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- [00:01]
Capital One Business Narrator
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- [00:56]
Mike Hoffman
Hi, I'm Mike Hoffman, Editor in Chief of Inc. And you're listening to youo Next of Audio Edition, produced by Inc. And Capital One Business. In this season's Audio Edition, we're bringing you conversations from the youe Next Move Pop up studio at the Inc. 5000 conference this past October in Phoenix, Arizona. You'll hear Inc. Writers and editors interviewing the founders of some of the fastest growing private companies in the country. In this episode, Inc Staff reporter Brian Contreras sits down with Paul Goldman, the founder and CEO of Muzark, a Music Copyright Administration company. Ranked number 2,959. The Sears Inc. 5000 based in Nashville, Muserk operates behind the scenes of the music industry, helping artists and publishers and rights holders navigate the complex world of royalties, data and intellectual property at a global scale. The conversation begins with Paul explaining how Merserk evolved from a startup into a scale up and why his next phase of growth isn't just about adding customers, but about learning how to responsibly leverage capital, technology and assets to compete with the industry's biggest players.
- [02:02]
Paul Goldman
My name's Paul Goldman. I'm the CEO and founder of Music. My Inc. 5000 number is 2959.
- [02:09]
Brian Contreras
Could you give me a short description of what your company does?
- [02:13]
Paul Goldman
Sure. So Muzerk is an administration company for music copyright, which means essentially we collect royalties in doing collecting royalties for large publishers and copyright agencies around the world. We're also an advocate for copyright because there's such a legal thing wrapped around intellectual property. So we're kind of like a finance mechanism of music. And when you see artists driving Ferraris, they get the money from what we do and we always call it like the back end is so boring. The non sexy part, but it's the real complicated part that deals with YouTube and Spotify and Apple music and fractional rights and all these billions of bits of data. So really, we consider ourselves a data technology company because we manage over 25 million copyrights at scale. We have a technology stack that does that, that has an AI patent in the US and soon to be global. So it's become quite a big venture that we've leaned into.
- [03:08]
Brian Contreras
Yeah, quite impressive. And you were telling me before we got on the mic that you're based in Nashville in the heart of the American music industry.
- [03:15]
Paul Goldman
That's right. Muzerk's home base headquarters is in Nashville. It originally started in New York as a typical startup 10 years ago, you know, as Inc magazine. You know, I was a big fan in those days of reading it, and we started to grow it out there. But about five years into it, we started to build in Nashville because someone who was part of my core team was from there and moved back there. And I said, you don't have to quit. Like, you're not quitting, right? He's like, well, I thought you'd want me to quit. I was like, no, just move there and like, let's figure it out. So what we realized is that Nashville was an amazing hub for copyright. Although it originally started, of course, in country music. But of course, now, as everyone knows, modern music is all crossed over. And so what we found is that's the core of the administration business, the copyright business. And if anyone's in this sector with catalog buying, which is part of our sector, Nashville is really the home base for that in the world. It's actually the tip of the spear. It's the one thing that Nashville has that's completely original to itself is this kind of backend administration of music and copyright. That's why it's so popular for songwriters. Cause that's where the copyright starts, is someone has to invent a copy copyright. Like birth it, basically.
- [04:24]
Brian Contreras
Absolutely. So, you know, we're coming up on the the end of the calendar year, and it's a time for entrepreneurs and everyone else to be thinking about the future. I'm curious, over the next 12 to 24 months, what is the single growth lever that you're most committed to pulling on?
