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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Ed Aten of Merchbar on Building the Leading Music Merchandise eCommerce

Posted on: 12/16/2016

Ed Aten

Ed Aten

Founder & CEO

Ed Aten of Merchbar - Podcast Summary

Ed Aten of Merchar shares his experiences building the leading ecommerce site for all things music merchandise. Merchbar has been featured in the iTunes Appstore 20+ times because it greatly simplifies buying your favorite bands t-shirts, albums and other gear.

Ed Aten of Merchbar - Podcast Transcript

Scott Orn: Welcome Ed Aten to the podcast.
Ed Aten: Yes. What’s up?
Scott Orn: Our second episode.
Ed Aten: Episode 2.
Scott Orn: Super excited for you to join. Now for folks …
Ed Aten: Scott hang on. Is this going to be closer to like the second Star Wars that was good? I mean could we call this Episode 5? Is that okay with you?
Scott Orn: Did you just call Empire Strikes Back good? Empire Strikes Back is probably one of the best movies of all time.
Ed Aten: Alright good. As long as we’re not what is it? It’s not the Phantom Menace. But as long as we’re not the new stuff. Can we be Episode 5? Is that okay?
Scott Orn: As far as I’m concerned, those movies don’t exist.
Ed Aten: Okay good. Good. We’re on the same page here.
Scott Orn:  
Star Wars: Empire Strikes Back. Return of the Jedi. That’s all that matters.
Ed Aten: The fifth podcast.
Scott Orn: Alright man. Thanks for joining. So we’ve been friends for a long time. I’m a huge fan of your company. I love what you’re doing and I want to have you on and I was kind of planning on having you on over the next couple of months but you had a big announcement early in the week and necessitated an emergency podcast here.
Ed Aten: Emergency podcast.
Scott Orn: For the audience, they may not know. I am one of the biggest Pearl Jam fans of all time and Ed did something amazing.
Ed Aten: Yeah. We signed Pearl Jam this week. Launched them on the platform, all their merchandise. Big partnership with the Ten Club. Awesome to work with those guys.
Scott Orn: I couldn’t believe it. I turned on my Facebook. Now it’s probably helpful. Let’s kind of take a step back and we’ll get to Pearl Jam. Tell me about Merchbar. Like what do you guys do? How did you have the idea?
Ed Aten: Yeah. So we’re the online retailer for music merchandise. We’re the one place to find and discover merch from all your favorite bands, right? So merch can be anything. Any physical good. Obviously like the classic things like t-shirts, hats, posters. But limited edition weird stuff, right? We have pinball machines. We have …
Scott Orn: Pinball machines. Wow.
Ed Aten: We have a $30,000 pinball machine. We haven’t sold one yet. But fingers crossed. I told the team if we sell a pinball machine, we’ll get one for the office.
Scott Orn: Do not tell my Dad that because my Dad collects pinball machines. What’s the band for the pinball machine?
Ed Aten: The Rolling Stones.
Scott Orn: Oh no.
Ed Aten: Yeah. The Stones pinball machine.
Scott Orn: I don’t think my Dad has $30,000 laying around but if he did, he’d probably want to buy that pinball machine.
Ed Aten: Amazing. I’m totally in. And you know what, if it’s for your Dad, I’ll throw in free shipping on that. Which is not insignificant. So we do that and we do it for like every band hopefully in the world, right? Any band that has merchandise. So everyone from The Rolling Stones and Led Zeppelin and Pearl Jam to like the Justin Biebers, Lady Gagas and then like the whole other tier of like you know, hip cool bands. Chvrches, Phosphorescent, Dirty Heads, people like that.
Scott Orn: So is it kind of fair to say, I think it’s an achievement by the way that you have everybody. Like pretty damn close to everybody in the music industry.
Ed Aten: Yeah. We are pretty damn close.
Scott Orn: That’s amazing.
Ed Aten: That’s the technical … yeah. When we sit down with MBA’s, we put it on the PowerPoint. It says, pretty damn close to everyone.
Scott Orn: Okay. So just to take a step back like you basically have an app or an e-commerce site and the super famous artists like Pearl Jam or Lady Gaga’s like, hey, I can sell a lot more merchandise if my stuff’s actually on a site that has a good shopping experience. That’s beautiful.
