Stockholm — In 2013, after Ola Sars returned to Sweden from Los Angeles, where he had led the team that built the original Beats Music platform, the serial entrepreneur met with Spotify CEO Daniel Ek to discuss an idea. Sars wanted to build a business-to-business (B2B) platform for the kind of background music that stores and coffee shops use to create ambience — and handle all of the relevant licensing for them. For years, that business had been dominated by companies like Muzak — part of Mood Media since 2013 — which use curators and proprietary equipment to create and deliver music programming.
With investment from Spotify, Sars created a digital platform, now known as Soundtrack Your Brand. Originally launched in 2014 in Scandinavia as Spotify Business, it can be used by anyone with a computer or smartphone and reports playback data to rights holders so they can get paid accurately. (Although Spotify has a stake in Soundtrack Your Brand, it operates independently.) The platform licenses recordings and mechanical rights directly from labels and publishers — it also pays public performance royalties to performing rights organizations (PROs) — and allows businesses that subscribe to play 50 million tracks, either by the recording or as an online radio stream, for prices that start at $31.49 a month.
“I am taking a broken background-music space where nobody knows where the money flow is going and bringing transparency to that market,” says Sars.
He’s not the only one: Soundtrack Your Brand, which went live in the U.S. in 2018, is part of a new wave of B2B services challenging longtime players like Rockbot, Stingray Music and PlayNetwork. The old guard is trying to adjust. In July, Mood Media filed for bankruptcy, partly because “disruption by competitors has … put Mood under intense pressure to innovate and keep pace with these advancements,” the company said at the time. (A Mood representative says the bankruptcy, its second in the last five years, hasn’t significantly affected client churn.) Competition could heat up even more: Brick-and-mortar retail stores, already struggling to compete with online retailers, will face their own pressure to create a better experience at whatever point consumers are ready to go shopping in large numbers after the pandemic. The right music could be an important part of that.
At the same time, stores are in economic straits, and they could be reluctant to pay more for music than they would by using consumer streaming services like Spotify. Those services don’t provide the public performance licenses needed to play music at retail, so U.S. stores that use them without ASCAP or BMI licenses could face legal penalties. Right now though, many don’t have them: A 2018 seven-country study that Soundtrack Your Brand commissioned from Nielsen Music/MRC Data showed that the use of consumer music streaming services by businesses without PRO licenses was costing rights holders $2.65 billion a year in potential income. (Soundtrack subscriptions include the PRO licenses that businesses need.)
Soundtrack says it has inked some 10,000 direct deals with labels and publishers worldwide, including a deal signed last month with Universal Music Group. The platform is also trying to ensure the money it collects reaches the correct rights holders. Most PROs can’t precisely track what songs are played; they rely on estimates of popularity, which in turn create “black boxes” of funds, says Jeremy Sirota, CEO of Merlin, the independent label collective, which has a direct licensing deal with Soundtrack Your Brand. Sirota likes the service’s “ability to provide track-by-track, use-by-use reporting, really granular data.”
The background services are essentially “outsourcing some of our costs,” says BMI senior vp licensing David Levin. “We would rather focus our hard costs on those higher-priced licenses” for live music and karaoke, he says. While U.S. retail businesses don’t need to license recordings, Soundtrack Your Brand, as well as Mood Media and PlayNetwork, do.
Sars, 47, previously created an algorithm-based music recommendation engine for DJs called Pacemaker in 2006 that caught the attention of Jimmy Iovine and Dr. Dre, who hired him in 2011 to build out Beats Music AB. Sars says family issues and general exhaustion led him to leave Santa Monica to return to Sweden before Apple bought Beats for $3 billion in 2014. (“They compensated me fairly,” Sars says of the Beats owners. “At that point, I would have given Beats Music a 50-50 chance of surviving because it was so crazy.”)
Soundtrack Your Brand, with 75 employees, operates in downtown Stockholm at offices that are not far from the headquarters of Spotify, Kobalt and digital distributor Amuse. The platform took in $11 million in 2019 and paid out about half of that to rights holders, says Sars, and he plans to boost that to between 60% and 70% once it signs more clients for premium accounts, which offer the kind of fully interactive song selection that Spotify Premium does, for between $40 and $50 a month, depending on the country. (Its revenue is up from $3 million in 2018, but Sirota describes 2020 as “challenging” for Sars’ company.) Soundtrack Your Brand operates in 74 countries, but over half of its business is in the U.S., where it’s growing the fastest.
To compete, Austin-based Mood Media has been trying to expand beyond music. The company, which has a presence in 52 countries, was created out of various background-music firms, including the 86-year-old Muzak, DMX Music and Pandora for Business, and it now promotes additional services like Sensory Branding, which provides scents for retail stores. Other legacy players like Stingray and PlayNetwork still provide venues with proprietary equipment — which Soundtrack Your Brand sometimes does as well — but have started to move online, too.
Rockbot, a 10-year-old company which operates in the U.S. and Canada, programs music for Neiman Marcus and Shake Shack and also offers a skinny bundle internet TV package similar to Sling. PlayNetwork, founded in 1996, operates Apple Music For Business and delivers curated music to more than 7,500 Starbucks stores in the U.S.
While the newer players rely on algorithms to create playlists for non-interactive licenses — where customers can’t choose specific tracks or what order songs are played in — Mood and PlayNetwork still offer the use of human music designers like Mood’s Amy Frishkey, who has a doctorate in ethnomusicology from UCLA.
The challenge for newer players like Soundtrack Your Brand is achieving scale without relying too much on contracts with large companies that control multiple locations. Sars is confident enough to plan to raise prices, however, and he’s urging rights holders to crack down on the unauthorized use of music. “If we can work together to get these rogue users on a correctly licensed subscription,” he says, “we could unlock a massive incremental value growth for the industry in the next five to 10 years.”