As Spotify continues to grow its consumer subscription business and expand the services it provides to artists, one of its side bets is making inroads in another route to music streaming riches. Spotify-backed and co-founded Soundtrack Your Brand, which streams music in business locations, is launching in the U.S. And to mark the news, it’s also announcing that it has signed a big global deal: it is now working with McDonald’s as the provider of streaming music services across the fast food giant’s footprint of more than 36,000 restaurants and other venues.
But do not read this as Spotify signing a deal with McDonald’s: it turns out that the global agreement’s music content will be fulfilled by at least two other providers, PlayNetwork (also an investor) and Omnifone.
The news comes as we have also learned that Soundtrack Your Brand has raised more money. The company — co-founded by Spotify’s former head of business development and a founder of Beats Music (acquired by Apple) — has confirmed to us that it has now raised $20 million from “its owners” (previously it had only raised $11 million).
In addition to Spotify, the other main backers of the service are Northzone, Creandum, Wellington and TeliaSonera (essentially, a selection of the main backers of Spotify itself); and PlayNetwork, a competitor to MoodMusic (Muzak owner).
$20 million, of course, is modest compared to Spotify, which has raised $1.6 billion and is valued at over $8.5 billion. But the bigger parent company faces challenges: not only are the economics of the consumer streaming business problematic; but there is fierce competition from the likes of Apple and Google — not to mention pure-play digital music companies.
Meanwhile, something interesting is developing on the smaller B2B front: the market has largely not been touched for years — many businesses still use CD’s or antiquated recording systems — but it’s one where companies are willing to pay for services. And if a company can leverage technology to provide analytics and commercial insights on how a venue’s audio system impacts the business, then there is an opportunity to make revenues through more than one channel.
The McDonald’s deal is a framework agreement. Soundtrack Your Brand has been named as the provider for streaming services to McDonald’s locations. But as the company operates on a franchise model, it will mean that SYB will have to sign direct deals with locations for installations to go ahead.
There is already some groundwork for this following through: before the global deal, SYB already started to work with McDonald’s in Sweden (along with other companies like Starbucks). There, it’s already installed in some 60% of all McDonald’s in the country. Ola Sars, SYB’s CEO, says his company is already running pilots with some of the largest franchises outside of Sweden.
Those who do sign up get “boxes” that can be installed with existing speakers and other equipment, and when these are hooked up online, they will get customised streams of music, along with a Spotify-like app-based experience in which employees and customers can interact with the music player as a jukebox for the 21st century.
And there is a bigger analytics and big-data play here as well. Businesses can get analytics on how music — and whatever else they choose to stream, be it promotions or whatever — interplays with customer activity, as a route to developing playlists that keep places jumping (and people eating and enjoying themselves).
The McDonald’s deal is interesting because it marks another stage of evolution for Soundtrack Your Brand, as it develops a more autonomous product that is not completely pinned to Spotify and continues to forge ahead with the concept of a B2B music streaming business.
Originally when the startup launched, it marketed itself as Spotify for Business, co-founded by Spotify itself. The logic for being tied to Spotify this way was two-fold. First, it was being funded by Spotify, essentially as an arm’s-length project to see how well a B2B strategy could be developed, without clouding the growth and focus of the core team at Spotify. Second, it was based solely on streaming music from Spotify.
However, the McDonald’s deal has surfaced an issue, which is that Spotify is not available in every country where McDonald’s is present. So now, Soundtrack Your Brand will be working with more than one provider: added to the list now are PlayNetwork (its other strategic investor) and Omnifone.
“Big brands that are international want to have a global solution, but our current investor and solution doesn’t have licenses for B2B in all markets,” notes co-founder Andreas Liffgarden (the ex-Spotify business development honcho). “So we needed to look for other sources.”
As one example, take South Korea, he said. “This is one of McDonald’s key markets but Spotify hasn’t even launched there. It’s a jigsaw puzzle.”
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