The Question of Being the First Mover

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A member of our group feedback to me about his thoughts on being the first mover in business. ” In businesses, first mover advantage often proves otherwise. The first one to do something usually fails. It’s more of a trap, really.

Usually, the followers observe and see what works and take out what doesn’t, then gain critical mass and soon people forget about the first mover while crowning the first one to gain critical mass. 2 cents.”

This is my answer below:
“You are right. I have another approach to this. I can only speak for my own experience.

When I said first mover, I don’t mean that you blindly go into it. One still need to evaluate the risk. My objective for being the first mover is for branding, publicity and awareness of our company. (Which is very important since we are a small company.) It is almost like jumping the queue. From no one knowing who you are to the global players pay attention to what you do.

A little case study of what we did. When I first discovered there is strong interest in stereoscopic 3D content, I start to evaluate if I should make our series into stereoscopic 3D format. There was some risk as the format at that time was not determined. Hence not many producers want to move into it.

I did some detail evaluation of the cost, the risk, the economical and technical viability before making the decision. I was weighting between money invested and potential returns.

With blessings, eventually it pays off.  With this decision, we manage to penetrate US by selling our Stereoscopic 3d series to the first 3d channel.  After we have sold our series to US, we started to create awareness. Today, Dream Defenders have sold to 5 platforms in the US in total. That deal also leads to another one with Cartoon Network where we get the chance to work on Award Winning Ben 10 Destroy All Aliens in normal format and Stereoscopic 3d format.

Now 3DTV is dead. So was it a wrong decision? Not exactly. We have achieved what we needed above which is creating awareness for the company and help us penetrate US. On top of that, it creates opportunities for some outsource projects for us.

After that we move on to work auto stereoscopic 3d content. (Stereoscopic 3d with no glasses) Then AR and now VR. Next will be MR. At every stage, the knowledge gained actually brought us forward to higher grounds.

Our current VR venture has given us an advantage. We are not just doing VR. Something more of a breakthrough that solves the current VR commercial viability issues. In the US, I have gotten many major players excited. So we will see where it lead us to next.

In conclusion, my main reason for being first mover is meant to create publicity, branding and awareness for our company.  I must emphasize that you need to evaluate the risk. In business, there is always risk.  With this move, Tiny Island has now known to be innovative and forefront; always ahead of the curve in the global market. This is useful for our future growth in consultation business.”

When you are small, how do you keep yourself alive.

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Met a friend in LA today. He used to be a senior management in a major studio. He asked me today. How did you manage to survive? The market situation back home is so bad. Regional countries provide cheaper services. You do not have huge investor’s money to back you up. Your company is so small. “

This is my answer.
” At times, I do ask myself whether this is my last month. ha ha.

I applied some of the principles of how our late Prime Minister build Singapore.

1) Build strong relations and connections with major players in North America and in Asia. Make yourself useful to others. As long as you are a useful chess piece to others. You will become important though you are small.

2) Identify new trends that can propagate. Move into new areas and take advantage of first mover. Provide unique services that others cannot provide.

3) Anticipate changes. Prepare new business model and adapt fast to the change.”

The challenges you should know in producing an animated series these days

(The following is written based on my own experience. It is meant to give independent producers a clear view of the current market situation. The following does not apply to big studios who has deep pockets or with strong commercial channels)

I have attended a Children TV Trade Show in the US recently. At the event, I have met a couple of independent producers. When they presented their IP to me, I am quite surprised that they are still trapped in the old system; expecting the TV licensing fee alone to cover the production cost. (Covering production cost is hard these days. Not to even mention profit. Even DVD market is dead.) One really need a licensing/merchandising strategy. It is no long an option. It is really hard to create an animated TV series or IP just to tell story without a commercial strategy in mind. I know it sounds horrible in a creative stand point. It is really not easy to raise funds these days.

I hope the numbers below will help you. When I first started, I was looking all over for such facts. Its not easy to locate them. This is first hand experience.

When I first step into the US, I heard that you can sell a half an hour episode at USD$50k. In 2007, (my personal experience) I sold at USD$25k per half hour  episode. In 2010, it drops to USD$15k per half hour episode. Now I have buyer in the US asking for free. I am not joking. The market kept changing for the past

Assuming your full production budget is about USD$5M (When I first got into the market, I was told that this budget should be able to recoup just by TV sales) and you are able to sell the TV series to 80 to 100 countries (which is not easy for indie producer) The TV licensing fees add up for these countries  can only cover between 1/4 to 1/5 of your production cost. I have seen independent producers still looking at producing it at USD$7M to USD$9M at the recent trade show. Its going to be very risky.

I am not saying there is no exceptional case. If you have a strong executive producer to back you up, hopefully it could be more. I am just being conservative. Last I heard is that some US OTT channel is looking for original content . They can finance up to 60% of the production cost. This does not include additional dubbing cost of 20 languages. Payment is made in every 3 months and can only come in after you have delivered the entire series. It takes up to 1 year to pay you back the 60%.

