From Financial Ruin To Selling The Orchard

The worst thing you can do as an entrepreneur is write a fucking business plan for two reasons. One, because it boxes you in. You need to start doing it to figure out whatever your initial hypothesis is won't be 100%. So you start doing whatever it is and learning as you go. The other is if you actually did a proper business plan with a financial model, you would recognize there's no fucking way this is going to work.

How is it to be eight years ahead of your time? Scott Cohen is telling about his journey with the orchard. Telling about how he was in financial ruins. That the future looked very dark. But he believed in a plan. He believed in the company. He believed in the future. And at the end, he was right. Hey guys and welcome back to the Sound Connections podcast. Scott Cohen, welcome. Nice to be here. I've been looking forward to this interview so much, Scott.

You have been a person I've looked up to for many years. And the listeners who listen to this podcast regularly know that I used to have a startup called Timber that worked with fractionalized rights on the platforms of investors can invest. Does that sound familiar, Scott? Yeah. Yes. Sounds familiar to what I knew you were doing and sounds exactly like what I'm doing now. Yes. We were young and dumb and that's not how you build a company.

But Scott, you are the founder of Jukebox, which is an amazing company. And you're also the founder of The Orchard, where we're going to talk a lot about your journey there and the exit today as a part of the exit series. But Scott, for the people who don't know who you are, could you just briefly explain who are you and what do you do? So, I'm Scott Cohen and I'm the CEO of Jukebox. That's J-K-B-X, but pronounced Jukebox. We allow regular people and fans of music to invest in hit songs.

And those investments are in regulated security. So, an investment in one of the songs on our platform is like investing in something you might invest in the stock market. Yeah. And you have also built a company that is globally renowned, The Orchard, which was the first, if not one of the first distributors in the world. We're going to talk a lot about that today. The first one. It was the first one and it's The Orchard. It's not a consumer brand, but it was the first digital distributor of music.

Something we started, or I started with my business partner, Richard Goderer, in the mid-1990s. Yeah. We're going to spend a lot of time talking about that today. And thank you so much for opening up about that journey. But Scott, to set the scene, Jukebox now, I believe, is one of the most interesting companies globally within the music industry. And you have previously built one of the most interesting companies in the music industry called The Orchard. But I need to understand your journey in order to understand how a founder like you have built up this career. Could you go back to the start?

How did you get into music? Oh, I was just a regular guy. Like, I was not a musician that didn't succeed, that then got into the music business because I couldn't make it as a successful artist. I wasn't any more passionate about music than any of my friends. If anything, I just kind of fell into it. I had another company. I had always had my entrepreneurial endeavors.

And so I had a completely different company when I was in university, when I was in my teens and into my early 20s, which was a painting company. I don't mean like Picasso. So I mean like painting houses. Okay. And I had some friends that were in a band and I was giving them what I thought was just like some obvious advice. And somehow before I knew it, I was managing them and I had no idea what a manager was.

I didn't know anything about the music industry, like nothing. But I started and that kind of grew and then I was managing a number of acts and then I would get them signed to record companies, major labels, independents. And before I knew it, I was in the music industry. There was no planned. I'm just like a dude. Wow. Okay. So you have this entrepreneurial spirit. You just accidentally get into the music industry. There's quite a big gap from that to founding the first digital distribution company in the world.

Yeah. Well, what happened was from managing, I then set up a record company, an independent record company. And this was 1995 and I set it up with my business partner, Richard Goderer. And those are people that know me know this story a bit, but we were just terrible at running a record company. And he's a seasoned veteran.

He should have known better. Like he had done some big stuff in the music industry. He's quite a, he's also quite a legend, but our label had, had failed completely. I'd lost all my money that I'd put in and I, and I was actually at zero. And so what I started to do was leverage, uh, the new technology of the day. And in 1995, that meant the world wide web. So what we would do, and again, it was a very different world.

It's funny how, how quickly things changed. But back then, you know, being on the web meant, you know, dial up modems, which were very expensive. You had to pay your ISP and in that case, it was AOL for us. We had to pay AOL for every minute we were online and you use the phone line and the phone company charged you for every minute you were online. And so we had 10 computers and six phone lines. And what we would do was we would have unpaid interns from New York university go into those message boards where people would talk about music because that's all you could do in 1995 was talk about music.

There was no, there was no video. There was no audio. Um, there were no photos, but there were these message boards and when people were, were talking about music, we'd have the interns click on their username and send them an email and they'd say, Hey, you should check out this band on our label, blah, blah. And in 1995, what was extraordinary was we got a hundred percent response rate. Everyone that received an email responded and it almost always was thank you.

Like, thank you for sending me an email because in 1995, it was probably the first email they ever received. I mean, you've got mail, like they never had that before and it was exciting. And then it was about music and people would send us messages like, where can I buy the CD from this band? And we like, you know, and then message back, well, where do you live? And they'd be like, I don't know, uh, Akron, Ohio. We're like, okay. And then we call our distributor and they go like, we'd email them back.

