Stores are Misusing Background Music and It’s Costing the Record Industry Billions
It’s unfortunately commonplace that many people — artists, small business owners and average music fans alike — don’t know that musicians should be making money every time their work is played in a restaurant, bar, or retail store. In fact, it’s illegal for businesses to play music through personal streaming accounts, a situation that happens with alarming frequency.
That’s one reason why Swedish background music company Soundtrack Your Brand teamed up with Spotify to create a platform that allows business owners to easily stream music and curate brand-friendly playlists for 30 to 40 dollars a month, with the company inking unique licensing deals with Sony and Warner, alongside indie music association Merlin, to make sure that songs’ rights-holders get paid for influencing these shopping and dining experiences. On Tuesday, Soundtrack Your Brand announced a new deal with Universal Music Group that will lock in deals with all three major labels.
“Ask any artist if they’ve ever, on their royalty statements, seen anything from any of the major providers of background music,” Ola Sars, CEO of Soundtrack Your Brand, tells Rolling Stone. “If you find anyone, I’ll give you a hundred bucks.”
Soundtrack Your Brand recently commissioned Nielsen to carry out the biggest study on background music to date. After surveying 5,000 small businesses across two continents and seven countries, the 2019 report found 21.3 million businesses that are using illicit consumer services. Even so, 88 percent of the participating businesses play music four or five days a week, according to the report. Eighty-six percent said they were prepared to pay for an improved service, while 71 percent said they believed a personal music account gave them the right to use it for background music at their place of business.
“I think this is a huge opportunity for the music industry,” Ola Sars tells Rolling Stone. Sars, who spent a decade in the world of Swedish music tech and previously worked with Beats by Dre, has a unique understanding of the consumer side of music businesses. Music is played everywhere in the public domain, he rationed, but the market hadn’t been successfully revisited in the streaming era — when business shifted from a CD-centric model to a pay-per-play and pro-rata model, and everything else that comes with a digital value chain.
Six years ago, he started the business-to-business Soundtrack Your Brand streaming platform based on the same industry standard as the business-to-consumer (B2C) markets. “I did a deal with [Spotify founder] Daniel [Ek],” Sars says. “I said, ‘I’ll build the customer-interfacing software and fund that, and [Spotify can] come in and provide me with the backend services, licensing, and help with all the complexities that come with managing 30 million tracks in real time.”
Sars quickly realized, much to his frustration, that companies were still distributing analog technology in the background music space. “It was primarily CDs, satellite feeds, or clunky streaming solutions that were not built according to streaming’s rules of engagement — reporting pro rata and updating millions of metadata points every week in order to report and reconcile correctly to the right songwriter in Idaho,” he says. He emphasizes that there are a wealth of complexities that come with the transparency requirements of a relatively new streaming-based industry. In 2014, streaming was still finding its way on the consumer side — and that’s just when Sars started pitching the concept. It would take him years to secure the support of record labels.
“I’m supplying 50 million tracks in 73 markets, just like Spotify and Apple Music do, with all of the contractual backbone — which took me four years and 900 flights to [build].”
Now, Soundtrack Your Brand is the market’s most substantial B2B music platform made up of 9,000 direct deals with publishers and labels. “I’m supplying 50 million tracks in 73 markets, just like Spotify and Apple Music do, with all of the contractual backbone — which took me four years and 900 flights to [build].” And the contractual rates and algorithms must be configured differently than what’s already in place for personal-use streaming. “B2B is a different business model, and I had to sell the notion that we should bring B2B into [music] streaming as well,” Sars says, before adding that this kind of model is already commonplace in the film/TV space — where bars and restaurants are required to have business plans in order to show a NFL or NBA game, for example, on their screens. “In the world of rights, you can’t open a cinema on your Netflix account,” he emphasizes. “That’s just not how it works.”
The licensing deal with Universal — Sars’ long-coveted, last piece of the pie — took around three years to execute. “Now with Universal onboard, [business owners] don’t really have a legit reason not to use a B2B service,” Sars said. “Previously, they could say, ‘Well, I want to play The Weeknd every morning and you don’t have it right now.'” (The perpetually optimistic Sars admits the timing of the closing couldn’t be worse, with the pandemic forcing many brick-and-mortar businesses to remain closed.)
Along with benefitting songs’ rights-holders, Soundtrack Your Brand also makes controlling the ambience of an establishment easier for business owners. If you’re not a master playlister, you can use the platform’s built-in AI to play music that falls within certain genres or vibes — like “progressive” and “elegant” music. If you have a chain of venues, they can have a variety of different soundtracks depending on the clientele of the location, the traffic/energy of the day of week and time of day, etc.
“We’ve done hundreds or maybe thousands of interviews with small businesses and big businesses, and [we’ve found that] there’s a lot of anxiety,” says Sars. “People are stressed out as hell by [thoughts of] playing the wrong music, paying the right licensing, insulting people, explicit lyrics.” The AI goes beyond just what’s explicit and into cultural nuances. “You can remove artists. You can remove references to drugs, but you can keep sex [if you want],” he says.
By 2030, Goldman Sachs estimates that the streaming market will increase from $25 billion to $75 billion, with the consumer market expected to go from 370 million paying users to 1.2 billion. With 100 million potential venues at 35 dollars each, that’s $3.5 billion that would have otherwise disappeared into the ether of illicit activity. (Even if only half of those venues get on board, they’re looking at nearly $2 billion.) If enough awareness spreads and the B2B model becomes commonplace amongst music streamers, the sector’s leaders will end up shepherding a serious chunk of change into the global music industry.
“All the societies need to get their shit together and see to it that this market is compliant,” Sars says. “There’s no reason not to collect these royalties. There’s no reason not — for an artist or a creative — to ask their label or publisher, ‘Where is my B2B money? I heard my track at Starbucks. Where are my dollars for that?'”