- [04:43]
Paul Goldman
Ooh, that's a good question that you're going to make me pick one. Very smart. Ours is specific to our company, right. Companies go through phases. The company's like almost 10 years old. It's our fifth year on the Inc. 5000 list with this company alone. So we've been growing quite extensively. But what's interesting about this question for us personally is this is the year it changes for us. And as a founder and CEO, sets the strategy. I've really had to make that adjustment because we're going from startup to scale up now. And with that comes how do you get a company into that mode? Which changes how we've been pulling the growth levers. Because in the early days, the growth levers could be just new customers or break even revenue, some, you know, basic things, or we need to even move the office to Nashville or expand in different markets. But now the growth levers are how do we get to this Scala mode? And the way that we do that is we've never gone into the level of we need capital to do that. And I'm not talking about raising seed money or money just to grow, like, you know, growth capital. Like, if we want to get into buying music and buying catalogs and really expanding the markets and competing with the big players, we need to learn how to use banks, we need to learn how to use credit lines. We need to access, not venture capital. And this type of capital changes the format of your structure. But we need to learn how to leverage capital to buy assets, to then leverage those assets to get more capital. Kind of what all big companies do. So for me, as a CEO, it's something I really focus on learning this year, actually. Although I'm around tons of players who do it, I've never really done it at the company. And I've spent a lot of time accessing people who have done that at a higher level. And once I started to understand it, it became very simple. It's kind of like real estate expansion, the same thing. But for me, the growth levers are kind of that, like, we just can't get a million customers in a day. Like, we're not going to get as big as we want to get. We need capital. And it's not just money. It's like capital to leverage assets that we then manage well and increase the value of. You know, so we're still doing our core business. There's. And that, as a lot of people know, is a whole different world of whether it's private equity, whether it's banking, whether it's investors who come in to buy assets only and not invest in the business. You know, different levers. So for me, sorry, I gave you a long answer, but that's what it is.
- [06:51]
Brian Contreras
Is there a single metric you're looking at to sort of track that growth and that scale, or a single most important metric at least?
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Paul Goldman
Well, it's interesting because now that the company's becoming kind of, I don't want to say numbers, but we're coming like an EBITDA company.
- [07:07]
Mike Hoffman
Sure.
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Paul Goldman
And we never looked at that because we just figured, well, we're, you know, we're happy to break even. I mean the idea is we put our money back in the company like most startups here. Like you make money but you're just spending it on like people or you know, it's. Which investors know. It's not a big, it's actually normal. The metrics of now, like revenue to EBITDA for the first year has become a topic with investors.
- [07:28]
Brian Contreras
Sure.
- [07:29]
Paul Goldman
And it's been a new conversation for me. Part of it's cool because I'm like, wow, we actually have a little profit. That's cool. That's kind of fun. What are we going to do with that? Of course we're not gonna do anything with it, but I mean, what are we gonna do? Like go buy a fur coat? No, but. And then that becomes a whole set of other pressures and now we are looked at through a different lens. Some of it's good and some of it's. I don't know if it's bad, it's just. I haven't figured out how much of it's bad. But it is different because they value your business now on different levers because now you're showing a new lever that they didn't know existed. And I think it's good for us because obviously we're growing and new things are good and you just gotta roll. But that's been our challenges this year, which you know, after eight years or something, or seven years, you know, we've been a typical. Started with two people built, built first customer, second customer, built technology that has a patent from scratch.
- [08:20]
Brian Contreras
Took years in that journey of scaling what has been the single toughest trade off to make and which of the options you faced during that trade off. Which way did you end up going or what did you end up prioritizing?
- [08:35]
Paul Goldman
As a CEO, I have to get less in the operations. I know that sounds generic, but any small company CEO is involved and that's not over managing just because everybody needs to kick in and push the car up the hill no matter what position you're in. At Muzerk, we have an amazing team where I can do that because everyone does an amazing job and can be trusted and we've built a good system there. But for me, and now it's more moving out of the day to day Moving into more strategy to meet with these other types of strategic players. It takes time and travel. And also my thought process is not on like what's the best health care plan for the company this year that's being taken care of. I would say that that in itself is moving more into a strategic role in letting go of the company that I built from. I'm a single founder, so for myself, yeah.
- [09:22]
Brian Contreras
Has it been tough to sort of delegate and seed some of the day to day decision making as you look to be more of a big picture leader?
