To obtain The Terror of Sound Stage 7 side quest in Dead Island 2, interact with the radio at the Tower in Venice Beach during/after The Search for Truth story quest.
To learn more about this quest, make your way to Sarah in her trailer outside Sound Stage 4 at Monarch Studios. After you speak with her, make for Sound Stage 7, which is south from her trailer. Clear out all the zombie in the jungle set then head to the city set. You’ll need to investigate all 3 victims spread through the city set. Once you’ve investigated the last one, you’ll need to lure 5 zombies into the city set in hopes of drawing out the big guy. Your plan worked and The Terror of Sound Stage 7 (aka Mr. Blades) will appear. Take him down then report your success back to Sarah. As a reward, you’ll receive 3000 XP and a Jade Dragon.