Ed Aten: I think that’s kind of the way it manifests itself to the end-user. The way things are set-up like in the industry is actually like very different than that, right? The music industry in many ways is super opaque and the way that like these things work is just very different, right? These artists for the most part really with Pearl Jam being a notable exception, they sign deals with merchandise companies. So they do a deal just kind of like a major deal with a label, right? Where they go in for a certain amount of time whether it’s a tour or an album release. That company will actually manufacture and represent them by the rights to their likeness and work with them to actually manufacture and distribute the merchandise. So a lot of our deals are actually with the merch companies which are companies you know, right? Warner, Sony, Live Nation, Universal, things like that. And then you know, the artist work with them and we all end up working together in kind of like a tripartite deal. With Pearl Jam being a notable exception. Those guys are on their own kind of wavelength. They have their own entire team that’s at the top of their games. We work directly with those guys for that one.
Scott Orn: That’s awesome. And so like when you had the idea, I remember you giving me the pitch. We went to concerts together. I went to a lot of concerts. I remember you kind of saying like, isn’t it crazy that at the end of a concert you have to stand in line and with like 20 or 30 people in front of you and you can never buy the tshirt you want to buy? That was like the amazing jump for me. I was like, yeah. Why is that? Like why I can’t I ever buy the concert t-shirt I want to buy?
Ed Aten: Well I mean if you like when I chop it up in terms of retail, you’re talking about a store that is open in one city at a time for roughly like an hour and a half. I mean that’s like the worst store you could possibly make, right? It’s temporary. It always has products that are out of stock and oh yeah, it’s like in the middle, at the time that it’s actually open, it’s in the middle of the time you want to be doing something else that you’re probably paid hundreds of dollars to do. So I mean we just thought about this and said, this is crazy. And you know, I think there’s still going to be a lot of people that buy things at shows. I think there’s still going to be a lot of great commerce that happens there. I think by the way, there’s a lot of things we can do to make it better but you know, the fundamental idea of like this is your only opportunity to get the shirt, like okay honey, like you stay here and guard our spot on the floor. I’m going to go stand in line for 20 minutes and hope that they have a large in stock. We put people on the moon. We can solve this problem Scott. We can solve it.
Scott Orn: Yeah it’s crazy. It’s like when you say like you want to be doing something else, you want to be drinking a beer, maybe you’re tired, maybe the finale blew your mind and you got to get home or relieve the babysitter. Whatever it is.
Ed Aten: Maybe you’re just trying to keep your shit together, right? Maybe you had a big show and you’re just trying to keep it together.
Scott Orn: That is very very true. So where are you guys as a company? Like what’s your stage? How you’re doing? Obviously you signed Pearl Jam but like …
Ed Aten: Yeah. Yes. We’ve … you know, it’s interesting. This is a different kind of company than a lot of companies in the valley right? We have really serious intellectual property and property rights owners that we’re working with. So it took us a long time to actually get out to market, right? The company’s now been in the market for almost 9 months at this point but we’ve been working on the company now for over 2 ½ years.
Scott Orn: Wow. I can’t believe it’s been that long. That’s crazy.
Ed Aten: It’s unbelievable but that’s how long it takes. One of the big benefits that we have is that we do have roughly everyone, right? We’re still adding more people all the time. We’re going to have another huge chunk of artists coming on next month which is going to be really exciting. Maybe we can be back for Episode 85 at that point to talk about that. But it takes a long time to get these deals done. A long time to get these integrations done which in many ways is a huge investment but it’s also a huge advantage, right? I mean it’s very tough if you’re going to try to come and do the exact same thing we are. So we’re out there. It’s been 9 months and it’s been fantastic. I mean at this point, we’ve had our app featured by Apple. Something like 10, 11, 12 times which is just amazing. I mean it’s like your dream. Like I’m a designer beyond being a CEO so to have that kind validation is fantastic. And then it’s just same same. We just keep growing every month, right? I mean it’s just … it’s what you dream of and it’s great to see customers responding. You know, when you’re a new company, when you’re new e-commerce company, getting those first customers, coming back with their repeat purchases, people like emailing support that they were told about you by their friends. Those are the things that are just tremendously validating and fun especially after you worked on this like in the closet for 2 years not being able to tell anyone. So yeah. It’s great time for the company.
