Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com. It is home of the ambitious upstart, the place where real entrepreneurs come to listen to real proven entrepreneurs talk about how they built their businesses. This isn’t the wantrepreneur home base. God knows there are tons of those places now.
So joining me today is a listener of Mixergy, a man who’s built up a company I happened to read about in the New Yorker about 10 years ago. Malcolm Gladwell, one of my favorite writers in the New Yorker wrote a piece that included this company that can predict what song is going to be a hit. It’s got this mathematical formula. Anyway, it was so intriguing, especially since you figure that figuring out what music is going to work is really tough, if not impossible and this guy and this company actually made it work.
Well, joining me today is the person who was written about in that New Yorker piece to understand how he got there, how he built up the business and how he’s gone so much further in the years since that piece was written. His name is Mike McCready. He is the founder of Music Xray. It is a company that uses data and analytics to identify high potential songs and talent at the earliest possible stage, the kind of stuff you never thought was possible his business is doing on a regular basis.
And this interview is sponsored by two companies that I use and have for a long time. The first will help you schedule meetings with people so much faster. I’ll tell you more about them later. They’re called Acuity Scheduling. And the second is a system that we use to track our booking process to make sure that we get hard to find people to say yes to doing an interview on Mixergy and so on. It’s software that you can use to close sales. I tell you more about them later. It is Pipedrive.com.
But first, hey, Mike. Good to have you on here.
Mike: Thanks for having me, Andrew. It’s great to be here.
Andrew: Before we started, I confessed to you that I did a lot of reading on your company, but I still didn’t understand enough about what you did. Then you told me about the SoundCloud 12-hour problem and I think that will help the audience understand this business that you’ve built here. Can you explain that? What is the problem with that 12 hours?
Mike: As computers and software have proliferated, what used to cost tens of thousands of dollars to record in a professional studio now costs practically nothing. You have a couple thousand dollars’ worth of equipment in your bedroom and some know-how and you can make really decent sounding recordings.
Andrew: I’m doing that right now. I’m in an office, but it didn’t cost me that much to set this up–one iMac and a mic.
Mike: Exactly.
Andrew: Yeah.
Mike: So, what that has created is a lot of musicians and creators out there that are creating more music than ever before. There’s 12 hours of audio uploaded to SoundCloud every minute. That data is a bit over a year old, so I’m sure it’s even more now. A lot of that is music. There is no way that the music industry can filter through that amount of music to find the needles in the haystack.
It’s not always apparent based on social media stats or YouTube views or SoundCloud plays and what not, what’s going to rise to the top, first of all because there’s a huge incentive for musicians and creatives to spoof that data. You can buy Twitter followers. You can buy Facebook likes. You can buy YouTube plays. So, when things start to bubble to the top, even using that sort of metric, it isn’t really apparent where the music industry should start.
I’ve been focused for a long time on how we can use technology and the interconnectivity of the internet to identify the high potential songs and talent as early as possible so that the music industry can get out in front of the trends and find the new songs and find the new talent, but as well so that the deserving musicians can be successful in their craft.
Andrew: Give me an example of one person who never–it might not have been discovered if not for your technology.
Mike: Oh wow, there are a lot. You know, we see in the range of 700 to 1,000 songs and acts selected for commercial opportunities every month on Music Xray. Now, most of these aren’t household names or the actual hit artists themselves, but they are writers and producers who are placing songs–
Andrew: Even better, do you have an example of one person who uploaded how, even as you tell us, we won’t know about them, but their story is really exciting?
Mike: Sure. There’s a band that was signed to Universal Republic Records. They were called Werm. They have an album coming up. There are songs placed into movies all the time on Music Xray. If you go to MusicXray.com, there’s a link for success stories. It will take you to a page and it just scrolls and scrolls and scrolls of people who have had opportunities with links to the songs and where you might find them.
Andrew: What about the fact that you guys charge people to upload their music to you?
Mike: Well, we don’t charge anything for the actual upload. In fact, in anyone can upload any amount of music to Music Xray. And for free, one of the first things that happens is we have a piece of software where music industry professionals often upload what are called reference tracks, songs that sound and feel like what they’re looking for.
So, when musicians upload music to Music Xray, that software analyzes what the musician has uploaded and compares the acoustic frequencies and the beat, cadence, rhythm, octave, pitch, chord progression to the reference tracks that the industry professionals have uploaded and it matches that and says, “Hey, the song that you just uploaded might be interesting to this industry professional or that industry professional who has this specific opportunity.”
But when the musician wants to submit the song to that industry professional, they’re guaranteed that the professional listens to responds, but there is a few dollar charge for that submission. The purpose for that few dollar charge is not our primary revenue stream. It is to create a throttle, to create a barrier because as we said earlier, there are 12 hours of audio uploaded every minute to a site like SoundCloud where there is no guarantee anyone is necessarily going to hear the music.
So, we need to put that throttle in there so that the musicians will filter themselves first. Most musicians, most serious musicians don’t really need that barrier. It’s the ones that perhaps they’re young or don’t really understand how the music industry works and would perhaps submit every song they’ve ever recorded to every opportunity on the site.
Andrew: Once you add a price, they’re less likely to submit any and the one that they do end up submitting are the highest quality. When you say submit it to a music professional, give me an example. Who are some of the professionals?
Mike: We have about 1,200 music industry professionals. All of them are employed across the music industry. They are the A&R people at Universal, at Warner, at Sony, a lot of their sub-labels. They’re the music supervisors for television shows that you watch, that I watch, movies. We have producers, publishing companies. We’ve even recently added radio stations where songs are being considered for airplay.
Andrew: So I was Googling you guys and I came across this site called MoneyPantry.com that according to SimilarWeb, which is a traffic analytics site that I use, according to SimilarWeb, they send you a lot of traffic. So, I went over to MoneyPantry.com to see what’s their connection to Music Xray and in a blog post there, they talk about how if you want to earn up to $1 per listening to rate music, to listen and rate music, go to Music Xray and they link over. What’s that about?
