Executive Suite: Slacker’s CEO isn’t one

Executive Suite: Slacker’s CEO isn’t one

Easygoing surfer Dennis Mudd made the transition to business honcho.
By Robert Alan Benson for USA TODAY
Easygoing surfer Dennis Mudd made the transition to business honcho.
SAN JUAN CAPISTRANO, Calif. — Dennis Mudd never had to work again.

He’d lived the great American dream, starting a company with his wife and best friend and selling it seven years later for $160 million. He celebrated by taking a year off, studying painting, helping raise his three kids, and going mountain biking in rural Vietnam and Africa.

"But I got lonely," says Mudd, 45, over lunch at a cafe near his home base of San Diego. "Most of my friends were working. I was too young to be retired."

 

Now he’s back, as CEO and co-founder of a new digital music company, Slacker.

He’s
reassembled 40% of his old team from Musicmatch — the company that
Internet giant Yahoo bought in 2004 and essentially shut down. They’re
housed in the same Spanish-style office complex in San Diego that used
to be home to Musicmatch.

"I knew the landlord, and I loved the building," says Mudd. "It was an easy call to make."

In the days before Apple’s iTunes software, Musicmatch was one of the first digital jukebox programs. It helped people keep track of their digital music libraries, listen to music and convert CDs to digital MP3 files. Musicmatch eventually sold downloads and Internet radio subscriptions. And the software let customers create personalized stations based on musical interest — hence the name, Musicmatch.

Pamela Mudd, Dennis’s wife and business partner, describes Slacker as "Musicmatch on steroids. It’s everything Dennis wanted to do, but the technology hadn’t caught up to his ideas."

Now it has.

Slacker is a free Internet radio application that offers personalized stations. Say you like Eric Clapton. Slacker will play Clapton songs, and tunes from contemporaries such as Traffic and Fleetwood Mac.

The twist: Soon, subscribers will be able to transfer the music on a custom station to a Slacker branded digital music player. Also in the works is a car kit — a dock and antenna — that will deliver fresh content to the player via satellite.

"There’s a lot of great Internet radio, but it’s (been) stuck on the Internet or your PC," says Mudd.

Satellite broadcaster XM tried something similar, with a portable player that let subscribers save radio songs to it. The major record labels responded by suing XM, saying it didn’t have proper rights.

Mudd doesn’t appear to have such problems. He’s signed contracts with Sony/BMG and Universal Music, has an agreement in principle with Warner and is negotiating with EMI.

Jeff Bronikowski, a Universal Music senior vice president, says signing with Slacker was a no-brainer, because the deal pays a premium for the music storage feature.

"Dennis created a successful business … even while he was fighting against titans like Apple, Microsoft and RealNetworks," Bronikowski says. "Dennis always worked a little harder, smarter and scrappier. I have confidence he can do it again."

Since the Musicmatch sale, Apple’s dominance over digital music has grown even stronger. Its iPod has an 80% market share in digital music devices; the iTunes store comprises 75% of digital music sales.

But Mudd says he’s targeting the growing audience for Internet radio, which attracts more than 50 million listeners monthly, according to the Radio and Internet Newsletter.

"Dennis is smart … to survey the landscape, find his niche and where he can fit in," says Phil Leigh, an analyst with Inside Digital Media.

The business path

Mudd grew up in San Diego, the son of a government engineer. After his parents split (and his mom became a parole officer in Monterey, Calif.), he went off to the University of California, Berkeley, with no idea of a career path.

He met future wife Pamela there, and they started dating within a month.

"He was this really easygoing surfer dude from San Diego, but it was surprising how smart he was," she says.

"He had this very competitive intensity. We almost broke up a few times fighting over who was doing better in school."

The pair married after sophomore year, and Pam’s dad, who worked in corporate real estate, suggested a business major as the only practical college degree. Dennis Mudd found the classes deadly boring. But having yet to settle on a career path, he stuck with it.

After graduation, he was hired as a product manager for storage media company Verbatim, overseeing floppy disks. "I got so lucky," he says. "You can get excited about anything if you really put your mind to it. I loved learning everything about floppy disks, the reliability requirements, the packaging. It was a great learning experience."

