Swe­den’s Sound­track plans to drown out Muzak

A Swedish startup is sell­ing back­ground mu­sic from the cloud Com­mer­cial stream­ing “is su­per­frag­mented and dys­func­tional”

Bloomberg Businessweek (Asia) - - CONTENTS - Adam Ewing

Not long ago, when Mathias Forslund wanted to rock out while pulling es­presso shots at the three Stockholm cafes he owns, he’d burn mixes to CDs. Once he dis­cov­ered the ease of stream­ing mu­sic at home, he wanted the same con­ve­nience at work. But af­ter scru­ti­niz­ing the fine print on his sub­scrip­tion ser­vice, he re­al­ized he was break­ing the rules. En­ter a Stockholm startup called Sound­track Your Brand .

Forslund to­day pays Sound­track about 350 kro­nor ($42) a month for each of his cafes to have ac­cess to 30 mil­lion songs streamed from the cloud. He can cre­ate playlists that change hour to hour: clas­sic rock for busier times, French chan­sons when he wants a calmer mood. “I love hav­ing so many songs at my fin­ger­tips,” he says. “Be­cause it’s so easy to use, it’s per­fect for our stores.”

Song-stream­ing leader Spo­tify and Ap­ple dom­i­nate stream­ing for con­sumers, with a com­bined 43 mil­lion pay­ing sub­scribers, but they don’t have li­censes al­low­ing them to of­fer their ser­vice as back­ground mu­sic in restau­rants, bars, and stores. Sound­track, by con­trast, has se­cured those rights for the cat­a­log it uses. One-third owned by Spo­tify, the com­pany is a ris­ing player in the mar­ket once dom­i­nated by Muzak. Sound­track lets cus­tomers choose from songs by thou­sands of artists, from Ri­hanna to Ra­dio­head to the Rolling Stones. The Web in­ter­face shows users what’s trend­ing, shares ac­cess to cu­rated playlists, and lets them sched­ule spe­cific songs, bands, or gen­res to adapt the mix to chang­ing moods through­out the day.

The com­pany’s lat­est coup: a global deal with McDon­ald’s that al­lows the fast-food chain’s 36,000 lo­ca­tions world­wide to sign up at a dis­count to Sound­track’s stan­dard rate. The agree­ment gives the com­pany its first foothold out­side the Nordic re­gion. About 130 McDon­ald’s fran­chises in Swe­den use the ser­vice at present; in the un­likely event that all of the com­pany’s restau­rants join, Sound­track would reap about $17 mil­lion in an­nual rev­enue. It “can de­liver the largest mu­sic cat­a­log on the mar­ket,” says Lisa Palm-Daniels­son, head of dig­i­tal ini­tia­tives for McDon­ald’s in Swe­den.

Ola Sars, Sound­track’s chief ex­ec­u­tive of­fi­cer, says the con­tract with the world’s big­gest restau­rant chain will give his com­pany greater vis­i­bil­ity and cred­i­bil­ity. Sound­track is streamed to about 5,000 to­tal lo­ca­tions; it will start earn­ing a profit when that num­ber tops 25,000, he says. The monthly

cost for a store is about quadru­ple what a pri­vate lis­tener pays for Spo­tify, and Sound­track keeps half of that, vs. the 30 per­cent of sub­scrip­tion fees Spo­tify pock­ets. “The mar­ket is su­per­frag­mented and dys­func­tional,” says Sars, clad in a T-shirt in Sound­track’s min­i­mal­ist head­quar­ters in Stockholm. “No­body had a sim­ple cloud-soft­ware dis­tri­bu­tion so­lu­tion.”

Many smaller re­tail­ers and restau­rants don’t know they’re break­ing the rules when they pipe in mu­sic from con­sumer stream­ing ser­vices, Sars says. By stream­ing songs on­line and of­fer­ing a sim­ple in­ter­face, Sound­track can win small busi­nesses in the same way Ap­ple’s iTunes weaned cus­tomers off pi­rate mu­sic sites. “You need to be able to dis­trib­ute the ser­vice in an ef­fi­cient way, and if it’s ac­ces­si­ble on­line then there’s a huge mar­ket,” says Sars, who helped cre­ate Beats Mu­sic, the stream­ing ser­vice Ap­ple bought in 2014 for $3 bil­lion.

Sound­track has raised about $20 mil­lion from back­ers in­clud­ing Spo­tify, Swedish phone com­pany

Telia, and U.S. com­mer­cial stream­ing provider PlayNet­work. As Sars spends that money on a global ex­pan­sion, he’ll face a host of com­peti­tors. The mar­ket leader is Mood Me­dia, which ac­quired Muzak in 2011 and re­tired the name two years later. Although Mood is far larger— it serves more than 300,000 lo­ca­tions—it’s los­ing money and is re­struc­tur­ing to pay off debt. It launched its own stream­ing ser­vice, Mood Mix, in 2014, giv­ing users ac­cess to mil­lions of songs and pro­gram­mable playlists, but most of its cus­tomers still get their mu­sic ei­ther on CDs de­liv­ered by mail or via satel­lite or the In­ter­net. At least a dozen smaller play­ers, such as Touch­Tunes

Mu­sic and Image­sound, pro­vide sim­i­lar stream­ing ser­vices, but Sound­track has a clear edge, says Si­mon Dyson, an an­a­lyst at Ovum, a tech­nol­ogy con­sult­ing firm in Lon­don. With McDon­ald’s, he says, Sound­track has a “spring­board to much big­ger things.”

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