How to license your idea to someone Chapter 2

Last year I posted an article about how the Shea brothers, George and Richard created a licensing machine out of a hot dog eating contest. It is a great template for anyone to follow to take their big idea to the global stage. This year on July 4th, I was pleased to see they continue to stoke their meat-munching-licensing machine with plenty of good PR, sports analogies and old fashioned controversy.

For openers, they changed the time of the contest from 12 minutes to 10 minutes. George referenced an old article in the New York Times linked to others to confirm the proper time should be 2 minutes shorter.

Chapter two lessons we can learn from the Shea licensing playbook.

Tip #1 Controversy.

Controversy sells! By making the change half the world will think they did it because their main sponsor Nathan’s does not like it when their product experiences an “unfortunate reversal” by the contestants. The other half of the world might believe they did it to create more ties that result in an overtime. This actually happened this year. A one on one eat-off in overtime means more drama, more minutes and more ad revenues. Controversy makes people want to talk about you even if they do not agree with you.

Tip #2 People love sports.

They flooded us with more sports analogies this year. Constantly telling the viewers you are watching a great sports moment, not a “pound the dogs until you hurl moment.” The more they go into the lives of the contestants, comparisons to the great battles of boxing, hockey, basketball… the more you view this as sports history and less a side show of eating mutants that escaped from the county fair. Advertisers love sports because it makes their product appear healthy.


Tip #3 Same message different platform.

This is licensing on speed. When you can take your brand and push the same message across multiple platforms. Many people just won’t watch this on ESPN. This year they now have a game exclusively on the Wii called, “Major League Eating the game.” They even have eating characters you know and love branded on the game. Think what happened to poker once the licensing guys got a hold of Texas hold ‘em. They have moved it to a global stage and the main poker players have video game deals, clothing and publishing to add to their poker winnings. It does not even matter if the eating game is any good; having a tie in with the Wii gives you something you cannot buy unless you are a very, very wealthy politician. Credibility.

If you missed last year’s blog about the Shea Brothers, here is a republished version. Stay tuned to Chapter 3 next year; I am sure they will have something new to teach us.


The art of great licensing (Post from October 2007)

I must have hot dog on the brain recently. This post however is from my fascination with a twisted sort of sporting event that has really turned into a case study in the ART of great licensing. Every July 4th 50,000 live spectators and myself via sofa, get a big kick out of the world's biggest hot dog eating contest put on by the International Federation of Competitive Eating I.F.O.C.E. I even TIVO'd it this year because I was camping. You are probably thinking "This guy has some kind of eating disorder, or else he only licenses out products that can be gobbled down". I am 6 feet 2 inches, 200 lbs, but I do have a major fascination with the art of creation. Creation is the foundation, the absolute bedrock of great franchising and licensing concepts. The royalties they pay you must be less then the value you create for them, otherwise you have created a value sucking vampire that will implode.

Everything around us had to be created, existing matter reorganized into a new and better purpose. Nothing we see is created out of thin air. In other words, there is no such thing as "immaterial material".

Every invention in this world was created from a previously created one. Everything we see was created by rearranging existing elements in a new and more useful way. Think of the evolution from vacuum tubes, transistors, microprocessors, modern PC, Blackberries we have come along way baby! That is really the evolution of solid science taking previously invented materials and rearranging them in a new and creative way to give more utility to the user and more margin to the inventors. The art of good licensing works the exact same way. Example, back to the Dogs. Hot dogs have been around a long time, contest to see who can eat the most of them probably were invented shortly after the hot dog was invented. In steps the Shea Brothers, who took the existing elements and by an act of promotional alchemy, they created an entire new category to license out, Competitive Eating and all of the ancillary byproducts spun off from that creative core.

A Brief history of the Shea Brothers.

The Shea brothers are two New York PR guys who worked for the original promoter of the Nathan's hot dog contest. That gave the Shea brothers an idea: Why not create a competitive eating league and expand the market to many categories not just one? In the early 1990s, they founded the International Federation of Competitive Eating, housed at their PR firm, Shea Communications.

ATTENTION READERS FREE PRIZE INSIDE!