Mike: So, that actually has nothing to do with the music industry professionals on Music Xray or the musicians. Music Xray has a fan component. One of the processes that we go through when a song first comes into our system and it’s first submitted to an industry professional, the song goes through this process called diagnostics. The reason diagnostics–it didn’t used to exist. You could just submit a song to an industry professional and get accepted or rejected and you go away.
But what was happening was a lot of musicians didn’t know us, weren’t certain that we were a legit company. They would submit a song to an industry professional, get a rejection and say, “Well, that was a waste of money and I don’t even know if this is real. I’m not coming back again.”
At that point, we hadn’t gathered enough information to know whether it was a needle or a strand of hay in the needle in a haystack analogy. So, we needed to create a system that upon that first transaction we could gather enough information about he song to know whether or not it was a great song or it was not so great.
So, we created diagnostics and it has a component where the song is also sent out to 20 potential fans–when I say potential fans, we target them based on their taste. When these fans sign up, they’re linking their Facebook account. We’re monitoring their listening activity. They’re putting in their favorite bands. So, when that song goes out to those 20 potential fans, those fans are being paid $0.10 for every song they listen to and they give it a thumbs up or a thumbs down.
So, they get the $0.10 whether it’s a thumbs up or a thumbs down. We don’t want to incentivize their answer. We want to incentivize their attention and incentivize their engagement. So, what you’re seeing on MoneyPantry–and there are a couple of other websites that, “Work from home,” or just do this or do that–it’s just music fans signing up saying, “I like to discover new music and I get $0.10 when I listen to a new song and give my feedback.”
Andrew: I see. I also see here in my notes–we ask you about revenue. You told our producer, you gave him a revenue number but you also said that you don’t want to talk about revenue publicly and next to the revenue number you said you want to put some context around it.
Mike: It’s not that we don’t want to talk about it. We just did over $2 million this year. We’ll probably double that in 2016. Most of that revenue is revenue from the submission fees that are coming in from the musicians. Of course, we don’t keep all of that. It gets distributed out.
Andrew: I see.
Mike: The reason I want to put that in context is because I said to you earlier as we were prepping for the interview that these submission fees are meant as a throttle to put the musicians in the position of filtering themselves and it is not Music Xray’s big idea. That’s not how we think that we’re making money going forward in the future. In fact, it’s becoming a secondary revenue stream and always has been thought of as that way.
So, when people say, “What’s your revenue?” They’re thinking, “What are you making on these submission fees?” When I say the revenue stream, it is primarily historically what we’ve been making on submission fees. But our revenue focus, our purpose as a company, as I said, is to identify the high potential songs and talent at the earliest possible stage.
When we do that, when a song comes in, it goes through our diagnostics. We’re able to generate based on that data a prediction about whether that song is going to get a deal or not in the music industry. When we predict that it is, we approach the artist or the songwriter and we say, “Hey, we’d like to get involved in your career. We think you have potential. We would like invest in you.”
So, we have an agreement where we invest in the artist. We started doing this last year and we’ve ramped it up here in the first quarter of this year. By making that investment in the artist, we’re helping them advance their career but then we’re also participating in the business with the artist.
Andrew: How are you helping them advance their career?
Mike: Well, as you can see for example on Music Xray, when a song comes into the system–actually, let me back up and explain that a little bit further back in the process. So, we’ve been observing now for over five years every song that comes into our system and every touchpoint between every industry professional and every artist and band they’re listening to on the site.
We observe how those industry professionals not only whether they select it for use in a commercial opportunity or whether they reject it, but then each of these industry professionals is also rating each of these songs. They give it a one to five-star rating on composition, production, arrangement, performance and hit potential. Additionally, as we just talked about, the song is being heard by at least 20 potential fans who are giving the song a thumbs’ up or a thumbs down.
Now, over five years, we’ve been observing each one of these songs and its interaction, how the song was rated, how it fared among the fans and then whether or not it actually went on to give you a deal on the site.
Andrew: So, you have a really good understanding of what works, what kind of music leads to deals.
Mike: We’ve taken all that data, we’ve recently plugged it into Amazon’s Machine Learning platform.
Andrew: Okay.
Mike: Amazon’s Machine Learning platform also takes into consideration the genre of the song, how many opportunities exist in the music industry currently for that type of genre of song, historically what the ratings have been and the fan reaction has been when a song gets selected for that type of opportunity. Amazon’s Machine Learning comes back to us now with a prediction and it will say, “This song has a 55% chance of getting a deal in the industry or a 15% chance or a 90% chance or even a 99% chance.”
But it assumes that the song, of course, before it gets selected for an opportunity, even the best material has to be shown to multiple industry professionals. A few of them are going to reject it. One or two of them might select it for the opportunity. But on Music Xray, as we discussed, there’s a submission fee.
The submission fee is sort of a perfect marketplace. Each industry professional decides what it costs to submit a song to them and they adjust that fee based on how much time they have and how many submissions they can listen to in a day or the three hours that they might spend on Music Xray. The average submission fee is about $16.
So, when we get that prediction score back from Machine Learning and let’s say it says this song has a 99% chance of getting a deal presuming it will be shown to 20 opportunities–$16 a pop, 20 opportunities has about $320 cost. We round that up to $400. So, when we see a song come in that has a high prediction score probability, we’ve begun approaching the artist and we’ve said, “Hey, you might not have $400 to invest or you might not believe in prediction scores enough to go out on a limb and invest that or you might have better things to do with your money.
So, we’ll put our money where our mouth is. We’ll invest the $400 in making sure that song gets shown to those 20 industry professionals. But you the artist get to choose which industry professionals and how you want the song submitted and so forth, what deal terms you’d accept, etc. When we make that $400 investment in them, our deal is essentially when you land the deal on our dime, we get 20% of the revenue that that deal generates.