Well, we have one CD in Cleveland, Ohio. Is that close to you? And you know, it was all this kind of stuff, this back and forth. Ultimately people would send us $10 checks in the mail and we'd ship them a CD, but Richard and I, we didn't have this epiphany. There wasn't some light bulb moment. There was over time and not a tremendous amount of time. We started to recognize what the power of the worldwide web would be that obviously things would get faster and you know, the, we were still oftentimes using black and white monitors, you know, it'd be like, they'll be in color and things will get smaller and faster and we'll be able to do more things.

And, and ultimately we realized, you know, anything that could be digitized would be digitized. Things that sound so obvious now, but weren't back then. And we thought, yeah, uh, people will be creating and consuming media digitally. And this is how it's going to be. And everything's going to be on demand and you'll get whatever you want, whenever you want it. And based on that, um, we opened up the orchard in 1997 as the first ever digital distributor of music. Wow.

Scott, I have a question before we go further in the, in the story, because if there's, if you ask around and I, I know a lot of people that know you, there is almost a consensus about now I'm putting my own words. So you being almost like a music technology prophet, um, people don't use that word. I'm just making my own call version of it. Um, which means every single time there's a new, uh, technology that being blockchain, AI, metaverse, whatever space you quite a lot of years ahead about understanding how this will impact the music industry.

Sometimes you're right about the timing, sometimes you're not, but nevertheless, you have this foresight. So for me, it already seems like this is what's happening with the orchard because you just dumped into the music industry. You maybe did not have the predisposition to understand what would happen, but what happened in your understanding of technology that suddenly make you this in my own, there you call it words, profit side of music industry. I like your choice of words, profit, you know, with the pH that somebody can see in the future, because it definitely wasn't profit as in making a lot of money because it was the exact opposite.

Yes. Um, so I, I was good at one kind of profit and terrible at another. Um, yeah, for me, it was always, you know, to me, it was always self-evident. It was, it was so obvious what was next that, because I'm, uh, I'm terrible at predicting things. Um, so I wasn't predicting. It was like, instead of looking at the music industry, I was looking at what's happening in the computer industry, what's happening in the broadband industry, what's happening in the mobile industry.

Um, but we're starting to look at that world. Then it was obvious what was going to happen in the music space. It wasn't, there wasn't any great, um, honestly, there wasn't, there wasn't any great prophecy. It was like, this is the technology that's happening. This is how other industries may be adapting it. This is, you know, other industries may be having different issues that are somehow related. Um, and just connecting some dots.

Um, yeah, I don't know. It, again, it seems so obvious now, but truly it wasn't. I mean, I remember, I think it was 1999, we did the first ever trial for downloads over a mobile network, which, which was crazy because as I'm telling my friends, oh, you're going to be able to download music over a phone, but they're still thinking, you know, the phone rings in the kitchen.

They walk to the other room and pick it up and it's got a cable and what I'm just going to listen through the receiver to, to a song. How does that work? Or no, I'm going to dial something because phones weren't like smartphones. They were old Nokia's, but we did this, this trial in Finland with Nokia and scenario, which was the, the phone company in the, in Finland. And I think there was like 500 Finnish people in this group where they could download a song on their mobile network.

Um, but even to download a song meant you had to, you know, the keyboard was, had like numbers on each, you know, or letters on each number. So to spell out a name, you'd have to like push the number two, three times, and then go to the number five and push it once. And then number six, seven, you know, three times. It was like you took forever and you could spell out a name and then click on it. It was painful, but it was obvious that this is the way we're going to get to that, that the web, even though it was still slow on the desktop, we were already looking at, oh, it's going to be mobile, not that we were thinking about it being mobile, we were already doing it in 1999 and, and maybe, you know, it's less about prophesizing about the future.

It's more about, you know, doing, you know, it's, it's less about thinking about what's going to be next and just start doing things because it's in the doing that you understand the world. And what's interesting about the orchard journey, and, and I've had the pleasure to hear multiple versions of it before is you guys were ahead of your time, maybe a bit too much ahead of your time. Can you, can you, can you walk me through what happened? Yeah. Yes. Nice to laugh about it all these years later. Um, at the time it was, it was, you know, cause it's, you can romanticize the past when I say these things, oh, and dial up modems and unpaid interns and all this.

And you romanticize it, but in the moment it was really challenging. Um, being the first digital distributor meant there was nobody to distribute to. There were very few online stores the way we had imagined them existing, you know, Spotify didn't exist. Um, nothing existed. Napster wasn't even around yet and they were illegal. We, we weren't trying to be a Napster. We, we imagined stores and we would supply the stores, but this also meant that we weren't making any money back to the, to our word profit.