Scott Orn: So you said two really interesting things there. You kind of dove into. Let’s make sure we come back to the second one. The first one was you’ve been featured in the App Store like 12 times.
Ed Aten: Mm-hmm.
Scott Orn: Which I saw from your Facebook feed and I was like, holy cow. That’s freaking crazy. How … like there’s tons of entrepreneurs listening to this. Like how do you do that?
Ed Aten: Other than being Steve Jobs’ illegitimate child …
Scott Orn: That worked out well for you.
Ed Aten: Yeah. You know, I think there’s a lot to this and it’s something that was very … this was not an accident. I mean in many way it was not an accident, right? And I think that the big takeaway that I’d say is, number 1 is, the App Store even though it’s this massive thing, it’s run by people and it’s run by a pretty small group of people that are really interested and interesting. So we spent a lot of time figuring out who the right person was to talk to and getting the right introduction to them. I think one of the things that we’ve done really well not just in kind of the Apple world but all around is you know, business development and partnerships and things like that. And really understanding the right person and the right way to get to that person and we spent an inordinate and obscene amount of time trying to figure out who to talk to and the right intro to them.
Scott Orn: Is this like LinkedIn stalking? Is this like hanging out in the Apple cafeteria? Like how do you do this?
Ed Aten: Oh this is basically doing a network map of every single person we know whose had an app that’s been featured in the App Store and talking to them about who they talked to to get like a layout of what the team looks like and then working with them to see like what their relationships are with these people and figuring out like what the right way to get connected with them is. And it wasn’t easy by the way. I mean when we launched, we were not featured. It was only after our second update. So I think number 1 is, it is one of those things where if you go to the wrong person in the wrong way, I mean it’s a pretty small team. You can just be with the wrong person and you can have a great app and it could just not get in the right hands and they have so much volume. It’s not an issue of like turf war. It’s just an issue of like we’re talking about like a very small team that’s literally dealing with like hundreds of thousands of apps. So you just got to get it in front of the right person at the right time. The other thing is, and this is like really simple but it’s always surprising to people I think when we talk about it so directly, is Apple really cares about Apple. And they want to support their ecosystem, right? I mean one of the big pitches that Apple has and has always had is this is like a close system that works. So the more things you’re doing that support their bigger goal, the better off you’re going to be, right? So if you’re just doing like Vanilla stuff that could work on any platform, that doesn’t integrate any of the things they’re doing, it’s probably going to be less compelling to them than like for example we were one of the very first companies to integrate Apple Pay. We integrated Apple Pay because I mean by the way, we love Apple Pay. We were the first people to share numbers about it. It was unbelievable you know, Tim Cook’s up during you know, WWDC and he’s actually showing like the 2x conversion rates. We were the first people to like share that number, right? I mean we’re big believers in Apple Pay ourselves just from the get-go. But doing things like that, that support their goals, I think that’s going to resonate with them and the good news is, I think a lot of those things are going to help you anyway. So you should think about doing them already. That’s how we think about it.
Scott Orn: You said something which I think is really wise which is, you weren’t featured right away. And I think a lot of times, people have like they look at it and they’re like, there’s the magic pill like I will build my app and then I will get featured in the App Store. That doesn’t happen. That’s not like how life works. One of the reasons I’m super proud of you is like you built this app and you iterated many many times to get to something beautiful, to get to something that works, to get to something people really love. That’s when you started getting featured. It wasn’t like, hey I got an MVP out there and Apple’s going to feature it, right? It’s like the real deal and you worked to get to an app that was good enough to be featured.