Andrew: I see.
Mike: That is Music Xray’s–that is becoming Music Xray’s . . .
Andrew: That is where you want to be. Is it literally hundreds of dollars that you’re spending, not thousands?
Mike: Correct.
Andrew: Wow. Okay. That makes a lot of sense. All right. I want to understand how you got here and also how you went form just helping the music industry figure out which songs are hits and using software, creating this model as it is today. But first, let me talk about my sponsor.
My sponsor is a company called Pipedrive. Here’s how it works here at Mixergy and I’ll show you guys and I’ll tell you too, Mike, since you’ve been on the other–you don’t even know that this is the process we used to get you on here. It’s an interesting process and it will help anyone sell, especially if they have a team but even if they’re just doing it on their own.
So, someone submitted you, Mike, as a potential guest. Andrea looked it over and said, “This could be it. I don’t know, but let’s add it into our database, which is in Pipedrive.” Immediately it went into column one, which is potential guests, just suggested guests.
We have a ten-step process for getting somebody to do an interview. One step is asking you to do a pre-interview, which you did, Mike. Another step is reminding you to do a pre-interview, which many people need a reminder. I don’t know if you did. Another one is do an interview here. One of the steps is find the email address. Another step is check to see, “Is this the right person to have on Mixergy? Does he fit within our focus?”
So, what we did was we understood here are our ten steps involved. Let’s just lay them out in Pipedrive. Each step has its own column. Whenever we have someone who’s suggested, we’ll put them in column one. Our next step is what? Let’s look him over. Is this person real? Does he have a real business? Does anyone else agree this is a real business? Can we do any research to see that this person is deserving to be on Mixergy?
Between you and me, Mike, I see a lot of other podcasters, they’ll have any interviewee on, anyone who says they have a business, especially if they six figures, seven figures–I don’t know why those two phrases are so popular–they get on. But for us, we want to do a little research. So, step number one, put the person in our system. Step number two, look them over. Step number three, find their email if we don’t have it. Step number four, invite them to do a pre-interview–all the way down the line.
That’s how we all as a team coordinate. That’s also how we keep ourselves accountable. Did we really reach out to ten people each week, which is our goal? Well, Pipedrive knows because we input every potential guest into Pipedrive. Are we keeping people waiting for too long?
Well, Pipedrive told me, actually, Mike, that I think you were in our system for 34 days. That means 34 days from when we heard about you as a potential guest to when we had you on Mixergy here today. That kind of stuff is important because you want to know, are you closing sales fast enough? Actually, 39 days, to be accurate.
So, that’s how it helps us. I’ll tell you how it helps anyone who wants to do sales. One of the first things you should do if you’re out there listening to me and you want to close sales is lay out the steps that you imagine, that you believe, that you’ve experienced are the steps for closing a sale for you. You can always change them later.
Lay them out as columns in Pipedrive. Commit to having a certain number of people that you’re going to put into your system each week. For us it’s 10. For you, it could be 10. It could be 20. It could be even 3. It doesn’t matter. But you come up with the number that you’re committing to. And every day, you work to move people through the steps that you’ve laid out in Pipedrive until you close them.
If you have a team of people, they could help you do it too and you could keep track of who’s really helping and who’s not. If you’re just doing it by yourself, use it to keep track of yourself and your progress and all the people you’re trying to sell to. If you’re trying to hire your first virtual assistant, their first job should be to put people in your first column, easy as that.
All right. It’s very, very, very visual. And it’s hard for me to fully describe how effective this is. The best thing for you to do if you’re listening to me is just go check it out. Try it for yourself and you will see it. Go to Pipedrive.com/Mixergy and when you do that, they’re going to give you a lot of free time for you to evaluate this.
Like I said, you won’t fully get it until you start creating your columns, until you start making your phone calls or sending out your emails. Then you’ll see the numbers and you’ll realize, “I could beat these numbers.” And then you’ll get competitive with yourself and then your team will get competitive with each other and it’s going to really help you close sales. We went form a distracted organization to one that’s fully organized. Pipedrive is what allows us to do it. Check out Pipedrive.com/Mixergy.
Mike: Wow.
Andrew: What did you think of that sponsorship message?
Mike: Convinced me.
Andrew: Yeah, I saw you shaking your head a little bit. I wanted to see if it was what I thought it was. Let’s just understand you before we understand your business. One of the coolest things that I heard about you was that you wanted to be in Spain because you fell in love. Tell me about that. You needed to be legal in Spain because you wanted to be in love. Does that ring a bell? You kind of told this to Brian, one of our producers here.
Mike: Well, yeah. So, I grew up in a very small town in the middle of Nebraska. It was a town of about 4,000 people. To get to a larger town, you had to drive a couple hours. To get to the airport, you had to drive four hours. Nebraska is an awesome place to grow up. If you want to say in Nebraska and from there be at the top of your industry, your industry really needs to be farming or ranching. If you want to have other opportunities and do other things, you really have to go to the city or leave the state.
I didn’t really know what I wanted to do, but I knew I wanted to explore other things. So, when I was 17, I was accepted into a foreign exchange program. I got very lucky, ended up going to a small town just outside of Barcelona. I was scheduled to be there for a year. I fell in love with the country, with the people, with the culture. I fell in love with a girl and came back to the US to go to college, but all throughout college was going back as often as I could.
After college, my choices were either go back to rural Nebraska or go back to Barcelona. So, I decided to think about that for a while and it ended up being 22 years in Barcelona. It’s still my home. I live now and work in New York, but have kept my place in Barcelona and go back and forth quite often.
Andrew: It’s still that place that you loved that we’ll talk about later you almost lost?
Mike: Yeah, sure.
Andrew: Oh wow, still that same place? Okay. So then you somehow needed to stay in Barcelona, as I understand it. As a result, you needed to make some money. Is that right?
