Digital Only Label X5 Music Gets $9 Million Venture Funding For U.S. Expansion

Who says venture capitalists don't love music? In the last few days alone, RootMusic received $2.3 million to help musicians build better Facebook pages and trueAnthem grabbed $2.9 million to take yet another stab at the unproven ad supported music market. Now Swedish digital-only record label X5 Music has landed $9.09 million USD from Northzone Ventures, who also happened to be the lead investor in another of the country's music exports, Spotify.

Why Invest In A Label & Who Should Be Nervous:

Given the latest sales figures, why would a venture firm want to invest in a music label?  To get "a deeper involvement into the value chain within the digital music area", a market they believe has lots of growth potential, Torleif Ahlsand, general partner in Northzone Ventures told TechCrunch. Northzone thinks that investing in music catalogs which have a potential future upside is the key.

For its part, the label says they will use the funding to open a New York office in the next few months, sign some American acts and begin investing in music catalogs. They want to be the “best alternative for major American artists,” according to Johan Lagerlöf, X5 Music's CEO.

Who should worry?

While a label can burn through $9 million pretty quickly, for a time at least X5, will offer new competition to a number of established but not wildly profitable U.S. players. The Orchard has invested heavily in catalog purchases and advances, and in exchange has been able to keep a larger percentage of digital sales than many other distributors. A plethora of indie labels have also grabbed one or more established major label cast-offs and released new product rather profitably. 

Now they all have a new and aggressive competitor with some real cash in hand. The cost of being an indie label or distributor doing business in the U.S. just got bit higher.