Um, we, we were taking losses. I think, you know, at my lowest period, I was something like $3 million in debt. Whoa. Like personal debt. We didn't raise any money. Didn't raise a penny. So I owed everybody. I owed the landlord, you know, the electric company, the phone company, AOL. I, I lost my house, all my possessions. I owed the IRS as in the tax authority in America.

And I, I often talk about, I owe them money. They use different terminology. They say tax evasion or tax fraud. And not only do you owe the money, but you could spend 10 or 20 years in a federal penitentiary. So this is what was facing me, you know, so lost everything. I was homeless. Um, and, and this is why the orchard is, is on top is by far the biggest, uh, digital distributor in the world, leading the market, doing all these things.

Um, and just to be clear in the end, everybody was paid, especially the IRS. Um, everyone was paid off, but, but those were really dark, challenging times for an entrepreneur. You know, it's, it wasn't like this story, like, Hey, I had an idea of the future and open a company and put together a business plan and a financial model, raise some money, ran the business. It went so good. It got better. It got so good. It was great.

It went great to amazing. And I sold it and I made a billion dollars and I was off into the future. Like, sorry, that's not how the story went. It was, uh, quite challenging for many, many years, a lot of hard grit, you know, of sticking with it. Well, what was it that made you so unrelenting in the pursuit of the company that you're willing to risk all of that? Uh, but because I was a thousand percent sure that this is the future.

It wasn't a, this is how people will do things. This is it. Um, whether it was going to be Richard, me in the orchard succeeding, I couldn't be certain. I wanted it to be, couldn't be certain. But would people be creating and consuming media digitally and accessing it from multiple devices on demand from wherever they are in the world? Yeah. That was the future. And I was just trying to stay alive long enough because I wasn't going into the future.

I was standing still waiting for it to come to me. Yeah. And finally it arrived, it arrived, it arrived in a big way in, um, April, 2003 with the launch of iTunes. Hmm. Because when iTunes launched, um, all those years of, of suffering meant that we were also accumulating a catalog of digital rights. And we were sitting on the largest casual catalog of digital rights in the world. I think when iTunes launched, we were something like one third of the iTunes music store because even the major labels had rights to music.

They didn't have the right to exploit that music digitally. And that was our business. Hmm. Scott, I, if, if it's okay with you, I want to go back to the misery you're talking a bit. Um, thank you. Thank you. I, uh, you know, the, all these years of therapy, but okay, yeah, let's, let's go dig down deep again. So you and your co-founder Richard, uh, was on this journey together. Uh, if it's okay with you, I would love to understand what kind of conversations you had at this point.

Like, were you in, when, when you were on the darkest of the dark, what were you talking about? It's interesting because Richard and I were, and still are incredibly close. Like, he's, he's my dearest friend. Um, and we never left each other's side during this period. We never pointed fingers. We never blamed there. There was, there was some denial in there because there's some nights where it's like, fuck it. Let's just get drunk. Like, I'm sorry.

Like, I, uh, if, if we're going to go down, then let's go down with a bottle of wine. You know, uh, we were, but, but it was constantly just being scrappy, just trying to figure out how we're going to get out of there. What's next. And almost, almost ignoring what was in front of us, not because, because we were well aware, this is it. Like, so we can dwell on it or we can just keep marching forward and keep trying new things and keep trying to set up another partnership or do this or anything to, to make us a little money to get us one more month.

Like, all right, I figured out a way how we're going to pay our rent next month because in, in the oddest way we had already solved for the big stuff. We'd solved the big picture. This is what the world is going to look like. This is what we're doing. When I look at the orchard business to today, um, almost 30 years on, it's essentially the same thing. You, you bring in some, some music rights and you supply it out to the places that people consume that, whether it's tick tock or Spotify and you monetize that and then you pay it out and you do some other little services.

Like nothing's changed. We figured it out. We'd unlocked it. So the conversations that he and I would have would be about, about honestly, how we're going to survive next month. What could we do to just get by one more month and doing that year after year after year is exhausting, but we were also having, again, and this is the romanticizing the past. We also had the best time of our lives. It was, it was amazing.

I mean, it was amazing. We were going through uncharted territory. I mean, it wasn't like, you know, there's a lot of businesses in the music industry now and it's like, they're just going down a railroad track, like a train. You know, you just, you know, you just, you know, you're going to get more subscribers or more users or like, like the track is there. This was wild west. This was wild west. Like, what direction do you want to go and how are we going to get there? Don't know.

And just off into the wilderness. And that's, there is an element of that being thrilling. You can have entrepreneurs that would know something a thousand percent. A lot of people, not a lot of people, but some people can see what's going to happen and they, as entrepreneurs, can pursue it. But there's many different motivations behind such things. For some, it's the monetary upside. For others, it might be fate, some sort of religious aspect.