Mike: Yeah. The legalization process there, there’s a lot of red tape. It’s very bureaucratic. I had, I guess, sent in or took in all of the documents that they had requested. It goes through this several month process and finally comes back with a rejection. It said, “You’ve been rejected because you’re missing Document-x.” But when you opened the folder that I had delivered, there was Document-X with their stamp on it as having been received.
So, I resubmitted as it was and said, “Hey, Document-X is right here.” It comes back again with the same rejection and the same reason. After you have been rejected a couple of times, you can’t submit a third time. The only way that you can then become legal is to actually sue the state, sue the government for mishandling your file, which I did and then I was approved, but between one thing and the other, that was seven years.
In the meantime, not being legal, I couldn’t have a real job and a real paycheck. So, I was washing dishes in hotels and working as a busboy and working as a waiter and doing whatever I could to make ends meet.
Andrew: Did you also sell watches?
Mike: Not yet. The only way that I could make money legally during this seven year period was if I owned a business that was profitable and was paying me dividends.
Andrew: I see.
Mike: I didn’t know anything about business. I was a psychology major in school. But a friend of mine had a really unique idea for a new dial in a watch that reflects the way they say what time it is in a language called Catalan, which is spoken in the northeastern region of Spain in which Barcelona is the capital. About 7 million people, it’s their native language. I was speaking that fluently almost natively by that point.
Andrew: Catalan?
Mike: Catalan, yeah.
Andrew: Impressive, okay.
Mike: My friend had this idea for a new dial on a watch that reflects the way they say what time it is, which is kind of untie and they’re very proud and nationalistic people. We got into the watch business and had some of these watches made and they became a bit of a fad and a fashion item.
I think partially because I didn’t know it wasn’t normal or that this isn’t how it was done, we took the business to profitability in five months and in my mind it was because I had to eat, but I found out through that process that I’m a talented entrepreneur, something I didn’t know I had in me.
Andrew: Was this the business called World Enterprises International?
Mike: It was the most pompous name I could think of at the time.
Andrew: That’s an ambitious name.
Mike: Yeah.
Andrew: You said you didn’t realize you had entrepreneurship in you. But I heard this story, again, from Brian. You told him that when you were five years old, you had this business. What was the business you had at five?
Mike: I don’t know if I would call it a business. When I was five years old, something got into me that I had some toys that I didn’t want anymore and I want door to door selling around the neighborhood, selling my toys to old ladies, basically, who thought I was cute and would give me money. I think my mother the next couple of days followed my route around and apologized to all the neighbors.
Andrew: Why? Why didn’t she let you make the money?
Mike: I think she let me keep the dimes and nickels and everything I had. I think she was a little embarrassed that his son was out peddling his toys.
Andrew: I see, like a needy person who needs to give up his toys so that his family could eat.
Mike: Perhaps, yeah, which of course wasn’t the case. I had lemonade stands and the car washes and all that. I was an industrious kid.
Andrew: I looked you up on Wikipedia. Wikipedia says that just before Music Xray you running a company that you started called Platinum Blue–is that it? That’s the name of Music Xray. What was it? It was…
Mike: Polyphonic HMI.
Andrew: Thank you. I was looking for the full name and read the wrong company name. So, what was that company? It looks like they’re very similar.
Mike: Well, I’ve been in the music industry for a little over 20 years, the first five or six years on the traditional side of the music business. But in about the year 2000, 2001, I crossed over to the dark side of music technology. My focus was always on what’s called the A&R process. In record companies, in recording companies, there’s this department called A&R. It stands for artist and repertoire. These are the people who identify the new talent, pair songs that other people have written to talent that is already on the label.
And this process has always been so much more about who you know and how you’ve networked in and how you get the opportunity to meet someone like this and how they come and discover your band. I felt like there was a better way that this could be done. At that time, I came across a company that was doing some really innovative work in artificial intelligence. They were using analytics and data in the energy business and in banking and in telecommunications.
They had some interns at the company that had pieced together a bunch of these little pieces of software and came up with a piece of software that could actually analyze music and do this thing called spectral deconvolution, which is isolating all of the elements in the music, isolating melody, harmony, beat, tempo, rhythm, octave, pitch, chord progression.
By doing that and then looking at the past 50 years of hit songs, we started identifying these repeating patterns, these 60 or 70 different patterns that even regardless of the genre, whether it was rock or punk or grunge or country, the hit songs all followed these same patterns. So, we started using the software to analyze new songs that hadn’t yet been released by the music industry–
Andrew: By the way, what was that ding?
Mike: That ding looks like a message came in here on my computer.
Andrew: What app do you use for those messages?
Mike: That was iMessage, actually. But I thought I…
Andrew: That’s alright. You can let it go. You’re not going to get that money. I see. But it was your friend that created that software?
Mike: No, it was a company.
Andrew: You didn’t create it. You’re not a developer yourself. You just saw that there’s technology that allows for this kind of analysis of music and you know what to do with it, but you didn’t create it.
Mike: That’s right. The company didn’t know what to do with it if there were any uses for it in the music industry. Actually, the first use we had for it wasn’t to try to predict hit songs. It was to use it as a music recommendation system, feeling like if it knew what you liked as a person, it could look at the common patterns in the music and suggest new music that you might now know.
We started selling this software–I should say trying to sell this software–to the music retailers that existed at the time, which were physical stores like Sam Goody or Tower Records or Best Buy. We were competing against a company in Silicon Valley, actually, at the time. It was the only other company trying to do this. They were called Savage Beast.
We were both too early in the market. Neither company was making sales. The founder of Savage Beast, his company was going bankrupt. We were too. Finally, they went back to the drawing board and changed their name to Pandora and that’s who they are today. We went back to the drawing board and created this product called Hit Song Science. This is the hit prediction software.
Andrew: I see. You were both initially trying to say, “Look, all you record stores, you don’t know what to buy. You don’t know what’s going to be a hit. Use our software. We’ll tell you what to buy and put into your stores,” right?”