Ed Aten: Yeah. I mean we’re talking about Apple here, right? I mean their bar, their baseline is very high. And you know, but they also like … they really want you to do great stuff. I mean so I guess I won’t go super deep into it because I’m not … they’re pretty like serious about what should stay in their like developer world versus like the general public but I mean I’ll say, they were directly helpful to us in making the app better between the first and second half. And I think that’s a huge benefit. There’s a lot of resources out there from Apple themselves and in the Apple community that if you like just dig in a little bit past the surface, they’re interested in helping you. So I would definitely encourage people to do that as well. I mean if you have something that you think is working but you’re not exactly sure what, there’s a bunch of resources out there that you can dig into that will help you take it to the next level.
Scott Orn: And I think so like just to recap a little bit, like you made a great point that Apple is really people. And the people behind the iTunes Store are really people who love their job, who want to promote really great apps and being creative and figuring out how to reach them and bring something to them that’s really interesting is kind of your first jump and then the second jump is like building something awesome. Not just kind of slacking it, throwing it out there. And then thirdly, making sure it’s consistent with Apple’s ecosystem. Like something that works for them that they want to promote.
Ed Aten: Yup.
Scott Orn: I like that a lot. And secondly, I want to come back to this. You talked a lot about business development and most consumer startups don’t ever have to deal with business development. Like they don’t it. So you typically see business development people in enterprise companies where they’re trying to do a partnership with Salesforce or Google or Microsoft, whatever. Can you talk a little bit about that? Like what works for you on the business development side? Because at some level, you’ve got like this consumerfacing business, the frontend. And then but to get supply, you’re almost like a marketplace. To get supply, you have to deal with all these crazy big business development deals. How did you do that? How did you know how to do that? Who helped you do that?
Ed Aten: Yeah. The insight or the … maybe not the insight. The horrific experience that informed this decision was my first startup. I had this startup called Swift.fm which I actually realized last night. I should try to sell that to Taylor Swift. So Taylor if you’re listening to this podcast, I’ve got a great domain for you. If you’re not going to be on Apple Music, if you’re not going to be on Spotify, you should start Swift.fm. I’ve got it right here. Like we could work something out.
Scott Orn: And the good news is I can confirm she’s a listener.
Ed Aten: Perfect.
Scott Orn: Just shoot me an email and …
Ed Aten: Scott will connect us. He’s got my number. But you know, working through that, we were basically a social network for music. We were a lot like what Sound Cloud is today but this is now like 4 or 5 years ago. And we saw luckily not super first hand but close enough how fuckin’ serious it is to like play by the rules of the IP owners. You know, I think that there’s … if I’m just being candid, you know, there is a group of people at the labels and I’m actually pretty supportive of the labels overall. And especially for someone in tech, I mean people would call me, they probably say bad things about me about how much I really deeply think the labels provide value. Obviously they have problems but I think there’s a lot of good things they do too. There are groups of people in those organizations that are lawyers that are really in business development. They are out to like find people that are infringing on their materials and get money from them.
Scott Orn: Kind of like the original patent troll style.
Ed Aten: Yeah. Okay. Alright.
Scott Orn: By the way, I’m not afraid to go there. One of my friends works for Napster back in the day and he’s like, I’m going to butcher this quote but he’s like, the music labels are run by evil lawyers who just want to screw you. He’s like, you don’t think there’s evil people out there but there’s evil people out there.
Ed Aten: So okay, this is really easy to say when you are stealing people’s shit.
Scott Orn: That’s true. By the way, that’s true. He will readily admit that they were taking liberties.
Ed Aten: Yeah. I mean that’s not taking liberties. Like the thing that I will say, I have empathy for the labels that almost no one else does is to them, it was very black and white. And these are people that like, oh you know, you too, okay. I’m going to give you $10 million upfront. I write the check and sliding it across the table and then other people are stealing that stuff.
Scott Orn: That’s a great point.
Ed Aten: They could’ve handled it in a different way obviously but I think there is some irrational response that gets part of this because it’s emotional to people when they feel like they’re being stolen from.
Scott Orn: That’s also their jobs right? I mean if their businesses are not viable because of stolen music, those guys have to find another job. That’s not easy for them to do.
Ed Aten: Yeah. I think absolutely and beyond that, I mean there’s also like a culture difference between the music industry and Silicon Valley that people here maybe take things very personally when on the other side, they’re like screaming and then hanging up the phone and just going to lunch and not thinking about it again. I don’t know if you like ordered a sandwich in New York but like people here apparently they just have no clue. This is just kind of how people are. I said no fucking tomatoes! And then someone’s on the phone like being pissed about someone stealing the Beatles catalogue from them. Yeah of course you’re going to have like a culture clash here.
