A music-streaming startup partly owned by Spotify is going after the elevator-music market—and it’s squarely aiming at the company that currently dominates it.
Soundtrack Your Brand, which is about 30% owned by Spotify, introduced itself in the US on May 5 with the announcement of a deal with McDonald’s. It won’t be a big revenue driver, but it gives the Swedish startup its first foothold outside Scandinavia—and sets up a clash with the industry’s current market leader, Mood Media, which is the successor company to the brand that practically invented the idea of ambient music in shops: Muzak.
Soundtrack Your Brand is entering a market that its founders say is worth more than $1 billion dollars, and ripe for disruption. Mood Media has been losing about $80 million a year on a shrinking revenue base, and its distribution methods haven’t kept pace with technology, leaving an opening for a streaming-savvy competitor.
Soundtrack Your Brand, which already works with Starbucks and McDonald’s in Sweden under the brand Spotify Business, sends customers an Apple TV-like streaming box that runs on Android and is hooked up to a sound system. The music that gets piped through can be controlled by corporate headquarters, which sets a playlist for its branches. Branch managers merely adjust the volume.
Mood Media’s delivery methods are relatively low-tech in comparison. It sends CDs in the mail every month to subscribers, who then copy the contents onto a proprietary Mood Media player, wiping the previous month’s music. When more rapid turnover of music is needed, like during the holiday season, two CDs are mailed out, according to a Mood Media customer-service representative. The company also offers players that get music by satellite and over the internet, plus a mobile app that charges by the month.
“We have a grander vision than serving CDs to stores,” said Soundtrack Your Brand co-founder Andreas Liffgarden. “We’re accelerating [Mood Media’s] downfall.”
Mood Media didn’t respond to a request for a comment. But its financials make for grim reading. The Toronto-listed company is carrying more than $600 million in debt, including $250 million coming due in three years. Part of that debt was inherited from Muzak, which Mood Media acquired in 2011. Moody’s downgraded its credit rating on Mood Media in March, citing “weak operating performance” and a potentially unsustainable debt load.
Despite Mood Media’s travails, it might still be sitting on a goldmine. Its in-store media segment, which supplies background music, electronic signage, and audio-equipment leases, last year made nearly $100 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), on the back of $370 million in revenue.
Leaders in streaming music, meanwhile, remain far from profitable. Spotify has consistently lost money while chasing growth. Its annual loss reportedly tripled in 2014 to €165 million ($188 million) for 2014, on more than €1 billion in revenue.
Soundtrack Your Brand charges businesses $50 a month for each location using its service. That’s about five times more than what Spotify charges individuals. The business offering also has a smaller library, with only between 200,000 and 300,000 tracks, compared to more than 30 million on Spotify or Apple Music. Consequently, artists get paid between five and eight times more when their music is streamed by businesses, Soundtrack Your Brand’s founders say.
If Soundtrack Your Brand succeeds, it could finally find a way to make streaming music services pay for themselves—and breathe new life into the elevator-music business. As co-founder Liffgarden says, “The music industry has been so busy saving themselves from piracy for the last 15 years, background music has been forgotten.”