Mike: Essentially. A lot of these stores in the time in their flagship stores had these kinds of intelligent listening posts where you could grab any CD off the shelf, take it over to the listening post. It would scan the barcode and the track listing would come up on the screen, you’d put the headphones on and you could listen to any CD in shop.
And our idea was okay, we put the software on their server and whatever track you’re listening to, it will suggest other music you might like in the store if you’re liking what you’re hearing or maybe it’s a CD you already own and if you knew that software existed, you could use it for that.
So, that’s what we were trying to sell, but music sales at that time had already started decline. Napster existed and people were pirating music. So, those stores were hesitant to invest putting those intelligent listening posts into all of their stores nationwide. They had to make a giant hardware investment before they could use our software. That was the barrier both we and Savage Beast were coming up against.
Andrew: I see. By the way, there’s this great article in The New York Times from March, 2010 about how Savage Beast nearly died, couldn’t raise any more money form venture capitalists, had to charge up 11 credit cards to survive and then turned itself into Pandora, a company that at the time of the article was doing $50 million in sales. They came so close to death that they needed credit cards to turn themselves around.
So, that’s the direction they went in. They were going to create a radio station that customizes itself to you based on its understanding of how music relates to each other. You went in a different direction. The direction you went in, is that what I read in the New Yorker, that Malcolm Gladwell article? Well, you tell me.
Mike: Yeah. It was the direction of hit song science, the direction of helping record companies–what we call today music labels–helping them identify which songs would give them a better return on their investment. At that time and even today, to promote a hit song in the US market costs upwards of $1 million. A very small percentage of them actually work, actually start getting listeners, people start liking it.
So, we knew that there was a problem to be solved. If we could help the music labels take better shots, they would not waste so much money on things that wouldn’t work. They could actually use that money to invest in more artists that have a better shot or put out better music and just optimize their business. It was a huge money drain.
So, that was the business opportunity that we saw. As a lifelong musician myself and when I was a teenager, had aspirations of being a rock star, I felt like this is a great thing for the whole music ecosystem.
Andrew: The first version of this was a PDF via email?
Mike: Well, I guess via email. The only people we were selling these reports to were the record companies themselves. Later, when we started Music Xray, we had a similar idea. We were using a different software. We were using a bit of a different methodology, but we were trying to sell these basic reports about whether your song is likely to be a hit or not.
Andrew: You mean musicians in the Music Xray days?
Mike: Yeah.
Andrew: Why make the transition? The companies are so similar. I actually don’t know what happened to… Why do I keep blanking on the name? Polyphonic HMI–I want to get it right and as a result, I’m not getting it at all.
Mike: Yeah.
Andrew: Polyphonic HMI, what happened there?
Mike: Well, a number of things. Of course, the company that was developing the software, the one that I’d partnered with, who had come up with the software, was a relatively small company that had never specialized in music before and had sort of created this software almost by accident. They had some interns that had pieced together other pieces of software that the company had developed and was using for different vertical industries in which they were very successful to create this music software.
At the same time, it was taking us a few years to get this company off the ground. There were research institutes and universities and all sorts of other companies out there investing heavily in developing similar types of software. There came a point where we had to decide if we were going to double down on our own development of the software or we were going to start licensing software that was developed by other people.
I felt like our core competency was our understanding of the music business, our ability to articulate how technology could help the industry change and optimize and waste less money and our core competency wasn’t having hundreds of researchers and developers constantly improving and updating and optimizing our software and our technology.
So, it came to a bit of loggerheads with my partners, this technology company because they saw Polyphonic HMI as a channel to market for their technology. And I saw Polyphonic HMI as a channel to market for whatever the best technologies were out there that were being developed regardless of who was developing them.
Andrew: I see.
Mike: We really just came to a point where we couldn’t agree. Unfortunate at the time, when you’re trying to build a company and you’re fighting against a lot of external market forces and if you’re also having internal business disagreements, business gets really hard to do.
Andrew: I see. And they owned a piece of your business?
Mike: They owned a lot of the business.
Andrew: I got it. I see. Okay. That’s why you decided to go in a completely different direction.
Mike: Yeah. I left the company in late 2005 and started Music Xray what toady is Music Xray in 2006. But of course, there were several years there of figuring out our product and our technology before we actually pulled the trigger on what you see today.
Andrew: I’m going to ask it the way that someone in my audience wished I would ask this question. How were you able to feed yourselves in that period between the companies when you were still trying to figure out what to do?
Mike: Well, I took out a second mortgage on the apartment I had bought. There was one point where my wife and I, she was my girlfriend or fiancé at the time, she’s from New York. We had met in Barcelona. I was traveling around for Music Xray all the time, trying to get things off the ground. I was in London or New York or LA and I was ending up only going back to Barcelona to go home.
So, we decided that we need to go to New York so I could keep doing this. We did. We probably foolishly looking back on it said, “Let’s see if we can do it and keep the home in Barcelona.” We moved to New York, rented a place, got here to New York, where I am, just in time for the financial meltdown and all of my funding dried up. I couldn’t raise any money even though the company was making forward progress.
I was so close to losing–I was probably days, maybe a week and a half or something away from maybe losing the home. I was willing to do it, I guess. At that point, I was going to go sell it and use the money that would have been left over after paying the mortgage to continue to propel the business forward.
I had been talking to an angel fund based in Madrid. We’d had a couple of casual conversations. I thought they had gone well, but didn’t think we were anywhere near signing a check. But I was going back to Barcelona to sell the place. That was literally the purpose of my trick. I bought the cheapest ticket I could find form New York to Barcelona. It happened to have a layover in Madrid.
So, before I leave, I call the angel fund and I say, “Hey, I’m going to be in the airport for four hours. I don’t really have time to leave the airport, come to Madrid, have the meeting, but if you guys want to come to the airport, I’d love to take this conversation forward.” And they did.