- [09:32]
Paul Goldman
I wouldn't say it's been tough, but it's been challenging is the word I like to say because tough implies it's been a negative process. It's been challenging for any company because let's say I thought six levers were going to work. Like you realize when you step away and you don't expect them all to work, you're going to see that those two are a little weak. And these three were great. And this one's like middle. So I'm kind of noticing that. Okay, then you have to go back. But it's kind of good. It shows your weaknesses. It's like if you take a car and drive at 100 miles an hour, you'll start to see where things fail. You kind of got to do it. And you know, as an entrepreneur, you just pray that the fires aren't too big. Right. That it's fixable, which it usually is. But every entrepreneur, in fact, we just had a talk with Jay Shetty, you know, saying like even I think I'm a failure a lot of times. And you're like, really? You're supposed to have like the best mind in the world. You know what I mean?
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Brian Contreras
Yeah.
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Paul Goldman
But it's. Everybody thinks this kind of way.
- [10:24]
Brian Contreras
I want to pose a hypothetical. Imagine you had a 30% budget shock tomorrow. What do you think you would cut first that wouldn't sort of slow your speed of growth?
- [10:34]
Paul Goldman
Well, it's interesting. We did have not a 30% of like the net revenue, but we had a 30% drop not related to us. Where Spotify did this thing probably nobody knows about called bundling, where they bundled music with books and audiobooks on purpose so they can take the copyright royalty and move it into a different sector which pays out differently. They're battling that in court now. So overnight there's a royalty called the mechanical royalty. If anyone listening as a music will understand, knows this. And their royalties dropped immediately about 40% of the money they were getting overnight, including from an Indy. So we did deal with something that recently, being in the Inc 5000 five years, we don't slow down on growth. You just really have to tighten up or fulfill the gaps with other things. And those are types of fires you have to put out. And those are the times in business where you learn and you train for something. But that day occurs. You say, okay, we've all trained for this moment. Everyone get in a room and let's start sorting this out. And then you've done this long enough. Like, as an entrepreneur for 30 years, I've done this long enough. Like, my stomach doesn't drop out anymore, per se. It's like, I know we'll get through it somehow. It's just about how difficult it'll be. But we're definitely going to get like, we're definitely getting to the other side. It's just about the process. We're not sure. So as long as everyone's on board with that mentality, like, we are definitely getting over to the other side. I can't tell you if it's going to be kind of easier or harder than we thought. But if we don't give up, the path is there. So I kind of take that approach. I mean, we haven't had a situation where we hit something where all of a sudden we had to roll in and fire. When I worked in a different industry, well, in the music industry, but on the production side, in New York City, when I owned a pretty large production music industry, in the market crash in the late 2000s, in 9 11, we were shut down for two months. We literally had to walk inside with 48 hours notice. When the markets crashed, it was like 2008, 2009 or whatever. And I had a fire like eight out of like 20 people. Wow. You know, it wasn't a good day. Yeah, but we've never experienced that. I think that's. Thank God. So.
- [12:35]
Brian Contreras
So, I mean, when that Spotify change came down the pipeline, what was the playbook there? Was it making up that lost revenue elsewhere? Was it cutting inessential aspects of the company? A mix of the two? What did that actually look like in concrete terms?
- [12:50]
Paul Goldman
Okay, so when that happened, we didn't fire anyone. Like what I just said about 2008 or 2009 market crash. Like, that was a very drastic situation. And all the companies were doing that. I built a strong enough company that we had a bottom. We weren't going to run out of money paying payroll. We're not going to fire someone just because we have a drop. It's a temporary drop. I knew the money like the bottom line. Revenue was here, it went down, it will come back up. Whether they reverse that law, which is still in courts and these things get reversed all the time. In the music industry, you see the battles all the time. Or we do make up with revenue, or we just hustle more, or we just take a drop that year and then just have to kind of like come back up. Two steps to get back to zero. But again, we have a strong enough company. We had cash in the bank, we have a line of credit with the bank, but we never really were in any like super danger. And part of that I think is because we have a strong team of people. We've run a smart financial business too. Like I do understand after being an entrepreneur my whole life, like you need a bottom. Like if you're running off the bottom, it's very dangerous and sometimes you're there and that's just the way it has to be. But you need some padding underneath, you know, below the surface of the ocean because you're going to go underwater a couple times.