I am assuming you are a reader of this blog because you have a concept and want to expand the reach or you are an experienced entrepreneur and are tired of working 100 hour weeks and want to know if a better way exists. Do yourself a favor, you must go to their site, consider it a free crash coarse in the art of creative licensing methods. http://www.iforce.com They have built up a major licensing machine by leveraging the insatiable appetite the world has with winners, personal stories, sports, eating and very clever branding. Check out their Federation crest, two lions, eating a hot dog, jousting with offsetting mustard and ketchup bottles! Reading their press you get that sense that they are two very passionate guys about either promotion or competitive eating, I suspect in the beginning it was the former but the passion for the Federation definitely cannot be denied.

All great franchisees have a "Real" quality to them. People are not fools, they can sniff a fake. Fakes blow out they don't last. I suspect the I.F.O.C.E. will be around along time because the concept seems so outrageous but the team behind it is genuine about the brand and the reality of that passion shines through every July 4th for me and apparently I am not alone. The list of corporate sponsors, media outlets, merchandising, and events just seems to have no limits. Dream big readers. Enjoy!

Guide to understanding smiley faces and other business secrets.

“In business you can never learn anything more important than successful communication skills.”

-Max Markson





I use IM (Instant messaging) software a lot. It is one of those fantastic business tools that makes e-mail feel like a black Model T. (That is a car produced 100 years ago, not Tyra Bank’s nickname.) You see, my kids have never heard of a Model T Ford. Likewise when they text me “Dad, AWC (((H))) I had to look into what they were saying. It was nice to know they went easy on me, it means “after awhile crocodile with a hug.”

I recently had a Russian translator ask me through IM “why do you keep calling me Russian, my name is Dymitry?” You see I was always jumping on and saying “RU there?” He probably thought for weeks, “this ungrateful American clod, he does not even know my name, he just refers to me as “Russian!” RU is short code for “Are You” not Russian. I taught him something new and almost weekly I learn new short code myself from the younger set.

I sent some licensing ideas to a sharp entrepreneur yesterday and I thought I made her sick when she responded ROFL!!! I was relieved to look up; I actually made her “Rolling on the floor laughing” with my brilliant idea and not “Rolfing in the toilet with that sick lame idea!”

Call it the curse of the 2-in-1 keyboard, caffeine or just a very serious generational problem of wasting keystrokes, if you want to communicate with the younger market you better know short code and smiley faces. You need to keep up or get left behind. Ok Chairman, loosen that tie and learn some code to call your next board meeting and see how many members get what the heck you are talking about. If all your members think your Blackberry is suffering from swimmers keyboard, maybe it is time to get some younger fingers in the board room. Younger blood might also bring fresher ideas and fatter margins. :@ )

If you don’t see the benefit of communicating with Gen Y on their terms, this can at least keep you from starting an international incident or learning what your teenager really thinks of you.

Here is a link to a short code dictionary and smiley face translator:

http://www.webopedia.com/quick_ref/textmessageabbreviations.asp#r

Patent licensing disasters by Eli Whitney

Imagine inventing a devise that put America on the map, wrecked civilizations and changed the world, and you still end up dying broke. If you are a history buff, patent expert or licensing lover grab a copy of Big Cotton I forgot how great a read it was until I went through my notes again last night.

Eli was a bright young tutor from Yale heading South via boat to try his luck teaching the children of wealthy plantation owners. In a chance meeting he bumped into Katy Greene, the widow of a revolutionary war hero. Katy saw potential in the young poor teacher and asked him to sit in on a meeting of plantation owners. They had a big problem, an old problem; nobody could solve how to increase cotton processing speed. It took one worker 16 months, full time pulling the sticky green seeds out of enough cotton to make a 500 pound bale. After hearing the problem, Eli said he would come back with an answer. That week his big idea came while watching a cat trying to catch a chicken. He noticed that the chicken got away but the cat had feathers in his paws. That image jarred Eli’s mind into looking at the problem from a completely different direction.

“Instead of picking out the sticky green seeds one by one, why not comb the cotton away from the seeds?”