Scott Orn: It’s basically the equivalent of someone in San Francisco using the wrong emoji or something like that. Or a mean emoji.
Ed Aten: Yeah.
Scott Orn: That’s the equivalent of the yelling over the tomatoes in your sandwich.
Ed Aten: Exactly. Exactly. So you know, I think that that insight of like okay, there are rights holders here that are not going to go away. I’m actually pretty bullish on the music industry overall. I was talking to my co-worker Aston about this. There’s a lot of industries that like don’t exist anymore. Like the internet’s actually killed … like actually killed them. Like there are empty warehouses, empty buildings, like Kodak is now a song by Paul Simon. Like it’s not a thing anymore. But the music industry’s still there. I think that’s something that people forget. I think we realize like okay, the music industry’s going to stick around and we should work with them. And actually, before we even got to that point, it was like, there’s a lot of opportunity to bring these worlds together because the music industry is not going away and no one’s going to disintermediate the labels for at least a very very long time and we just said okay, what’s there? Honestly, we just spent a bunch of time playing with different things. Thinking about different ideas. And that’s really like how we ended up coming up with a product that we thought was beneficial to consumers and beneficial to the labels. I mean at the end of the day, we’re not … our pitch to them is not, oh we’re like going to help you deal with piracy. Our pitch is, everyone here is going to make more money. Fans are going to get things they want. They’re going to have a better experience.
Scott Orn: It’s an awesome point. Like I can buy the t-shirt I want to buy or the Band of Horses rare poster that I want.
Ed Aten: How’s your poster Scott?
Scott Orn: I love that poster. Thank you very much.
Ed Aten: Yes. Nailed it.
Scott Orn: By the way, that’s the kind of stuff available on Merchbar. It’s awesome. But like I can get … this stuff actually exists for me to buy and have in my house and make me feel good whereas like this if we destroy this industry, like what will we all listen to? I don’t know. I think this is actually a pretty good steady-state situation right now. Like the music labels are organized and strong enough to fight with the technology companies and the technology companies are strong and have enough money to build really great distribution but they can’t overwhelm the labels. Like Spotify needs the labels. Live Nation needs the labels. Merchbar in a sense needs the artist that’s represented by the labels.
Ed Aten: Absolutely. Absolutely.
Scott Orn: So I think it’s actually like a pretty good situation right now.
Ed Aten: Yeah. I mean you know, I think that … I think one of the deceptive things about music is people listen to their favorite album and they hear their favorite artist’s voice and there’s like this magical like personal connection, right? I mean that’s how almost everyone that works in music got into it because we love music. We love musicians. We like live for these experiences. And I think that that relationship is totally true and it’s totally legitimate but it’s easy to skip all the other things that go into that. Like your favorite Band of Horses poster, we have a team of people that like, oh it was shipped to the wrong address. You actually are going to want to talk to someone about that. That’s like actually a job and if I knew the Band of Horses lead singer’s name, but it’s like Tom York from Radiohead is not like emailing people back about like oh hey, like sorry that your new Radiohead shirt is late. You know, there was a problem with the post office in Chattanooga. I mean it’s just not happening. And there’s all these other things that go on behind the scenes like inventory planning, I mean on the merchandise side, I can go through all of them. Even on the label side right? Like figuring out like oh, this box is going to fit in like these shelves and this end cap is going to have this artist. I mean there’s actually a lot of work.
Scott Orn: It’s complicated stuff. Super complicated.
Ed Aten: It’s actual work that has to be done and I don’t know how many musicians you know but they’re not … you know, and we don’t want them doing that anyway.
Scott Orn: They’re not like reading Six Sigma books on how GE industrialized the world on their weekends.
Ed Aten: Exactly right. Exactly right.
Scott Orn: So dude, people may not understand how amazing your business development success has been like to get these big time artists is pretty amazing. Like just give us like the quick hits. Like what’s … how did you do this? What worked for you? Is it similar approach to like the App Store where you kind of like did some digging and figured out who the important people to talk to and figure out what appeal to them? Or like how did you do this? Because I think people can learn from this.