- [14:02]
Mike Hoffman
Up next, Brian asks Paul about the role AI may play in driving efficiency. After this quick break.
- [14:17]
Capital One Business Narrator
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Brian Contreras
Talking about efficiency and how you build some cushion into your financial situation. Do you see AI playing a role going forward or even currently? I know you mentioned AI earlier in creating new efficiencies.
- [15:32]
Paul Goldman
Absolutely. In fact, our technology platform which is called Blue Matter, has an AI patent, the only one in the music industry. It was patent during COVID before it was public use of patent. It's a pretty huge thing for us. It's basically when you think about it, how do you go into a database like YouTube or Spotify that's listing billions of lines, I don't know in minutes from people using it all over the world, from different countries and different laws. And how do you basically go through that and comb through looking for artists, looking for someone who owns 10% of this song, getting the money together and out the door. And it's interesting, we just hosted a panel last week in New York at this Amando festival, which is a music festival in Brooklyn. And we had the main AI panel there, and it was called Boring is Back. And that panel basically spoke about people are kind of bored, I think, with AI what it does. I mean, we all get what it does and how important it is. But it was about like the chain of AI in different pieces to make like the process. Like our AI is dealt in, like in ingesting huge amounts of data, matching in these huge databases, getting the reporting back and things like that. Other chain of commands are into, like sending money around the world, like banking type of things and multiple currencies, things like that. So in our industry, it's really now about the chain of command of AI companies. And if you talk about PE companies, the main play they're doing now in the music industry, which are called roll ups, which are people who aren't familiar when they go to buy like a bunch of service companies in an industry from A to Z to create a chain of events that will kind of have the market. Three years ago, they bought companies that didn't speak to each other in the chain and weren't building the right technology. So the big topic now is how do we buy the right five companies who have the same plugs? Because AI is a generic term. So everybody's AI is a little different. And so they're having a big problem trying to acquire the right five companies because if they only get like three out of five of them, they want to build this efficiency Right. From one to another. Sure. So that topic that you brought up is a big thing that even is leaning into the investment financial markets, which obviously fuels our industry.
- [17:31]
Brian Contreras
We've been talking a lot about scale and growth. I'm curious, how do you think about company culture during the scaling process and either evolving that culture as the company grows bigger, or maintaining the things that made the culture fun and a nice place to work when it was a smaller operation.
- [17:52]
Paul Goldman
Yeah, these are good questions because there's all these things we're dealing with right now as we're growing.
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Brian Contreras
Sure.
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Paul Goldman
So we're a company, I think, but people tell me that have a really good company culture. We've had people work I think there's two people having their nine year anniversary. Someone has a 10 year from day one. And I tell people when someone approaches and say like, wow, we love the team at Muzerk. They're really good to work with. Somehow they think it's like kind of an accident. I don't think they understand how much effort. Like internally we're like a family. We have little spats and people get upset and need to talk things out. People will say like, hey, this really bothered me. And you know, it's just like. But at the end of the day, that's what creates the culture is like, we can talk about things, work things out. So the company culture thing, I already have recognized that it's going to be something I need to really look at and keep an eye on closely. Because the more people you have, the harder it is. It's easy to have five people with a company culture, but the more diversity you bring into your company, which is what you want in personalities and everything. The idea that someone's like, well, we want to hire people with the same vibe. I'm like, yeah, but the vibe, it's not each person, it's the culmination, right? It's the sum of the parts. So, like, if I hired everybody like me because they're all like me, that doesn't create a good culture. What we want is a diverse group of people, personalities and backgrounds that create one whole culture on itself, right? Like the spokes in a wheel. I think that's the key and that's what makes culture difficult. And I think a lot of people see it as an individualized, like, hey, I'm a cool dude, I like this type of music, we wear this type of clothes. I'm gonna work with a bunch of people like me. We all go to the same type of shows, we all live in the same neighborhood, we have the same political views. Whatever it is, to me, that's not actually good company culture. And that becomes hard. But I guess to go back to my initial thing is I'm always amazed how people think it was just an accident and if they really knew how much time we spent on it internally, like real efforts, just like a human relationship, it's not easy to do.