10 days later Eli came back with a working prototype that was so good, the basic mechanism and motion is still used today. Katy’s fiancé proposed he build the machines and he would license them out as fast as he could make them. He sent the design to Washington DC and Thomas Jefferson, the Secretary of State at that time signed his patent registration in 1794. The government was a lot smaller back then! Every cotton farmer in America wanted one. Greed took over and they charged the farmer 1/3 of the crop plus the cost to build a machine. Why all the excitement? The gin reduced the labor on 500 pounds from 16 months to 10 days! When they eventually added steam power or horses, they could produce 500 pound bales in 4 hours!

Improved gins came on the market with better licensing terms and they remained inflexible even in the face of a new issued patent on a competing product. By 1797 Eli had built 27 gins and nobody wanted them. He had set in motion the biggest economic upheaval ever to hit America, people around him were getting fabulously wealthy and he sat frozen with indecision. In relative terms it would have made the internet bubble look normal because almost the entire South was already dependent on farming. We cannot imagine how crazy it must have been to crank that gin wheel and know all the cotton you could crank had a buyer ready to snap it up.

Eli’s landmines we want to avoid with patent licensing:

• Alienated prospective customers with exorbitant royalty rates.

• Refused to license their design to other manufacturer to meet urgent demand.

• Opened themselves up to knockoffs because of their inflexibility.

• Went broke trying to repair the damage instead of changing course.

To see how staggering this invention was. The year of the invention, America exported 500,000 pounds of cotton to England. In 1800, just seven years later, it exported a whopping 17.8 million pounds! Think of the gold and silver pouring into the south to buy all the cotton and you watch everyone else get rich on your idea.

Just remember your best ideas are in the future. Don’t ever get married to a new innovation and become inflexible in the face of reality. The higher you price the license and royalties, the harder people will try to go around the patent. The really wealthy self made business builders put together a sting of winners, not one lucky grand slam. Next time you are at the negotiating table, remember Eli.

Good time to be a Rock Band

Today marks a first for music. Motley Crue, probably one of the most hated bands by parents of the 1980’s released a new single yesterday exclusively on Xbox Live Marketplace. Sweet karmic revenge! You thought your parents were just too old when they told you to “turn off that crap!” Now your kids will drive you nuts jamming to the same band you loved in the 80’s! Technology and licensing is stretching brands to levels that either make us feel older or young again, I am not sure yet.

Already 6 million songs have been downloaded in 90 days on a game that was touted as too expensive to make it. Take an old brand like the Crue and revive it with an entirely new generation. It just shows you that creativity is the only barrier when it comes to great licensing. As I looked at the available list of downloads I see a giant opportunity still hanging out of the school bus, preschoolers. I know it would be about the most un-cool thing your parents would ever tell you, “we got the latest Wiggles song on Rock Band, let Wendy jam with you and your friends for awhile.” I am dead serious here, why make it metal exclusive, would older kids really stop playing just because their sister can jam with Elmo?

Licensing is all about combining strengths to make something even stronger. I remember when Elvis Enterprises was only a few banana peanut butter sandwiches away from selling the mansion to pay the bills, now they are doing 40 million a year. Robert Sillerman now owns 85% of all the trademarks rights film, music publishing, intellectual property and photographs really all the licensing rights in the world to the King. In 2004 he paid Lisa Marie 100 Million for the 85%. At the time many thought he had lost his touch. Sillerman is not a novice, he has amassed a billion dollar fortune moving in and out of media properties with the latest coup being the American Idol franchise he scooped up for about 192 million in 2006.

The Idol is a giant licensing machine. The way they merchandise that show is really incredible. From downloads to product placements and all the production rights to the contestants during and after the show. Simon Fuller the founder of Idol and now just a minority shareholder in his baby is also worth about a billion dollars.

So what can we learn from music and software moguls to apply in our own business today? What is the absolute one thing you are great at? Where are you a complete disaster? Remember, the King was a larger than life performer but a disaster of a business man. Someone needs to be the performer, someone needs to pull the curtain and someone needs to sell tickets. Which one are you? The King is making more dead than alive thanks to Sillerman and Motley Crue has new life thanks to Bill Gates. Today nerds and rock stars can coexist as long as they play their parts. Stick with what you know, rock on Whale watchers!

How to cure jetlag and make a billion dollars.