When they got there, they kind of walk up to the table I was sitting at in the cafeteria area and they say, “How’s it going?” I get maybe three sentences in to explain how’s it going and this guy, [inaudible 00:41:17], the head of the fund, puts out his hand and says, “Stop. I’ll tell you what. I’ll give you $50,000. Come back to me in three weeks and meet those two metrics you just mentioned to me. If you do, I’ve got some more money for you.”
Andrew: Incredible.
Mike: Yeah. It was crazy. It was…
Andrew: What were the two metrics you were aiming for at the time?
Mike: I needed to onboard a couple of clients that had promised to use our product and pay us some money. I can’t even remember what the other metric was. But it was within reach. It wasn’t an outlandish thing that I wasn’t going to be able to hit. It saved the company and saved my home.
Andrew: The same place that we talked about earlier in the interview, isn’t it?
Mike: Yeah.
Andrew: All right. A quick message about a second sponsor that I’ve been using for a long time–it’s called Acuity Scheduling.
So, I recently sold this package to people in the audience for I think it was $1,000. I said, “I want to talk to every single person who bought this to understand why they bought it, what they want out of it, to understand what’s a win for them with it?” The way most people would do it is they would just send out a list of available times to all–I don’t know how many people bought. It’s more than that. But let’s say ten people.
So, let’s say all ten people get a list of ten or twenty different times. The first picks Monday at 9:00 a.m. The second person picks Monday at 9:00 a.m. but now you have to go back and tell one of those people, “Sorry, the time I listed you isn’t available.” It becomes a logistical nightmare.
What I did instead was I went to Acuity Scheduling. I connected my calendar and said, “Here are the available times that I have. I’d like it to be a half-hour call. I need 15 minutes more to prepare. So, make sure not to book me without any time between the two meetings.
Here’s my calendar so that if I happen to add anything to the calendar later to the day, you’re not giving that time away for someone else.” I did the whole thing. I got the code. I embedded it on my website. You don’t have to, but I decided I wanted it to look like it was part of Mixergy’s site. I sent a page to that Acuity calendar that was embedded on my site to my customers and I said, “Hey, you want to have a chat? Here’s my calendar. Pick the time you want.”
And when they pick the time that they wanted, the Acuity Scheduling form automatically asks them for their name, automatically asks them for their phone number because I want that, automatically asks them for their Skype because I want to be able to see them when we talk because they’re customers and I think I can read people better when I get to see them as well as hear them. I also ask them a couple of questions about why they bought.
All of that when they booked was cleanly organized on my calendar. So, I could see the name of the person that I was meeting with. I could see how they answered. I could see their phone number on my calendar. I could see their Skype name. I could see all of that. It makes it real easy for me to connect with them. That’s the way I used it.
Our producer, Jeremy Weisz here at Mixergy organized an event and he wanted to sell it to just the right people. He really wanted to be selective because it was going to be an in person event for a dozen people. He was charging $4,000 per attendee. I said, “Let’s just talk to every single person who’s interested.”
When someone expressed an interest, he sent them a link to his Acuity Scheduling calendar and they booked a time with him. As a result of those calls, he was able to sell the perfect people on the opportunity by talking to them on the phone and doing something that you can never do on a webpage.
All that is to say that Acuity Scheduling is great if you want to make sales the way that Jeremy did. He did over $50,000 in revenue from that one event because he got to talk to people. Or it’s good for scheduling calls with people who you’ve already sold and you want to understand what they’re buying.
If you haven’t tried Acuity Scheduling, I urge you to go check them out. They are at AcuityScheduling.com. Let me just make sure that they’ve got this whole thing up for us. I ask every sponsor to give our audience a little something extra. Yeah. Here it is. AcuityScheduling.com/Mixergy.
When you go there, they’re going to give you more time for free, 45 days for free, more than they give anyone else so that you can try this out so you can book people and you can see how helpful it is for you to grow your business and understand your customers–Acuity–let me say it clearly because I think I’ve got a cold or something–AcuityScheduling.com/Mixergy. It’s a great resource and urge you guys to all check them out.
All right. So, now I understand the business model, Mike. I understand where you were going with the company. It’s time for you now to populate what is essentially a marketplace. You need artists and you need these music industry people to listen to those artists, right? Who do you go after first?
Mike: The music industry professionals.
Andrew: Okay. How do you get them to participate in this?
Mike: Well, that is the tricky part. I think that is really one of the things that is given us at Music Xray an advantage over other companies that have tried to do this in the past. I’m a person who comes from the music industry originally and then always having technology in my blood, I grew up with computers and the original IBM PC and what not. So, I was very fortunate as a kid to in my town, have a really decent computer lab at the high school. So, I’ve always been really interested and fascinated with technology, although music is my main passion.
So, when I came to the music tech world, I knew a lot of people in the music business. The music business has historically been one of relationships. It’s a small industry. If you take the entire music industry and glom it all together, it has a far smaller market cap than just Google or a lot of large companies.
So, I knew a lot of people and my days at Polyphonic HMI with hit song science, I have been traveling around a lot evangelizing what technology could do for the identification of high potential songs and talent.
So, when I began setting up Music Xray, there were a lot of people that would take my calls and would take my meetings and would go out on a limb with me and say, “Okay, we’ll try this.” It’s a bit of a crude analogy, but it applies. You could say it’s a bit of a singles bar business model, where the singles bar will have ladies night and when the ladies come and they’re there, then the men will show up and buy the drinks.
So, it was bring in the music industry professionals, bring in the opportunities. You don’t have to tell the musicians that they need opportunities or they should have contacts with the music industry professionals. They already know that. You don’t have to make a sale to them about why they want what you have.
And then as you’re bringing the musicians in, you then go kind of back to our earlier conversation about then, “Okay, how do we make sure that we can tell the difference with data between the needles and the strands of hay and make sure that each song gets funneled to its appropriate opportunity and its appropriate industry professional.”