Ed Aten: Yeah. So one of the big lies that people outside of Silicon Valley or the people that are getting into Silicon Valley think or see or like you know, just like understand to be true even though it’s not is that things are fair, right? There’s this like idea that like oh if I build Instagram in like Dubuque, that like Instagram still would’ve been Instagram. But Instagram was Instagram because of like not just because it’s a great product and it’s a murderously amazing product but it also is what it is because you’re in San Francisco. You get like [inaudible 00:22:10] in the first day. You get M.G. Siegler on it the first day because you know these people because you’re in South Park because you were able to raise half a million dollars from injuries in Horowitz before you went live because you went to Stanford and you know these guys are you’re a product manager at Google. And I think one of the things that we did was we said you know, what are the things we can do that no one else can do? And there’s a lot of things … there’s a lot of opportunities out there that only you can do, right? I mean Mark Zuckerberg started Facebook at Harvard. Like how did friends to work out? People need to look to their origin story and say like, what are the things that this team can do that no one else can? And they can be different types of things. They don’t all have to be like white dudes at Stanford. But don’t try to have … don’t try to force your life into someone else’s origin story.
Scott Orn: Yes. Yes.
Ed Aten: So for us, we said okay, we … my co-founder and I John Hecker, between us, have like a unique set of backgrounds right? I’m a pretty like long-term nerdy tech guy. He is a big music guy. John signed Avril Lavigne on a publishing company for a while and this is going to connect a lot of dots to you really quickly. He was the first guy to sell merchandise in mass retail. Music merchandise. He did the initial deals to sell like The Rolling Stones and Kiss in K Mart and Sears, right?
Scott Orn: So like a merchandise lifer meets a … and I say that in a positive way. Meets a really smart tech guy who loves music but maybe his first music startup didn’t go so well because he had to deal with difficult IP owners.
Ed Aten: It went okay by the way. It went okay. The first startup went alright. It was good. Thanks Scott.
Scott Orn: I didn’t mean to throw you under the bus there. I know it went okay. Sorry. I mean it wasn’t like a billion dollar whatever. I wasn’t throwing you on under the bus. My point is, you two guys had really complementary skill sets. You saw the world the same way and you kind of recognize that you could work together and bring the best out of each other.
Ed Aten: Absolutely. And from there, what we did was we went and talked to people and listened really closely. I think aligning objectives is incredibly important. I think getting people marching in the same direction is you know, it’s a key thing. I mean there was a Jack Welch quote which I’m going to throw out for you because you’re an MBA and to all the nerds listening to the podcast that aren’t. Jack Welch, former CEO of GE actually wrote a bunch of great books. He was like, show me how someone’s paid and I’ll show you how they work.
Scott Orn: Totally.
Ed Aten: And we basically just like, how do we set this up that like everyone can win? And what is it that we really want to do here? And I think we went … one, we went to the right people because of John’s relationships. We’re able to work directly with the right people at these companies that were decision-makers. Two is we show them technology that they knew they cannot make themselves. Three, we set up business terms that were very low … little downside risk. A lot of upside for them.
Scott Orn: That’s a huge point. Huge point because sometimes entrepreneurs get in there and they’re like, they’re grabby. They’re trying to grab a lot of economics and they don’t understand that they’re working in someone else’s ecosystem and they’re a guest so to speak.
Ed Aten: So you said this earlier. This is e-com but it’s also a marketplace. It is … we look at it fundamentally as a marketplace that we’re performing like a retailer role and we spend a lot of time thinking about pricing that works for everyone right? And we really also set it up so that you know, for us to win, like for us to do what we want to do, for us to make a lot of money, this needs to be very big. So that’s another part of it. Bill Gurley’s like written about this pretty extensively and you know like, go check out his post that talk about like what’s the optimal pricing in a marketplace. Usually that’s not like 80% take rate.