Those great moments of clarity when the timing, idea, product and marketing seem to distill upon your mind like spring dew are few and far between. When they happen, drop everything and start writing! Next don’t lose your notes! When Howard Schultz jumped on a plane to go see who was behind a little coffee shop called Starbucks, he had no idea what he would find. He sold house wares, what did he know about coffee! He was dying to know how two coffee shops in Seattle could outsell the entire Macy’s account of a special coffee machine.

I am sure he had no idea that he would one day sit on top of the largest coffee franchise in the world some day. His gut told him, I smell the smoke; I need to go see how big this fire is.

In 1982 Dietrich Mateschitz found himself in steamy Thailand nursing a major jetlag. Asia is full of little shops with strange potions in even stranger bottles. He probably jumped out of a tuk-tuk at the first site of a store that looked remotely close to a pharmacy and somehow communicated his German clock has not reset to Bangkok yet. Maybe he was watching a kick boxing fight and noticed two Red Bull logos on all the shorts and banners and thought, “why am I watching this, I should be sleeping, and what is up with those Red Bulls?’

The details are unclear, but he knocked back a can and BANG, the big idea hit him.

Dietrich was the Marketing Director for a German toothpaste company and licensing and marketing was already in his blood. His big idea, let’s license this drink, change it to western taste buds, soup up the branding and see how much we can make selling to truck drivers, travelers anyone who needed a quick boost.

Do you think in 1982 he could see himself on the Forbes 400 2008 biggest swingers in the world list?

#260 all self made! Check out his photo. Like a good race horse, boxer, actor…Billionaires and future billionaires have a certain look, the vibe.

http://www.forbes.com/lists/2008/10/billionaires08_Dietrich-Mateschitz_DGAD.html

No this is not a lesson on how to start a billionaire face franchise. Our friend Dietrich however, followed a proven formula to get fabulously rich and here is the lesson we can learn from him.

Step #1 Do something, anything.

Move around, travel, read, talk to people, do something for someone without any expectation of a return. That creates the ingredients. Great ideas are like good soup. You throw in a lot of great stuff but you need to let it simmer, it takes a while. Killer home runs start with fresh ingredients.

Step #2 Keep an open mind.

What does a marketing guy at a tooth paste company know about creating a global beverage empire? Ask Howard Schultz the same thing about coffee. Ask Ray Kroc when he was selling milkshake machines door to door, did he ever think he would control the biggest hamburger franchise in the world. They all had a common winning trait. A fertile open child like mind to anything new and creative. When you hear negative people that never offer a better solution, just tune them out and eliminate them from your social circles if possible. Anyone can criticize, but without offering a better solution, they are just a pain in the butt and they will never help you get to billionaire row.

Step#3 Play the long game.

With a massive 70% market share for energy drinks you would think that it was ok to kick back. Dietrich has what all billionaires have, vision. They can see 4 or 5 moves ahead. A brilliant move he made was to link Red Bull with sports early in the game.

Great marketing is a mile deep and an inch wide

While every beverage company was playing the short game brewing up new caffeine in a can ideas glutting the market, Dietrich was busy buying up sports franchises. Investing today's earnings on yesterday's business worked great during the industrial production phase 100+ years ago. Today old thinkers will always get crushed by nimble visionaries who take today's cashflow and invest in future businesses. When the competition comes, the winners have already moved the brand to a new and larger stage, leaving the copy cats holding a bag of thin margin, profit sucking vampires.

Step #4 “Don’t get safe, get creative.

The natural tendency when we are ahead is to protect the lead. Yea that worked for Memphis Monday night for the big game right? You are up by three points with 20 seconds left. Foul the guy! Don’t let him go down and drain a three, force him to a one on one! I know fouling when you are ahead and time is running out might seem counter intuitive but going against the grain, fading the herd is often the winning idea. Safe in marketing is a fast track to the poor house. Safe might work in the short run but it is a guaranteed loser in the long run. History is full of dead safe companies you have never heard of.

Additional articles:

“Why most advertising and investment ideas are wrong.”

http://franchisewhale.com/2007/12/why-most-advertising-and-investment.html

“Who knew cavemen could sell insurance.”

http://franchisewhale.com/2007/12/who-knew-cavemen-could-sell-insurance.html

OK, hit the road, keep an open mind, think five chess moves ahead and get creative! When you get on the 400 list, please thank the Whale, I know I will.