For others, it's other things. And if it's okay, I do, I do want to understand, okay, you were a thousand percent sure this was going to happen. Still, why? Well, what was the motivation behind not giving up? Yeah, it certainly wasn't money. Um, you know, you, of course you want to make money and do that on some level, but if that was the motivation, then there'd be easier ways to make money. So it couldn't have been that, um, there was something about the excitement of being first and doing something unique.

Um, there was also something that was very interesting at the time where it wasn't trying to disrupt the music industry. Like I hear this term disruption thrown around all the time and, and I'm not a fan of disruption. What we were trying to do is we recognized an opportunity for, you know, the independence and how do we would involve them again? We weren't against the majors. It was the majors were, were sorting this out themselves. They didn't have a problem getting into iTunes in the day and the things that they were doing before that.

But there was a whole class of, of musicians that were left out that, um, for whatever the promise of the web was back then, you know, it didn't exist because there was this idea in the nineties, you know, if you wanted to succeed, you know, the, the music industry, everything before that, up until this period, let's say 2000. And was, if you wanted to succeed, you had to get a manager and an agent, you went to get signed to a record company.

You had to get on radio and get press and all that. You had to go through all those steps and you needed, you know, teams of people to do that. And the web was like, no, the promise is anyone can do that. Right. But it turned out that wasn't the case because you still couldn't get into, you know, even before there was iTunes, there were other digital stores. And even before those, there were, you know, sell your CD online, you know, get into an online store. There were stores in the mid nineties called music Boulevard.

And, uh, you know, places like that where people could order a CD online, like, but you were happy. That was great. If you were on a major label, that was great. If you had a big distributor, but for everyone else, you were still out of the game. You had to get quote signed. Um, so we said that doesn't seem fair because it's unlimited shelf space in the, in the web. So we thought actually everyone deserves a chance. Everyone deserves a chance.

We can't say that they'll, they'll be famous, but we should give them a chance. So that was the, the driving motivation. How did we're not taking away from everyone. We're just adding now today. Maybe you would even say it's gone out of control. Like there's so much, like we opened the floodgates, um, and now there's truly a flood. Yeah. Well, thank you for sharing your trauma with me, uh, in the audience. We can go to some of the good, good stuff.

Uh, so 2003 iTunes launched. You had a third of the catalog there. That must've been an amazing feeling. Was it just, you know, winning, winning from there on? Or like, what did you experience? Truly, it was winning, winning. There, there was so many losses, losing, losing for so many years. You know, we lost in 95, 96, 97, 98, 99, 2000, 2001, 2002. That's eight years of a losing streak. Um, we were due for a winning streak.

And so I remember, um, we got that first check from iTunes. So it's, they launch in April, the end of the month. Then it's 30 days plus, I think a week or 15 days was like 45 days later. And we got that first check and it was like, holy shit. And that one check was more money than we'd made the whole year. The second check was double. And those checks just kept doubling and doubling and doubling. Um, and it just was a hockey stick spike to a billion dollars.

It's such an unconventional journey. Um, and that's, that's what's so amazing about the Orchard story is, well, every single startup is, is its own journey and every single founder is on their own journey. Um, but the reality that you stuck to something so long is almost insanity. Like that, that at least from the outside, like, you know, okay. Yeah, maybe, but yeah, maybe.

I don't know. I don't know. Um, yeah, maybe it was insanity. It was, it was, it was, it was, it was also, you know, it was truly desperate times too. I mean, they're just desperate and, and yeah, yeah. But Scott, you, you stick to the company for a long time. Uh, you were there for a long time and helped it grow. Um, one of the things I would like to like to spend some time on is, is sort of the acquisition. So if it's okay, we'll just to do some, some quick years going ahead from you guys launching, checks doubling, uh, and then you're in a good space and it's all about scale.

But what happened that time period? Well, we, all right. So I have to rewind. So just before the iTunes launch, obviously iTunes didn't just magically launch. They negotiated with rights holders. And so we, we had a pretty significant catalog. Not that they were good negotiators. They were still take it or leave it, but we knew iTunes was coming. We knew iTunes was going to be massive. Like the industry knew it because the iPod was so massive. Yeah.

And so there, everyone knew iTunes was going to be big. And so it was just before then that was the first time Richard and I took any outside capital. So a dear friend of ours, Danny Stein came to us. We had worked up with something on, with him before, and he had set up, uh, a new, uh, I don't know, private equity. I don't know what, how you classify them at the time.

I think they were private equity. Um, and said, you know, we know iTunes is coming. We know how bad you are financially. Cause he was a friend. Like we know what the situation is. Um, now's the time you need growth equity, growth capital, because, uh, because the point is you, he's, he knew our journey from 95. He's like, you guys have worked so fucking hard. Itunes is going to launch and you're going to get your first competitor, your first real competitor.

And they're going to come in fully funded, no skeletons in the closet. And they're just going to just wipe you away. And all that work was for nothing. It was quite a compelling argument. He made, and I was like, yes. So we sold them, sold them a big chunk of the company so that one, I could clear out the $3 million in debt. And two, we could have the growth capital to get one step ahead of this, our, what was going to be our emerging competition. It was, it was, could have been one of the smartest moves I ever made, um, to keep that company then to, to scale it.