Andrew: So, one of my past interviewees created a company called Clarity.fm. I guess it’s called Clarity. Their URL is called Clarity.fm. They had a similar model where they had entrepreneurs and venture capitalists and experts in areas like Google Analytics all in their network.
And then any entrepreneur that wanted to tap into that network by, say, talking to an angel investor, by talking to someone how is great at Google Analytics could just pay a bit of money and the Clarity would make those introductions. They still had to pay. What did you think of that? I saw your eyebrow go up as I said it. What did you think of that model?
Mike: I reminds me of–there are a couple of companies out there that have crated marketplaces and venture capitalists.
Andrew: So this was not much so they could meet for closing a sale but for advice but people were using it a little bit like that too. But Dan Martell, the founder, told me that he still had to go and buy ads on Facebook. He still had to bring people in because otherwise they wouldn’t know that Clarity existed. Did you have to buy ads? What did you do to bring people in?
Mike: Well, we did some search engine optimization. All of the industry professionals that we brought in were all high touch. It was me calling people, me having meetings with people and explaining what we were doing. But yeah, to let the musicians know that we were out there, we would make sure that we were popping up on the search engines when you submit music to the music industry or how to get a record deal. But at this stage in our development, we’re also using online ads through AdWords and Facebook advertising.
Andrew: So, even though you had, to use the analogy, the hot girls at the club you still needed to buy some ads to let people know they were there.
Mike: Yeah.
Andrew: I see. Okay. Who got good at that? That’s a skill on its own. Dan forever was trying to make sure that he was paying the right price per customer. It wasn’t an easy process. He was really proud of the fact that he was able to get it there. It wasn’t just through this matchmaking service that he was able to do it. How did you do it?
Mike: I wouldn’t go a far as to say we’re good at it. I feel it is a constantly evolving art/science. The companies that sell these ads have increasingly sophisticated interfaces and software where it’s kind of always learning which keywords are giving you the best results and you can begin tracking how many clicks ends up being a conversion to someone signing up for a free account.
Andrew: Who did that? Is that you doing it or did you hire someone that was especially good?
Mike: No. I did it myself for a while. Now we have a couple people on the team–
Andrew: You would just sit and do these ad buys and analyze each purchase?
Mike: Yeah.
Andrew: How do people learn how to do that?
Mike: The first platform that we began using was Google AdWords. I don’t want to say it was intuitive, but if you spent some time on it, it was straightforward that you could start to figure it out, you could start to optimize after you’re spending a few thousand dollars a month on it. Then they’ll actually call you up with an account representatives who will give you tips and get inside your account and tell you what you ought to be doing better.
Andrew: Do you remember one thing that worked for you that others might not have known?
Mike: Negative keywords, what are called negative keywords. Those aren’t key words where you might think that when people are typing that, they are trying to find a company like yours, but they’re actually looking for something completely different and it’s almost bothersome to them that your ad is popping up when they’re doing that.
They help you learn which keywords and phrases are triggering what for you is useless traffic and what for the user is a useless search result. You can start suppressing that so you actually don’t come up when that specific keyword is typed in so you’re not wasting your ad spend.
Andrew: I can that that’s helpful. I know that–I could see the power of that. Another thing I see here in my notes from your conversation with our producer is you said that one of your first goals was to get covered by big media magazines.
I actually look as far back as when you were creating the watch, you were in success magazine. I saw a photo of the watch. It looked cool and I can see why it was striking enough that people would want to buy it. I was more impressed that you got into success magazine, that you were able to pull off the watch business. How did you get it back then? How did you get it from Music Xray? How did you get people to pay attention?
Mike: Success Magazine, I don’t even really remember how that came about. It wasn’t really a useful PR play for us because our market–
Andrew: Because it didn’t sell marches.
Mike: Our market was only the Catalan market, that northeast region of Spain. We were selling internationally in a few novelty stores and what not. But actually, what happened with that watch company–I think I got some really good PR experience–there was a another company as soon as we launched–we launched on a shoestring. We had no money, had made a limited run on these watches. We had to sell all of them before we could go back and get more from the manufacturer.
This other watch company that already existed emerge with a similar watch to ours who already had a network of distribution to the retailers. They were going around to the retailers with false documents saying that they have copyrighted and patented this watch and that we were intimating them.
We started getting kicked out of stores that we had already secured the accounts for. I was desperate. I didn’t know what to do. I knew a casting agent for theater and for movies. I was telling this problem and they offered to help me get celebrities to design their own dial of the watch that I could then sell as limited editions.
Implicitly, it was sort of getting the endorsement of these celebrities. I would do a little launch for each one of these limited edition watch at a retailer, which would bring some press. We started getting a lot of press each time we would do one of these little watches. We probably did about 20 of them.
The other retailer–I think there was a court case and it started blowing up in the media. I became known in the media as this savvy, marketing genius. Well it doesn’t describe me at all., but the way that it was playing out in the media, it was sort of being out that way. I learned the value of the press, the value of media. We actually put the other watch company completely out of incomes. Not just out line that was competing with ours. They have over-extended themselves and were spending too much and trying to dislodge us.
Andrew: So then how did you did it again that you got into the New Yorker? How did you do it to grow Music Xray? What was your process?
Mike: There is a human interest aspect to what I do. It’s not necessarily purposefully sought, but hit songs are something that everybody knows what they are. There’s social relevance to them. People want o know why this gets in their ear and they can’t get it out. What’s the magic to it? How do people figure this out?
When we started learning and discovering, just like you and I can agree on what smells pleasant and what doesn’t, there are certain repeatable, mathematical qualities to hit songs and to hooks in music. When you can start quantifying that, in almost a scientific away, it’s very interesting to people. It takes me a lot of practice and I have to think about how I explain it, but I’m fairly articulate and I can get it to a point where you explain it in a non-geeky way. The media has followed that and generally been very kind to what we’re trying to do.