Mickey slings some paint

I was in Home Depot with my little girl; she is 4 and very active. She is really into coloring, painting anything artsy. She goes right for the paint swatch samples every time. Tonight she came back with a handful of samples and they oddly had the sample color in the shape of Mickey ears on each one.

I asked my little girl, why did you pick that one? She did not say I like green, she said, “this is Mickey’s paint.” Squares are just too square for a four year old. If you want to sell anything to kids, print it on Mickey ears! I wondered, if the first movie Mickey showed up in, “Steam Boat Willie” had Donald Duck on the boat instead of a mouse, would we all recognize the image of a duck head instead of mouse ears for Disney? Donald has always played the understudy to that energetic mouse. Was it just a late, duck start or fate that made the mouse the icon for Disney? Anyway, back to Home Depot.

I turned the swatch over and it said, “Disney color by BEHR.” Next I went out to the Disney site and found an incredible selection of colors with catchy Disney names. What kid would not want Donald orange, Princess Bouquet pink or Tinker Bell green? Typically a licensing deal like this would be in the 6-8% range of gross sales for the Licensor (Disney) for BEHR to use the Disney name. They also brought Home Depot into the mix to have a retail exclusive with their 2,100 stores.

http://disney.go.com/disneyhome/disneypaints.html

I love this kind of deal, very smart licensing idea by Disney. Take something that old Walt would never even dream of getting into. Cut a deal where they use the name to create an entirely new use for the brand without you ever manufacturing a thing. Make the licensing deal in a category that drives additional brand loyalty as it is used. Once you go Princess Bouquet on the walls, you probably will go the sheets, lamps, toys…I am sure Home Depot also cut BEHR a good deal to keep it off the shelves of Lowes.

Those ears have some real power.

• What is the main thing people identify with your brand?
• What other cross over categories can your big idea jump to?
  
• Does your franchise have cross brand appeal locked up waiting to be licensed out?
  

Donald Trump licensing seems to take the position that all categories have a "Trump" player in any crowded field. He puts his name on a lot of average stuff and it does not seem to tarnish the upscale image of the Trump name. Maybe we tend to be a little too pious when it comes to the use of our brand names and we could learn a lot from the Donald, the man, not the duck.

License Versus Franchise what should I do?

We had so many hits on Peter's podcast, here is a separate link to make it easier to forward to people and bookmark it. His permanent home is the podcast bar in the top right corner of Franchise Whale.

Listen as an international trademark, licensing and franchising attorney explains when a franchise fits better then a license. Peter Eichler shares 40+ years of experience with fortune 500 clients, celebrities and Hollywood studios in this 13 minute Podcast.

Anytime you know someone who did the licensing for Star Wars, Governor Schwarzenegger and the new Rambo movie, you know you like him already! In addition to his international franchising experiences, he is a great find and a joy to work with. Enjoy!

Click here to listen right now:

Click here for podcast:

I love a parade

What can we learn about business by watching a parade? How to turn a dirty street into a cash cow that’s what! Step one, invite people to sit on the side of the road. Step two, ask other people to walk in the street. The franchise concept you are selling? The people on the side, look at the people walking in the street. The people walking, wave at the people sitting on the side. Then brand it so people feel they need to pay you rent just to walk and wave at the people sitting. Start the music! Next, license the trademarks, TV rights, and memorabilia. Stop! I am not in the parade business am I?

If they can make a dirty street in small town USA print money, I know you have something far more valuable to market. Is your business missing the parade?

Last night I went to the Zoo lights with my family. I live in Phoenix and the winter is the best time to go to the Zoo. After I walked around for an hour it dawned on me, any Zoo that is closing down today has nothing to do with what they tell you, “Oh the high cost of animal care, poor donor base, high overhead…” It has nothing to do with the animals at all or the donors. It has everything to do with this simple concept. All business is the show business! My 10 and 12 year old boys get an earful about business wherever we go. I can’t help it, I think it, dream it, talk about it, it is not something I do, it is who I am, I’m sick, there I said it. I think they actually believe the Zoo trip was just a smoke screen to another branding lesson, without the whiteboards.