Yeah. And, and then the other thing brought, you know, what, what was amazing was then he brought in and, and his partner was, uh, Joe Sandberg. Um, and what, what Danny and Joe did was then bring in professionals to, to augment it because Richard and I were scrappy entrepreneurs and that's like, Hey, let's bring in people that know how to fucking run a company. You know, we, you know, we got Greg Scholl was one of our early people. Like get people that know how to do this shit.

Like not. Yeah. You're good at survival, but let's maybe there's people that went to a Harvard university, for example, and actually know how to do it at this stage. And so I was like, yeah, that's a great idea. Let me, let me ask you some question about that. Uh, because, you know, at least from, from here, it sounds like quite a unique thing because you, you have been struggling and in your own words, losing for eight years. And still there's this investor that says, in spite of all of that, I'm going to bet my money on you guys, that is not a small risk to take.

What, what was it about your relationship and his trust in you that made that happen? It's funny. Cause now, now that I think about it now, cause you're the first person ever asked anything remotely like that. I always took it for granted. I never thought it was a risk from Danny and Joe. Um, uh, but yeah, they, they believed, they believed in the, in, in our vision. They believed in, you know, the overall space. They too knew what was happening with iTunes and the size of our catalog and our positioning.

Um, yeah, I, I mean, it, it's interesting that maybe another way to phrase that is when we talk about risk, um, people are often talking about the investors risking and I don't believe they're risking at all. Um, if an investor puts in money, if you're a VC or private equity and you're investing in something and the investment doesn't work out, do you lose your home?

Do you not go to a nice dinner that night? They're not risking anything. This is their extra money. They haven't risked anything. The people risking are the people like me living in the, on the floor of the office, the people that are employees of a startup. You want to talk about risk. If the startup doesn't work, they lose their, their job and they can't pay their rent or their mortgage. They, you know, if they're American, they can't pay for their healthcare. I mean, like you want to talk about risk.

Yeah. How about work at a startup? Not invest in a startup is not risky. Wow. It's not risky. That's amazing perspective. I haven't, I haven't actually had it. I asked a question you haven't had before. I haven't had that answer before. So thank you so much for that. Yeah. No, it's, it's that again, I get that they're putting up capital and I get it, but they're putting up capital to lots of companies with the expectation that some of that most of them won't even succeed. They, they have a portfolio business and they put up money that they can afford to put up.

It doesn't impact their lives. If it pays off, their lifestyle gets better. If it doesn't pay off, their lifestyle stays the same. Hmm. So, so based on your answer, I'm going to interpret a bit. The reason why they invested was because they saw these founders are not going to give up and the time is right. And the combination of those two made them believe it was a good investment. Yeah. I think that's it. And we, we had de-risked a lot of it.

Hmm. We de-risked it because the time is right. And during the time getting up to that point, we had been building things. We haven't been building wealth, but we've been building a catalog. We've been building relationships. We were known in the industry. Everyone knew who we were in the industry. Again, you know, we're not a consumer brand, but everyone in the music business absolutely knew who the orchard was. Hmm. Amazing. Scale, scale. That happened. Um. Yeah. And the scale part, and I don't mean to diminish it, but the reason why we thought it was great to bring in outside people and totally supported our new kind of investors, owners.

I don't know what, what you want to call them, but, but the reason we supported it was because at that point, that's just kind of math. That's a spreadsheet. Like it, I'm not, I don't want to diminish the work because I'm in no way should this sound like I'm diminishing it, but that's something you can learn in school and you can apply it. Yeah. The other stuff is should they don't teach you. Yeah. They're not teaching you in your MBA program what we went through.

And that's one of the reasons why we have this podcast, because how the fuck do you get to know that? Um, so hopefully it's through examples and doing it yourself. Yeah. And, you know, I, I think, I think, you know, what, listen, it sounds like I'm against things and I'm not, I'm just trying to, to juxtapose these, you know, what you learn in business school as an MBA is so valuable, but there's certain, there's certain assumptions that where you're stepping in, you know, and, you know, the things you learn, you know, like write a business plan and a financial model to me, I think it's the worst thing you can do.

The worst thing you can do as an entrepreneur is write a fucking business plan for two reasons. One, because it boxes you in, you need to start doing it to figure out what you, whatever your initial hypothesis is, won't be a hundred percent. So you start doing whatever it is and learning as you go. The other is if you actually did a proper business plan with a financial model, you would recognize there's no fucking way this is going to work.

I'm sorry. Like, like you would just run the other direction. Like if I modeled this out and go, okay, where are we? And like in 1995 is like, no way am I doing this? No way. So you need this kind of naive, naivety to go into and go, this is going to be amazing. Sure. It'll be great. And we'll start, just go do it. Yeah. There's a time for the business plan and the financial model, by the way, it's, it, it's just not on day one or negative one.