He found that he took to business. After a year, he enrolled at the Wharton School of the University of Pennsylvania to get an MBA.

His cousin Frank had hooked him on the idea of making elaborate mix tapes of different artists on cassettes. Mudd spent hours on them.

At Wharton, he wrote a thesis about using then-hot cable TV technology to make the ultimate mix tapes, and helping people discover new music.

Mudd received a "B" for his effort, but it was the catalyst for a $160 million windfall later in life.

After Wharton came a stint at Hewlett-Packard as a product manager in the printer division, where he met Jim Smith, a product engineer who became the third partner at Musicmatch. Smith recalls Mudd back then as "this dynamic, aggressive person with tons of ideas."

Says Smith: "He’s pushy and driven, but he works well with a team, and I appreciated that."

The Mudds and Smith talked about starting a company. After throwing out a bunch of ideas, (Pamela Mudd and Smith wanted to open a bar in Spain) Mudd pulled out his old college thesis and won them over with his notion of a digital music company.

They cobbled together $450,000 from family and friends, and went to work.

Friends and family

Giving his son funds for the idea "was easy," says dad Don Mudd. "I thought it was a gift, not an investment. I’d read that first-time business ventures are not incredibly successful, but thought if anyone could pull it off, it would be Dennis. He’s got great instincts."

Pam’s role was finance; Smith, the engineer; and Dennis, "the dreamer," says Pamela Mudd. "Dennis sees everything at the 30,000-foot level, while I take care of the details."

Logic would say that in deciding the company’s course, it would be the Mudds vs. Smith, but both Smith and Pamela Mudd say it was the opposite: Smith and Pamela vs. Dennis.

"You need a dreamer running the company," she says. "But you also need people grounded in reality to bring him back to earth."

Musicmatch won raves for its ease of use. By the time of its sale, the software had been downloaded more than 100 million times, and its Internet radio service had more than 200,000 paying subscribers.

Mudd says selling Musicmatch was "the saddest day of my life" once he realized "within hours" of signing the agreement what would become of it.

"So many people had put so much work into something," he says. "It was heartbreaking to see it all disappear."

Musicmatch software is no longer available, and the popular radio services have been discontinued. Many Musicmatch employees have been let go, says Mudd. Yahoo declined to say how many staffers are left, and declined to offer comment for this story.

Up and running

Now, Mudd has pulled much of the old team together, including Smith, but not Pamela Mudd, who is involved with charity work.

The Slacker website is up and running, and the portable music player will be unveiled within a few months. Mudd has beefed up his executive team, hiring top executives who used to work at device manufacturers iRiver and the now-defunct Rio.

Trying to sell digital devices to a consumer base that has shown its allegiance to the iPod has proven futile for companies as diverse as Dell and Intel.

Mudd isn’t concerned. He doesn’t see Slacker as competing directly with Apple or the Internet sites that create customized play lists based on your interests, such as Pandora, Last.fm and even Yahoo Music.

"I’m selling a portable radio player that can store thousands of songs and get refreshed constantly," he says. "That’s not their business."

Mudd plans to make money by having his Web application ad-supported, offering a $7.50 monthly ad-free premium version and profiting from the sale of the device.

Slacker’s risk is selling the concept of portable online radio to a generation of consumers who have become accustomed to on-demand music via their iPods, says David Card, an analyst at Jupiter Media.

"With Slacker, you can’t skip around and see all your songs," Card says. "I wonder how people are going to react to that."

Two years after the Musicmatch sale, Smith says Mudd is "calmer, more relaxed, and less frantic. Back then, there was always this fear we used to have about the big companies wiping us out."

Pamela Mudd characterizes the time off as "recharging." She says her hope is for her husband to put in four or five years, then spend time traveling with her after their kids have gone off to college.

"I don’t think he likes running a business as much as he does creating," she says.

Mudd acknowledges that he has little time for painting and meditation now that he’s back at work. But he does go on mountain bike excursions in the hills of San Diego during the week, something he never found time for during the Musicmatch years.

"I need the exercise," he says. "Or I’ll die."

http://www.usatoday.com/money/companies/management/2007-04-08-exec-suite-mudd_N.htm

 

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