Scott Orn: His article is like called Take Rates and it’s such an awesome point. Sometimes entrepreneurs get a little greedy and they don’t know and by the way, it’s best to start low and then just kind of work your way up over the years. Like eBay has increased their “take rate” like many many many times. You don’t start big. You start so that you can get in the business, provide a service that people like and have the suppliers, the customers, everyone kind of liking you and using your system.
Ed Aten: Yeah I mean I think we … I would say we look at it just slightly differently. We’re not looking for ways to just increase our rate going forward. We think there’s other services we can provide down the road. If we need more margin, there’s a lot of other things we can do down the road that are going to support the whole ecosystem and going to support our partners and going to support customers. So it’s not necessarily like the thin wedge of getting into business and then like when you have leverage, turning the screws on people but that as you get into business, there’s other things that you can do that add value that you should get paid for. If you’re adding value, you should get paid for that.
Scott Orn: Well you guys have so much information. That’s what I think is like kind of the amazing thing about your business like you know I bought that Band of Horses poster and you know I like Pearl Jam. You know what I’m searching for.
Ed Aten: I know where you live.
Scott Orn: That too. And if I can maybe buy concert tickets or something else from you like there’s a ton of stuff you guys can do. I think that’s a great point. Just to go back, you said something that I thought was really amazing. People need to listen. Listening provides huge benefits and so many times people are so fired up to tell their story or what … here’s how I’m going to take over the world or whatever. And sometimes they just talk too much. And they don’t listen to their partners.
Ed Aten: Alright. So I’ll give you the quick story here like how the company started because it was not my idea at all. So I’m doing Swift.fm, social network for music and it blows up in hip hop, right? It was actually, it was super fun. I got to meet a lot of my idols, right? The guys from A Tribe Called Quest, Heavy D, Questlove and The Roots were all like pretty big users. And part of the like virtues of that which people at home may not recognize is I am like a pretty short white dude and when you blow up in hip hop, you actually like and you start you know, meeting artists, go to things. I would spend like a decent amount of time at shows where I was the only white guy. So if you’re the only white guy at a show and you’re backstage, very obvious conclusion is this guy works for a record label.
Scott Orn: Oh I never thought about that.
Ed Aten: So I don’t work for a record label. But that did not stop me from getting a lot of demo CD’s. A lot of demo CD’s. So I’m getting all these CD’s and I have no way to listen to them because I have a MacBook Air. I don’t own a car. I mean I literally have no way to listen to this. And we said, you know what, I don’t know what I’m doing. We’d sold the last company and I was kind of between things and playing with a few different ideas. Made this super simple app for sharing music with people by hand like where you are. You and I are in the same room …
Scott Orn: I remember that. Yeah.
Ed Aten: I’ll just share a song with you right? We called it [inaudible 00:48:41]. It was super fun and it worked. I actually want to bring it back. If someone’s listening to this, please steal my idea and build it. I’m too busy. But it was really fun and it really worked. I’ll even send you all the wireframes and I’ll send you all the design assets.
Scott Orn: That’s how we met. We met when you were working on that.
Ed Aten: Yup. And so we did that. And I randomly was at a party. By the way, the moral of the story here is just party. That’s how we started this company. It was partying.
Scott Orn: Party, meet people and go backstage.
Ed Aten: I was at a Red Bull party for the Americas Cup and met the owner of the Cincinnati Reds. And in chatting with this guy and a couple of people that were with us at the time, he basically said, you know, I love what you’re doing. Like I love sharing music. I’ve done some stuff with bands. What if you use this to sell merchandise? Like what if instead of like when you’re at the show like an artist giving everyone a song, what if like it knows you’re at the show and you sell merchandise? And that’s when I realize, oh man. There’s a huge inefficiency … that’s really like when we started unpacking like the inefficiency of this and we started thinking about it in terms of sports and then realized this is in order of magnitude worse in music and well that’s where we’re from anyway, that’s the world we know. And it was after that that we actually went out and started trying to work on that idea. We built a company. We built a prototype. Raised a tiny bit of money and we’re out talking to some of the guys at the majors to work with them and one of the guys said to us, it was actually Joseph Bongiovi who was at AEG at the time. Jon’s cousin I think. Really amazing guy. Really amazing guy.
Scott Orn: Does he have Jon’s hair?
Ed Aten: Yeah.