Yeah. It's when you're working, there's a point you have to go like, God, I need to budget this out. Like how much are we spending a month? How much do we actually make? Yeah. But you, by the time you do that, you got to be into it. Yeah. You got to be committed. So like, whatever the numbers show, there's no going back because you're in. Yeah. But if you start, you'd never start. Yeah. Scott, at one point, you sell the company. Um, I want to understand. You say at one point, but at three points.

At three points. That's true. That's very true. Let's go through those three points. What, at what time was it? What happened? Again, after the first go around, the timing gets very hazy for me. Yeah. So, so it was to Danny Stein and, and Joe Sandberg, dimensional associates. And then, then if anything, Richard and I were just like, um, how do you put it?

We, we were, there were other people now in the company operating. We paid off all our bills. We had a little money in our pocket. Life is good. Um, they were the ones that ultimately drove the next two exits in, in two tranches to Sony. Uh, and we were, you know, we would just be beneficiaries along the way. Yeah. Um, which was actually a very liberating place to be.

Yeah. Again, there, there is a level of, you just get there and you can, you can go now, it's somebody else's problem. You put the money in, you figure out how you're going to get your money out. You know? And then when the money comes out, it's like, you know, whatever. What there were, you know what, I don't remember at what point, but, but there was a point when I had zero equity left in the company, zero, none of it. And so I was just there and it was wonderful. And they paid me a lovely salary.

And mostly I was just going around to travel at conferences and evangelize, speak to people, take meetings. It was great. It was a lovely life, but I, but then ultimately I got bored of that. I have to say. So then, cause then I wasn't building anymore. Then it's just kind of coasting on your past, which isn't, which isn't interesting anymore. It's, it's almost like I understand when artists that have a hit in the sixties or seventies and are like, Hey, play the hit at the concerts. Like, no, thanks.

Been doing that for 20 years, 30 years. I'm tired of it. Um, so, so there was a level of, yeah, I mean, done this. Like there's nothing more to do. I mean, we, Richard and I solved these problems in the nineties. Yeah. We were just waiting for things to catch up and then, then just execute to a plan. Um, so. This is very interesting. And this is, this sort of informing the last five, six, seven years of, of your time now.

Uh, but before we get there, I just want to ask you questions. You said at one point, um, you're at 0% equity. Was that at the, the first Sony buyout or was the second, what sort of happened there? There was a lot of different things happening there. There were at one point trying to think what year that was could have been 2009. We backed into a public company. There was another company we bought. There was a competitor and then the market crashed. So I could, I don't know. I, it's all, it's funny. It's all very hazy to me and almost, and I know it's the whole point of your, your podcast and the exit, but to me, it was almost the least interesting.

Write me a check or don't write me a check. The work's been done and the work's been done. I feel more like an artist that recorded an album 20 years ago. And then you get a royalty check. How did he get it? I don't know. They got to sing the guts, you know, like, I don't, I don't know. I don't care. Just write me the check. No, not that they don't care about the orchard. Cause I actually, you know, love the orchard. And I'm very close with the people there and Richard and I are still close. And when I'm in New York, I pop by the office and I see them and I, I love the people there.

And Brad and Colleen run the company these days and they're just amazing. But the finance part, the financial part about it, I gave that up a long, long time ago. And that's my point. What, once that, that transaction happened with dimensional right before the iTunes launch, I was out and mentally like anything that happened after that, what paper do I need to sign? It's amazing.

Okay, Scott. So for the last 10 minutes of the podcast, we're going to talk about sort of, you know, the last five, six, seven years you've had. One of the questions I've had going into this podcast is like, how in the world did you transition from the orchard to chief innovation officer of Warner? What was the, what was like, how did you make that transition? And my interpretation based on what you said is, you had a lot of time to think. You had a lot of time to, to put your energy into new stuff and imagine stuff. Is that what happened? That's a lot. So, so if I said I was always on top of what was happening in the nineties, in terms of technology, that never stopped, that continued.

I was always interested in what's next. How could the music industry leverage this? You know, because even, you know, it sounds so obvious now, but social media, it wasn't meant for the music industry, but it was how could, how could the industry leverage my space? You know, think way back then to Facebook and Insta and Tik Tok, like, so I, and then it was blockchain and, and web three and, and AI and AR and VR and the metaverse.

Like, so I'm always interested in what's next and how the music industry will play in that. And I was kind of done with the orchard in the nicest way done. Like, like I said, the, the hard work had been done a long time ago and I didn't want to, I didn't want to be somebody coasting on the past and I announced my retirement. Um, and, and then in the interim, I was talking to the CEO of Warner music group and he asked me what I was doing and I don't know when we're talking about the future and then, I don't know, I, it would all just kind of happen.