Each year, 265,000 out of the 1.4 million annual visitors, see the Zoo lights at the Phoenix Zoo over 46 nights. This has nothing to do with their “main attraction”, the animals. The only animals I saw were 20 flamingos and a large mechanical giraffe that talked to the kids and made a crowd of 200 at a time pause for 15 minutes. Nice bit guys by the way, the longer you are in the park, the more you want to eat. More stops, more revenues. Note to management, add more talking animals. The real kicker is in the numbers. They did those numbers only open 4 hours each night versus 9 hours during their regular calendar. That means on an operating hour, trade weighted basis, 20% of their annual revenues are generated using only 7.5% of their operating hours to create that revenue. Sorry to spreadsheet on your parade, but the next time you are singing the blues about your flat sales, try juicing your franchise by creating a crowd around what you already have.

Donald Trump throws like a girl, so what!

I know it was horrific to watch, confusing, was this the same guy that has the girl, the money, the jet… seeing the guy throw like Darla from the Little Rascals was brutal. More breaking news, she did not marry him for his blazing fastball or hip hair style. You don't put out a new book titled "Think big and kick ass" by sweating the small stuff. The coup he pulled of at 40 Wall, will go down as not only the biggest real estate deal of his life, but possibly the biggest deal ever done in the city of New York. If you want to know how to turn a million into five hundred million in 10 years, read the book. It takes coconuts and innate talent to fade the crowd when it may be the worst time for you to pull the trigger. Knowing what you are good at, and using that knowledge at the right time makes up for a lot of wild pitches.

LeBron James makes $20,000,000 dollars a year playing basketball for Cleveland and you don’t. He’s really good at it! I am going to take a wild guess and say he might not be the world’s best web designer, painter or engineer but he has 20 million reasons to not stress out about his weaknesses when he looks in the mirror every morning. What is stressing you out?

Forget your weaknesses. Someone can do it better and cheaper and you are wasting your time, money and energy trying to improve what you are just not very good at. Be honest.

Headline: “Bill Gates can’t dunk"

Remember your strengths. Intellectual property (“IP”) licensing is exploding around the world. You have years of valuable IP locked up inside your head and trapped inside your business that needs to be unleashed, licensed and annuitized.

The market will gladly pay a fat premium for your strengths, don’t forget LeBron!

Apple did not get where they are today by keeping their strengths buried under a mountain of weakness.

“1,000 songs in your pocket” they are good at marketing.

Turn over your iPod “designed in California, made in China” they outsource their manufacturing weakness, but kept their design and engineering strengths.

Do you have strengths?

Do you have weaknesses?

Are you honest?

Are you a rebel?

If you can answer yes to all four, you are already on the road to enlightenment grasshopper, just move toward the light.

“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

-Bruce Lee

Would you really like to get kicked in the groceries by Bruce Lee? Imagine that feeling next time you are tempted to waste your bandwidth on stuff that you are never going to be very good at.

“When the opponent expands, I contract. When he contracts, I expand and when there is an opportunity, I do not hit. It hits all by itself."

-Bruce Lee Enter the Dragon

License your strengths, outsource your weaknesses- Be the Dragon!

Licensing the unnatural act

Painful stat of the day, IBM's market share of personal computers:

1981- 1.9 %

1984- 63 %

1990 - 15.2 %

2000- 5.4 %

As a kid we are really more inclined to buy and sell stuff then license stuff. The idea of licensing is not natural; it seems too complex, too intangible. Some kids pick it up quicker than others however. They are the ones who usually go on to make gobs of money while making it look easy. I watched an interview with Diddy, P Diddy, Puff Daddy, Daddy Puff…last week. I never knew he started off his career in licensing, he probably did not know it either. He recalled the look of disappointment on his Mother’s face when he would ask her for new shoes as a 12 year old boy. It hurt, the look really drove him to find a way to make money. The best gig going for a pre-teen was a paperboy but he was still too young, he needed an angle.

The ah ah moment! Cut a deal with an older paperboy to stay home then work the route; pay the older boy who already had the contract 50% of the revenues and the publisher would never know. He expanded to other paperboys and cut 30%, 20% even 10% royalties with college kids to stay on as the carrier of record and get paid for the license. As the pie grew, his share of the pie also grew. No wonder he is doing well in music and clothing, two giant licensing industries.

