of about 30 million music tracks available for listening, out of a global total of about 50-60 million tracks in existence. But that is not the whole story.
Liffgarden notes that at best most streaming services see the most heavy play on their platforms of only a couple of million tracks. Last year we played 200,000 unique tracks on our service, and our competitors playedroughly the same amount, he said. Today SYBs competitors have libraries of about 1 million songs that they are tapping for their services, and SYB itself is working with platforms like Spotify and Play Network to relicense roughly the same amount of music for the SYB service.
But longer term, the plan is for Soundtrack Your Brandto move to its own direct licensing deals with labels. Licensing has proven to be a major headache for companies like Spotify, which we have heard from close sources is trying to renegotiate its own terms in order to get a bigger margin for itself.
Liffgarden and Sars who are in the processof inking these deals now explain that their scenario is different because SYB is an enterprise service. As a more narrow use case, it will only license around 15 million tracks at the end of the day for specific uses.
This larger catalogue will give it a significant edge over competitors in terms of the quality it can provide. It make it lessdependable on other platforms (which was part of the undoing for an earlier startup in the same space, Soundrop, which lost the wind in its sails when Spotify changed its terms for apps on its platform).
Apart from this,the fact that it is charging more per userto play the music will also mean a higher margin for Soundtrack Your Brand in the end.
The third area where SYB is hoping to outcompete is in terms of what its actually providing to customers as a service. There is, of course, straight playlists that SYB will curate for its customers, as well as give retail workers the ability to play music on demand.
But it is also powering its system with big data and analyticsthat will help improve the selection of music, aimed at helpingretailers figure out how to better boost its sales, bring in more customers, and keep them longer (or perhaps subtly usher them out faster).
This is not just about music tech, Sars said. This is about moving into retail tech and the bigger moveto digitize businesses.
Weve asked Soundtrack Your Brand the question before of why Spotify didnt encourage its executive to build this service in-house as its own B2B arm. The answer remains the same and is worth noting here again: essentially, Spotify is completely trained right now on getting its core consumer business right and growing it, and the negotiations, strategy and resources needed to introduce an enterprise service right now would be too distracting to the central mission.
Ironically, SYB growing and becoming more independent is a win-win for Spotify in the end: the company remains an investor so would benefit from any growth at the company. And my guess is that there are certain rights of refusal Spotify would have on acquiring should itdecide to try to operatean enterprise business in-house.
The fact that SYB is making independent licensing deals also plays into that idea: it means that the platformwill have its own standalone agreements (right now, PlayNetwork provides music for SYB in markets outside of the Nordics). Standalone agreements would not need renegotiating, should SYB ever end up getting acquired by someone, be it Spotify or anyone else.
As part of this round, BaldertonsLars Fjeldsoe-Nielsen, previously head of mobile at both Uber and Dropbox, will be joining the startups board.
Ive witnessed disruption first hand. Dropbox made storage cool, and achieved a shift from a consumer to a business proposition. Uber changed the way we think of transportation. Soundtrack Your Brand will do the same thing to background music, he said in a statement.
Updated to remove an investor name (who is not investing) and also added detailabout the Spotify Business service.