Typically, there are only about 6 countries who are able to pay between 4 to 5 digits per half hour episode. Or if you are lucky, you can get a couple of pan regional deals (e.g Pan Asia or Pan Europe Deal) which will also pay about 4 digits per half hour. The rest of the world is paying only 3 digits per half hour especially in Asia. If you add all these numbers up, you will know it is not easy to cover more than USD $4M of your production cost.

Currently, some of the countries that you might be able to get subsidy or investment to offset your cost is Canada, France, Ireland, Malaysia, Korea and China. The rest of the world is not that easy.

One need to have a strategy in place. Your IP needs to be able to engage the sophisticated audience not just on TV. But also on all new digital platforms. Your concept and designs probably needs to have Toys, Computer Games and Themeparks (China) in mind. (Now even Netflix has started to look at Toys now.) There are some  strategic investors looking for good IP to feed their business. These strategic investors will come in right from the beginning. No longer after the release of the series.

Korean producers are very savvy and focus. You will see many of them armed with concept based on the needs of strategic investors. The only challenge is you might end up having too many similar concepts. Hence to challenge your creativity, you need to find a way to create a concept that stands out from the rest.

Don’t get me wrong. I am not discouraging indie producers NOT to work on your own IP. In fact, if your primary survival is servicing (outsource work), you should work on your own IP as competing in prices in outsource work is not the way to go for long term survival. What I am trying to put across here is to change your strategy. Know the market. Build your connections. Get yourself updated with the latest trend. The world economy and technology is shifting its place. In business, there will always be a change. As long as you move with the change. You will survive.

Something I wrote previously. Hope you find it useful as well.
https://entrepreneurshipinanimation.wordpress.com/2016/05/14/various-potential-strategic-investors-for-animation/

 

Lessons learnt in Leadership

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One of my staff asked me the following question :
“Sometimes what is sad is after training someone to be a good leader, they will go away and move on. Isn’t it tiring to keep training new ones?”

Here are my answer.
“If you are a good leader. Your disciple will stay. If he choose to go, it could be because he does not fully understand the true meaning of the leader’s work. It’s a transition and growing up. Sometimes when he goes out there to see the world and experience himself, he might slowly appreciate what he has learnt from his previous leader. And maybe someday he will return.

If he does not return, then I can only say that I have to work harder as a leader to deserve him. That is how I consistently improve myself.”

Her Second Question:
“When you give a connection to people, do you feel afraid that they will take that potential job away from you?”

Here are my answer.
“In business and entrepreneurship, it’s all about relations and trust. If one is afraid of everything and do not trust anyone, one cannot get things done.

It’s all about integrity of your disciple and the client you choose. And most of all, the values you bring together in a company. I am selective over my long-term clients and most of them became my friends. That is how I run my business.

If your disciple can easily steal your client. Then you know that you are weak in your business relationship and you are weak in evaluating the right person to be chosen as a leader. So you have to pay for the price. The more mistakes you make. The sharper you will be.

Treat people with your heart and sincerity. You will attract the same kind of people to you. (Both client and employee) With this, no one can steal anything from you.”

The IP creations for Animation is growing in China

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Chinese companies are slowly moving away from servicing work to IP creations. Not only they are interested in IP creations for their own domestic markets. More and more are looking for overseas partners to learn how to create content for the global market. Though they have started much later than most Asian countries. In terms of learning how to monetize their IP and gain knowledge in licensing & merchandising, they have caught up very fast. In fact, I would say faster than some Asian countries like us who has started even way before them. With their huge capital, population and box office, I anticipate that they will slowly catch up with US. Or might even replace their position eventually.

There is a potential that some of them can become the next Mattel or Hasbro in the East. Or even Turner or Disney who has the entire eco system. Some of the big players already have their own TV stations, Film Production Company, Distribution Network, Toy Manufacturing Arm, Games Companies, Themeparks etc.

The Themepark owners, Toys Manufacturers and Computer Games Companies are especially the ones most interested in IP creations and learning how to globalize it.

I see a trend of them setting up a pre production arm in LA to tap on the best talents there. Or they will buy over good IP from overseas. Then slowly looking at outsourcing their productions to cheaper countries. So that they will focus on IP management, licensing / merchandising and stay at the top of the value chain.

Currently there are still companies who are willing to learn how to globalize their IP. Initially I was estimating maybe in another 5 years time, they probably already learn all they need and will be independent enough to operate on their own. In 5 years time, they might already have the entire value chain setup. But looking at the rate they are progressing, I think maybe another 3 years (Not 5 years anymore) they will be ready and will NOT need others help anymore. So if you are heading to China for opportunity. I say, it has to be NOW or NEVER.