- [19:55]
Brian Contreras
Maybe a good point to wrap up on looking, say three years out from now. What metrics will signal that you have achieved the growth you're looking to achieve and what does that growth look like for you? You know, what is sort of your ideal situation three years from now?
- [20:13]
Paul Goldman
Well, I think of Muzerk Even if I was working there or not, I consider a company that will hopefully move on without me. I want its core business to be the same. To protect copyright. We collect more money for people. We collect money for people who are disconnected from royalties around the world. That's been our thing is like it's very hard for people to collect. If you go to Japan or anywhere in the world and collect everywhere in the US things are much easier. Everywhere else in the world it's thousand times more difficult. I don't think a lot of people understand that, but I do think that music will grow. But the core mission is the same, but it'll be working with some technology so it can handle scale. Because the only way to, I don't want to say beat the platforms because they are our partners, but to run in parallel with them as equals where they can't do things like bundling and we have to sit there and twiddle our thumbs will only come when our technology is comparable. And of course the music industry is a creative industry. If you take Spotify, YouTube, they're really high level technology database platforms, they're not music companies. People think Spotify is a music company. It's really, you hit a button on your phone, it serves you up a data on a server. The music company is the publisher who signed the writer and wrote the songs and the label who made an artist big enough that you even know who they are. So the idea that Spotify is a music company, I tried to make people understand that YouTube is a massive database. They're amazing, mind blowing technology at scale that they can handle. The goal is to just be more equals where we're running more symbiotic. And it's not always like you drop the hammer, we survive. You drop the hammer, we survive. And that trickles down to the creative artists. So I would hope that Mewzerk gets to that level. And the only way to do that is of course you need people, but you do need the technology to run at the same pace because they're so far ahead of everybody else in the game, even the governments are afraid to do something to them. That should just show you how far ahead they are of everybody. You know, it's good for modernization if it's used in a good way, but it's bad in the sense of if you can't regulate things and someone does bad things, they really going to get away with a lot.
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Brian Contreras
Sure. So what is sort of the ideal status quo, maybe three years out, the relationship you would like to see between Those platforms, the artists and the labels, and then yourself, your own company,
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Paul Goldman
music will go to an agent, will probably start owning assets itself. So we're getting into catalog buying and things like that, which makes sense because the way I compare it is, know in real estate is very common. Like there's a management company who's managing buildings all over a city, then they decide to raise money and then buy buildings because they manage them so well. So the idea of the structure of what we're doing is not new. Many companies have done it, but I think we just need to do it in the next wave. And the next wave just uses the technology of its generation. Obviously, the way we listen to music has changed greatly in the last 20 years. Completely changed. So I think in that way, when Mewzerk has more assets under its belt and is also growing, obviously in just business per se, again, it just goes back to my earlier theme of in this business, they're not going to do anything for you unless you have leverage. And I say it in a positive way. I wouldn't waste my time in this industry if I didn't think it was worthy. It's definitely worthy, but that's the way it works is if you don't have some equal footing, then they just move without asking. As soon as you have some sort of equal footing, it becomes more of a, hey, does this work for you? And this works for us. And I think that's when the music industry will change and they're getting there. I mean, universal public, you know, these are huge companies now.
- [23:55]
Brian Contreras
Sure, absolutely. Well, it's been a pleasure. Thanks for your time, Paul.
- [23:59]
Paul Goldman
Yeah, thank you. Appreciate it.
- [24:01]
Mike Hoffman
That's all for this episode of youf Next Move. Our producer is Blake Odom. Editorial, editing and sound design by Nick Torres. Additional editing from Sam Gibauer and Tad Wadhams, and our executive producer is Josh Christensen. If you haven't Already, subscribe to YourNext Move on Apple podcasts, Spotify or wherever you listen. And you'dnext Move is a production of Inc And Capital One Business.