And one thing led to another. And I retired from the orchard on February 1st, which was a Friday, 2019, and then took the weekend off. And then that Monday I was sitting in Warner music groups offices as the chief innovation officer, kind of trying to say, if I could take something from nothing, could I take something that's already worth billions of dollars and, and help them chart the future of that organization? Um, because, because you could see what was on the horizon, you know, growth of Spotify, for instance, growth of tick tock.

That's what, but could you look over the horizon? Yeah. What's beyond that, that we see what's over the horizon. That, that was an interesting challenge for me. And with that said, I don't think I necessarily succeeded at that challenge at Warner. It was probably my, if anything, that was probably my biggest failure. I mean, I try, I don't know how they perceive it. Um, but I perceived it. Like I didn't get in what I didn't accomplish what I had hoped to accomplish there. Cause I knew what to do, how to do it, how much it would cost, who could do it, all that.

And then I got mired in the large corporate politics. It's not about Warner's large organizations like, oh, you can't just do what you want to do. No, you gotta like go through committees and approvals. And what, what would be so simple is now taking nine months. And finally, everyone's like, okay, we're going to do this project. Yeah. Everyone's agreed. We're going to do the project. We have the budget. We know who's going to do it in the great. We can put it in next year's official budget.

Now you know what it is. Then you can get it approved for next year and you can launch it in another. And like, oh my God, you're saying I just spent nine months to do this, but we can't actually do it for another year after this. It's like not how I was used to operating. And we don't need to dwell too much on that because, uh, I want to spend some time on what's happening now. After Warner, uh, you believed, uh, you failed, uh, it, but for me, it just sounds like, uh, a founder entrepreneur spirit, not maybe necessarily put in the right space to thrive.

Uh, and as far as I've also understood, you were planning on retiring then, but then, uh, the spirit of entrepreneurship caught up with you. What happened? Yeah. Um, again, another opportunity, it, it truly, it's, it, it is, uh, from entrepreneur's mind, like you see it and you, you can't control yourself. Um, and so the opportunity was to create a new, um, layer of revenue of opportunity for the music industry.

You know, as I said earlier, I'm not believer in disruptive technologies or disruptive companies. Um, I like enabling companies that enable the industry to, to grow bigger. And I, I love the music industry. I've been in the music industry most of my adult life. So I love the industry. I don't want to disrupt it. I want to say, wait a minute, how can we do something that the major labels benefit, the independent labels benefit, the DIY benefits. And matter of fact, in order for us to succeed, they have to, they have to succeed as does Instagram, Facebook, TikTok, YouTube, Spotify, Apple music, Amazon. Like how do we have the whole industry succeed? Because you know, you, you can imagine in order for Spotify to succeed, iTunes had to die. You know, it, it replaced something. It would, it, this is, I don't, what, what I'm doing now doesn't replace anything. It adds a layer on top while everything else still stays in place.

And that is opening up investment in music rights to private investors. Yeah. So, so lots of people have read about all these deals where people are buying music rights, you know, Justin Bieber and Bruce Springsteen and Fleetwood Mac and, you know, all, all kinds of rights being sold. But I realized that, that essentially there's a couple of dozen companies that are the only ones that get to participate in that. So how could we allow the fans, the very people that made these artists famous and just regular people, what are called retail investors, how could we give them an opportunity to also share in the wealth and so, you know, if, if I think about it, as I'm talking to you, I'm, I'm talking to you on my Mac book, which I wouldn't want you to confuse with this Mac book because I keep my personal Mac book next to me.

And then I have my iPhone here, which is very similar to these other two iPhones that one's my personal one and one's for us, but I'll often take notes on my iPad right here. You could, you could make an argument that I'm a bit of a fan boy of Apple, right? I mean, this close to being a fan boy of Apple, like I'm a consumer of Apple products. I spend a lot of money on Apple products every year, get the new iPhone every time they release a new one. So, so that's, that, that's me, but I'm also an investor. I still own shares in Apple. Like I'm not a sophisticated investor, you know, in terms of like, what's the price to earnings ratio.

And let me, let me crunch the numbers. I'm like, I should own some shares in Apple. You know, when I say to my, my accountant, like, get me some shares in Apple. Oh, it's already in your portfolio. I know. I know. I want extra. How much? I don't know. Just make sure I have extra for no other reason than I believe in it. But when I think about music, it's still really one way traffic. You know, some, an artist puts out music and you stream it online, you go to some concerts, you buy some merch, you get the vinyl and that's the end of it. But what would it look, that relationship look like if you could also be an investor, if you could also invest in the very music that you helped to make famous. And so, so what we do is we work with the large rights holders, those that own the copyrights and, and they still own the copyrights. What we ask them to do is to sell to an issuer company. We ask them to sell to an issuer company, a portion of the income

streams. That issuer company buys some of the income, let's say 10% of the income of a song, buys it, takes it to the SEC to get qualified. And when it comes back, they've converted the income streams of hit songs into regulated securities. And those regulated securities are then listed on the two bucks platform. So the same way that you could buy 10 shares of, of Apple stock or Microsoft, you could buy 10 shares or a hundred shares of a hit song.