Let me unpack that. You said that you can explain this in a non-geeky way. I told you before that I hard time understanding what your business did. Like I understood it, but not well enough that I could introduce it cleanly. I asked you to tell me about it. You did. I wrote this one sentence down, “This is going to be my one-sentence intro so that anyone out there can get a broad understanding but a good one of what Music Xray does.”
Later on, I came back and I asked you specifically for one second to describe what your business is to compare it to the sentence that I had. It was almost exactly the same thing as you said before, which told me that this was practice and thought about. You weren’t just riffing when you told me what your company does.
How do you practice that? How do you get so good. I hate long questions. I now that a lot of entrepreneurs I interview, I ask them that one question, “What’s one sentence that describes your company?” They have a hard time summing it up in a sentence. You’ve gotten good. How do you do it?
Mike: Well, Music Xray is definitely the most challenging story or narrative I’ve never had to explain. It’s because on the surface, Music Xray looks like–I don’t know if this is the right way to say it–run of the mill, pay to submit website for musicians to reach the music industry. On the surface, it looks like that is our mission. It is what we do, but it’s a byproduct of what our real mission is, which is to help the music industry identify high potential songs and talent at the earliest possible stage.
Andrew: Again, that’s exactly the same way you said it to me twice before. How do you get to that sentence? Are you sitting down and writing it and practicing with people. DO you have PR agency working for you? How do you come up with that one sentence. That is a lot of interaction, not necessarily sitting down and writing it.
Ultimately I suppose it came to that, but what I was doing before with hit song science was very focused on hits songs. But what we do here at Music Xray encompasses a lot of other commercial uses for music that don’t have anything to do with hit sounds–soundtracks and sounds like that are licensed into the television and movies and so forth. So, you can’t say hit songs. You have to say “high potential songs; commercially viable music.”
Mike: I see.
Andrew: Sometimes it’s not even songs. Sometimes it’s a score to a movie. So, it’s not even songs. But I use the word songs to kind of make it brief. But you have to think, “Okay, high potential songs and talent because sometimes it’s just a songwriter finding that opportunity. You’re identifying it at the earliest possible stage, sometimes while it’s still in demo format.
Andrew: How do you iterate on it? I remember reading Mark Burnett’s book and he intentionally, because going into make a pitch for one of his reality TV shows, he would tell his friends at dinner parties what he wanted to do for the next TV show. He looked at them as he said it. If they leaned forward, he knew that he had vocabulary that drew people in. If he didn’t get it, we could look at their faces to see that they were confused. He’d go back and rework it. But he would methodically rework it personally and then bring it out to his friends. That’s the way he knew how to explain something like “Survivor,” or that race he had, I don’t remember what it was called, not “The Amazing Race,” but something else.
Do you have a process like that or is it much less formal than his?
Mike: It is definitely less formal than his. It is probably sort of the same process, but I don’t get invite to dinner parties were it’s a lot of investor meetings when you’re coming back.
Andrew: You’ll talk to an investor. If you’re not called back, you’ll think, “Maybe I’m not explaining his right, let’s rework it.
Mike: Or a music label or a television show to listen. Wow. They didn’t get it. I have this one very brief stories–with hit song science in my previous companies, one of the first two guys who gave me an opportunity were both at the very end of careers in the engineer in the music industry. One is a guy named Ahmet Urtegan, who is the founder Atlantic Records which is one of the flagship labels of Warner Music Now.
He was in his late 80s. He took a couple years after this. We went up to his office, my partner, Tracy Reed and I, we laid it all out for him–computer screens, clusters, algorithms, all this stuff, to a guy who is one of the great music guys and didn’t know anything about technology. In the elevator on the way down, Tracy and I looked at each other like, “He didn’t get it, did he?”
But the next day, we don’t a call back from Craig Kallman, who today said, “I don’t know what you showed Ahmet yesterday, but he thought it was really exciting and we need you to comeback in and tell it to us. So, I don’t know…
Andrew: Yeah. You’re saying if you don’t get it perfectly clear the person still looks a little confused, it doesn’t mean you haven’t nailed it. You nailed it. Sometimes a little confusion is fine.
Mike: Yeah. You don’t have to everything right. You have to do enough of the right things right to get you to the next stage. Like football, you get to the first down. Sometimes it’s messy, but you need it.
Andrew: All right. Well, you got there. It feels great to see that you’ve done well. It’s so cool. The first thing that you said when we connected was how strange it was to see me because you’ve heard my voice in your ear for so long. I love hearing that. I love hearing the entrepreneurs who I have on Mixergy are the kinds of people that are in the audience I spend forever researching. Sometimes I see someone else do an interview with ten static questions, I think, “Is it really worth it?” When I see that you’re listening, I feel like, Yeah, it’s further and how do I get even stronger. So, thanks for listening.
Mike: It’s a great show. I think that you never–I never don’t learn something. I’ve been an entrepreneurs for a long time and I’ve been at a lot of different stages as an entrepreneur for a long time. There’s always some nugget, some morsel or some way of explaining something on your show says that the light bulb licks. That’s’ great.
Andrew: Thanks of bring to there listening. Congratulations on all your success. Know we’re just at the beginning of it. If you want o check out the website it’s MusicXray.com, right?
Mike: That’s it.
Andrew: MusicXray.com and my two sponsors are AcuityScheduling.com/Mixergy and Pipedrive.com/Mixergy. Because I’ve got a cold, of course, Ari is going to put it in the show notes. So, all you have to do is go back to Mixergy if you forgot that or you didn’t hear it clearly enough or any of my other sponsors, it’s always on the site.
I know Mike has been subscribing. Subscribe in your favorite podcast player, you’ll get every single episode automatically delivered for free. If you miss it, we’ll charge money for it. But if you subscribe, you get it for fee and you get to keep it forever. So, go subscribe to Mixergy. Thank you, Mike. Thank you all for being a part of Mixergy. Bye, everyone.