Somewhere along our journey, some of us pick up the fact quicker than others, more money can be made with less effort using our minds not our hands. Unless of course you have very talented hands, which I do not. Control the contract, control the cash, control the outcome.

"The day Gary Kildall went flying"

The tale of young Bill Gates cleaning up on old blue goes down in licensing lore as the Mother of all licensing deals. The legend goes like this: One fateful day in the summer of 1980, three buttoned-down IBMers called on a band of hippie programmers at Digital Research Inc. located in Pacific Grove, Calif. They hoped to discuss licensing DRI's industry-leading operating system, CP/M. Instead, DRI founder Gary Kildall blew off IBM to spend the day in his airplane, and the frustrated IBMers turned to Gates for their operating system. While he's revered for his technical innovations, many believe Kildall made one of the biggest mistakes in the history of commerce. (Strike one) *Licensing note, you cannot be great at everything.

Quick timeline recap:

1980 July 22^nd team from IBM meet Bill Gates and Steve Ballmer to discuss Microsoft products. Microsoft is 5 years old by now.

Aug 28^th Microsoft and IBM sign a formal contract for Microsoft to develop certain software products for IBM's new microcomputer. Microsoft will receive US$200,000 to adapt the operating system to the IBM PC, and US$500,000 for DOS, BASIC, and compilers. Microsoft is to have an initial version of the operating system and BASIC working by mid-January. Bill Gates also bets that IBM clones will flood the market soon and they will all need to use his software. He negotiates to also keep the copyright to the software.

Microsoft bought the rights to QDOS for $50,000, keeping the IBM deal a secret from Seattle Computer Products and inventor Tim Paterson.

Microsoft missed the January 1981 deadline, trickier then they thought. They must modify QDOS enough to avoid a lawsuit from Gary Kidall at Digital research and make it work on the IBM hardware.

1981 Aug 12^th IBM announces PC for $1,565 with QDOS, modified and renamed MS-DOS.

Gary Kidall tells IBM that its MS-DOS infringes on its copyright, He says he will not sue if IBM sells CP/M on the IBM PC in addition to MS-DOS. (Strike two) IBM agrees then goes on to charge 5 times the amount to consumers to buy Gary Kidall’s software then MS-DOS.*Licensing note, watch backend points, don’t get enamored with the big numbers and take your eye of the finer points.

Don’t cry for Gary or IBM both came out ok. Gary sold his company to Novell for 120 million in 1991 and IBM’s PC numbers went intergalactic for the first 3 years under the agreement, only to squander the lead later.

In 1981, Tim Paterson (Inventor of QDOS sold to Microsoft for 50k) quit Seattle Computer Products and found employment at Microsoft.

Which is worse?

Selling your software for $50,000, join their company and watch your new boss go on to become the world’s richest man.

Or

Take out the plane and relax for the day and get beat out of the contract of the millennium.

Or

Go from 63% market share in PC’s to 5.4% and become the poster child for letting the big one get away.

It is easy to look back and believe you are a genius and would have done things very differently if you just had their luck to be in the right place at the right time. The fact is, history is written forward, not backward. When you are in the battle the answers are only clear after the fact and the “Geniuses” get to look back and spin their prophetic take on others mistakes.

Live and learn.

Dogs or coffee small is good big is better

Pink's and Starbucks, the ultimate retail success paradox. Starbucks, aptly named after the first mate in Moby Dick, has spawned caffeine syphilis around the world. With 7,521 self-operated and 5,647 licensed stores in 40 countries, its shocking to be somewhere without a store almost as shocking as the line around Pink's one and only location for the past 67 years.

Licensing Common thread tip; atmosphere and variety. Check out that menu, I need a Pink's and I am two states away. "We'll always have Starbucks". Thanks Rick.

A little soda on the filet?

Barbecue lovers have been mixing their own "micro-Q" for years. Cadbury Schweppes has now moved outside of their comfort zone to team up with Vita Foods and has brewed up some real winners! I had the Dr. Pepper BBQ sauce this past week and give it 2 sticky thumbs held way up! Another great licensing idea and low risk winner. Bring two well established products together to create a new license category and extended their brand experience. Nice job guys.