This is amazing. And for people, I mentioned at the start of the podcast, I had a company that at least recognized like this could be a thing. And we met at Eurasonic 15 months ago, we've also met before that, where you had to talk about jukebox, where you had to talk about this thing. And I remember in the room and I was, I was almost fainting. I was like, what is happening right now? And I remember sitting in the front row and you talked about, for example, um, sort of, um, the odds is being paid, uh, through a part of this thing. And I, I just started clapping. And I remember I was the only person in the room and he said from stage, okay, this guy's the only one who gets it maybe. Um, because it is so important, sort of the, the underlying philosophies you have on this. And, and for the audience listening, this is not nothing. Like this is tracks by Beyonce, Taylor Swift. This is huge songs, huge assets that you list for fans to invest in. Yeah. And what we do remember, they're not, they're often the ones that

don't own those songs. Somebody else owns it. And so we established this creator, um, program where even though we don't have a contractual obligation to pay the artist, the songwriters or the recording artists and, and there's no royalty. Like we're not playing music. We still thought they need to get paid too. So we created this pool of money that, that we divide up between the creators because without the creators there, there's no music. And without music, there's no music industry, without music industry, there's no music investing. So yeah, we need to always take care of the, the creators. And so I think it's fundamental to our business and I couldn't imagine doing it any other way. Scott, for me as an entrepreneur, you doing something very important that maybe is not spoken about as much in public. There was this research project where I was a participant where they interviewed me about investing in music and in companies. And one of the arguments I had is I

believe historically speaking, music is undervalued, uh, from a consumer side, you know, it's people just don't pay a lot for it. And, and changing the narrative towards what is music worth is very important for the startup ecosystem because you have investors that through their own behavioral finance approach, value music is some emotional level that also affects the willingness to put in capital. What you're doing now is you are giving different ways for investors to understand the value of music, which is absolutely essential to not only, you know, build a company yourself, but stand in the forefront of the music industry, the music tech industry and saying, Hey, what we're working with is worth a heck a lot of money. And I think it's important. And actually to end the episode, that's where I'm going to leave it. I'm going to thank you for doing that because now when I'm getting in money to the company, to, to portfolio companies that I work with, I can show to jukebooks and say, this is at the end product, even at a retail investor level, this is worth a lot of money.

Yeah. And, and I know you're trying to end it. I'll, I'll go one more minute. I know you're like, okay, get this guy off, give him the hook, but, and, and for those people listening that you can tune out now, but the, the undervaluing of music is really odd because in the digital age, you know, as we transitioned from the physical to the digital, everyone was like, music has value and you've got to pay for music. Cause you know, people were stealing from Napster. I was like, you got to pay for it as value. And what value did they assign to music? 99 cents.

Like, are you kidding me? You know? So the, a pack of chewing gum costs more than, than music. You're saying, I think we've been historically undervaluing music and I think we continue to do it. You know, if, if I think about passions that people have, you know, music quite ubiquitous, let's look at other things, you know, people like, I don't know, they like yoga. Do you know how much somebody spends on yoga? If they're a fan of yoga, yoga classes, the spandex pants, the, you know, get a mat and a couple of blocks and, oh, let's go on a yoga retreat. They spend thousands and thousands a year. If you're a fan of music, like you don't spend that. Think about skiing, something I took up late in life just a few years ago. Like, holy crap, is skiing expensive? Like, you don't have to be a fan of skiing. You just go, I'm going to go away for a week of skiing. Thousands of dollars just in that week. You have to get a hotel. You have to fly there. You got to rent the gear and you

get in the classes, instructors. Like it is so crazy expensive. It's not something you have to love. It's just like something you do. And then music, which is part of your life. You go, okay, I'm a super fan of music. And you go, great. How much do you spend? Well, $10 a month on a music subscription. It's 120 bucks. Go to a couple of concerts, bought some merch and a piece of vinyl. Like super fans are spending $500. Like five to get a super fan to spend a thousand a year.

Like we're talking about what other people spend their money on is, is multiples above that. Music is so wildly undervalued. There's so much headroom for how we're going to grow this. Jukebox is just one of the ways that we're going to go, we'll show you there's more value. There's a lot more value to music. Um, both, both intrinsic and extrinsic, you know, both there is money to be made and everyone in the ecosystem will make more, including the fans.

That, um, thank you preacher. Uh, I'm going to take that message with me. And no, I, I believe, you know, I'm, I'm 30 years old, Scott. Uh, I have a long career ahead of me. And if there's one thing I believe in, then that's it, then that's it. So, so thank you for doing your part. Thank you for being on the podcast. Thank you for being honest. Thank you for sharing. Excellent. Have a great day.