Scott Orn: Oh.
Ed Aten: Really amazing guy like all around. You know we’re sitting there talking to him and we’re like, hey we want to work with a couple of artists. We want to support their tours like blah-blah-blah and he said, you know, I’m happy to do that. That’s great. I think there’s huge opportunity there. But why don’t I give you everything all the time? And why don’t you do that with everyone because there’s no one place to go to buy this stuff. Then we then took a step back again and said, okay, this is a huge opportunity and then you start like unpacking all the things you can do there and it was really going out, listening to that idea from him, going out talking to customers, talking to fans, talking to rabid fans, talking to intermediate fans, talking to like actual humans. This is like a thing we talk about all the time in the offices like actual humans. People that are not in San Francisco. And that’s really like that’s the genesis like how the company like really started moving and going on the direction that we’re at.
Scott Orn: So if I were to recap that, it was listening to a guy at a party who happened to be the owner of Cincinnati Reds who knows something about merchandise sales because that’s what sports teams do.
Ed Aten: Yup.
Scott Orn: And he kind of pointed you in the right direction a little bit and then that second meeting with Mr. Bongiovi, it sounds like he just kind of wanted you to take control because it made life easier for him and the revenue opportunity was there. Why do it for one band when you can just do it for all the bands he’s working with?
Ed Aten: Right. You know, I mean it’s really you know, it’s just funny. There’s big network effects here that come into play. That if your function in the industry is like buying rights and manufacturing things, it’s just a different thing. And you know, getting out there and especially these things that have you know, components that are B2B, it’s really hard to understand those people’s motivations without talking to them. It’s hard to understand what they’re focused on, what their priorities are, what they think is a priority and important but they don’t do themselves. These companies aren’t set-up to do these stuff. They’re not going to you know, start an organization of nerds in San Francisco like we are. It’s just a different thing. So you know, getting out there and learning and listening and you know, and candidly, one of the reasons we were able to do those because we were able to get those conversations because of John that other people weren’t able to.
Scott Orn: Yup.
Ed Aten: So that’s kind of how we got going.
Scott Orn: Dude, that is a good story. So I know you got to go here. So tell people where they can find Merchbar. Obviously Pearl Jam is happening right now but you’ve got tons of other bands on there. They can buy pretty much any band they want.
Ed Aten: Yeah. Yeah. I mean if they have merchandise, we either have them or we’ll be getting them soon. And yeah, Merchbar is on the web. It’s Merchbar.com. It’s in the App Store. You can search for Merchbar. M-E-R-C-H-B-A-R. Merchbar. Clearly we named it after a bar because we figured out what to do when we are partying. So …
Scott Orn: That was part of your core advice.
Ed Aten: Core advice.
Scott Orn: Party. Go backstage.
Ed Aten: Party. Go backstage.
Scott Orn: So that had to be in there.
Ed Aten: Yeah. And yeah. You know, we have a … right now, we have something like over 12,000 artists. We have over 100,000 items and there’s actually some other like big exciting news coming up that I hope we can come back and talk about more in depth. But with love, anyone that has questions, ideas, we’re hiring like crazy. So if you’re an engineer or a designer or you’re murderous at customer service, customer service processes, all those kind of things, when you build a company from scratch there’s a lot of work to do. So smart, interesting, motivated people that love this stuff, give me a call.
Scott Orn: Awesome. And if you’re looking for a $30,000-Rolling Stones pinball machine, Merchbar is also the place to go. Dad I hope you’re not listening to this.
Ed Aten: Yeah. Free shipping with offer code Scott Orn Kruze Consulting.
Scott Orn: Awesome. Alright. Hey Ed, thanks so much for coming by. Awesome having you and thanks for all the lessons. Really appreciate it.
Ed Aten: Yeah. Thanks to you Scott.
Scott Orn: Bye. Take care man.

Kruze Consulting is regularly reviewed as one of the preeminent providers of finance, accounting, tax and HR services to high-growth companies. For our offices in San Francisco, San Jose, Santa Monica, New York and now Austin, TX, our experienced team serves venture and seed backed companies in diverse industries from SaaS to biotech to hardware to eCommerce.

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