You got a license for that?

OK, let's talk about licensing faceplates.

If you could license anything... ANYTHING... to put on a faceplate, what would you choose?

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Now before I get into this, let me tell you something I learned in my business class in college. Let's say you're a business and you make things. Let's use two-wheeled scooters as an example. Oh, and don't read this late at night. It'll hurt your head.

Now let's say there's two companies. Company A and Company B. Company B is smart. Company A... not so much.

Company A decides to make these two-wheeled scooters so they can sell them for $100 each in WalMarts, Toys R Us, etc. They get orders for 100,000 scooters, that will cost them $25 a piece to make, and they will sell to the stores for $50. Not too shabby, hm? They have to come up with $2.5 million dollars but they'll make $2.5 million dollars after they pay that back.

That doesn't sound too dumb, does it?

What's better is, when the stores sell out and reorder more, they'll have $5 million in the bank to use to make more scooters for $25 each. It's brilliant!

But then guess what happens? Another manufacturer comes out with a similar scooter that sells for only $50. The retailers sold off about half their inventory before these other scooters showed up, and had to clearance your scooters out, meaning they only made about $25 per scooter instead of $50, and they're not going to buy any more. FROM YOU.

Not that brilliant after all, was it?

Now here's Company B. They have orders for 100K scooters that retail for $100, just like Company A. But they don't order 100K. They order 500K. That sounds like suicide, doesn't it? No, it doesn't, and here's why.

First thing that happens is that they got a price cut at 100K, 250K and 500K. Had they only bought 100K scooters, each scooter cost them $25. However, by going to 250K, they got the price down to $15 per scooter, and by buying 500K, they got the price all the way down to ten bucks.

So Company A paid $2.5 million for 100K scooters, while Company B paid $5.0 million, but got 500K scooters out of the deal.

Here's how it played out for Company B: Company B sold their 100K scooters to WalMart and Toys R Us for $50 each, but they only cost them $10 each. BOOM, they've already got $4.0 million of their $5.0 million investment back. The rest of it plays out just like before: they sell about half of them, a competitor comes in with scooters for $50, and your $100 scooter sales die. WM ends up eating half of them. BUT WAIT! Or as Phoenix Wright would say, HOLD IT! Company B STILL has four hundred thousand scooters they can sell that only cost them $10 each.

They go back to WalMart and Toys R Us and say, tell ya what... if you want to buy 200K scooters, we'll let you have them for $25 each and you can sell them for $50. They agree, and BOOM, Company B just took in ANOTHER $4 million dollars. Company B is now $3.0 million ahead and STILL have 200K scooters to sell! Remember, Company A only made $2.5 million and their game was over.

So Company B knows it's just going to happen again, so they get pre-emptive and they contact a bunch of discount stores: Big Lots, you know, that kind of thing. They tell them hey, we've got these scooters that are all the rage. We can let you have 200K of them for only $15 each. While WM and TRU are selling them for fifty bucks, you can sell them for thirty. They agree, and take all 200K for $15 each, and BOOM, they made another $3.0 million.

In the end, they invested twice as much money, but made $6.0 million profit compared $2.5 million.

Now that's a huge chunk of info to digest, and either way, both of them were winners. One was just a bigger winner than the other. But some thinking like that could make the difference between making money or losing it. Take three million dollars off both those totals, and Company B is still $3.0 million ahead, but Company A is now $500K in the hole.

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OK, if you're still awake, let me explain how that applies to faceplates.

If I, or anyone, licence a property to turn into a faceplate, the questions include:

What do I licence?
How many do I buy?
How much can I afford to pay for the license and mfg.?
What "out of the box" options could I use to get my cost down?

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What if there was a new Disney movie coming out, let's say Pirates of the Caribbean 4 and there was going to be a game. I could sell them to game stores, but I could also sell them to Disney stores, an outlet that isn't an option for a standard game. There's also Disneyland, with a HUGE amount of traffic, and all that traffic has money in their hands to spend.

What if you made faceplates for rock bands? Green Day, Korn, Metallica, Slipknot, Mars Volta... let's say you made faceplates for thirty major bands. You could sell half of the faceplates in stores and half back to the bands at cost for them to sell at concerts along with the shirts and dogtags. You sell them to them at cost BUT... your cost is lower because you could buy more, which means you make more off the plates you sell to stores, yet lose nothing on the plates you sell to the bands. (That applies to the Disney example as well).

I like my Disney idea. If it was the right Disney movie/game, you could get more store visibility and get it into stores that wouldn't usually carry faceplates.

Let's look at the band thing again. Let's say you got permission from thirty bands, and you made two thousand plates for each band. You got the price way down, and sold 1500 of each 2000 plates back to the bands at cost plus 50%. Two thousand plates cost you $5000. That's $2.50 a plate. You sell 1500 of the plates directly to the bands for sale at their shows, for $3.00 each. That's $4500. The 500 plates you have left only cost you a dollar a plate. Up the price to the bands to $3.50 a plate and you made $5250. You're already $250 ahead and you've got 500 plates left. Let the bands know that they're getting them for $1.50 less than what retailers will pay for the plates to cover the licensing/permission fee. You're knocking $2250 off the total cost of the plates to cover the fee, in exchange for making them the majority of the plates. (A usual licensing fee is 5% of the retail fee. At $14.99, that would be, oh! Seventy-five cents! You're paying double their normal licensing cost? Aren't you swell!)

Now that's with one band. Multiply that by THIRTY bands, and you're $7500 ahead AND you've got five hundred plates x thirty bands... you've still got 15,000 plates to sell that cost you nothing. You could sell them for whatever you wanted.

So let's say you take 450 of these plates to sell, but you keep 50 of each. That means you've got 13,500 plates to sell, and 1500 you're keeping to yourself.

You take these 13,500 plates and you make a deal with GameStop to send six various plates to their top 2250 stores. You sell them to GameStop for $5.00 each ($67,500 profit because the plates are already paid for, you see)
They sell them for $14.99, the same price as the Guitar Hero III faceplates with the bands on them....hmm...

Now let's step back and survey the landscape. Thirty rock bands are selling Xbox 360 faceplates at their shows for $19.99. Stores are selling them for $14.99, but it's totally the luck of the draw whether you can find YOUR favorite band at your local store. You hear there's a Korn faceplate out there that you HAVE to have, there's not any in any local stores, 'cause your one local store got Metallica, Slipknot, Metallica, Green Day, KISS and Cannibal Corpse. You know they'll be sold at the concert, but you can't wait and you're afraid they'll all be gone. So where do you go?

You go to eBay, where as luck would have it, there's some guy who has one of each (well, fifty of each, but... only one at a time. :) )

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OK, see what I mean? Outside of the box.

OK, last post and I'm gone for the night.

If you were in the faceplate business, what would you do? What might you like to do but probably woudln't make SENSE to do?

I'd like to see a set of Katamari faceplates, with The King Of All Cosmos, the Queen and the Prince (like my custom.) I'm not even going to ATTEMPT to make a King Of All Cosmos plate. Screw THAT.

I'd like to see a Star Wars license. One plate for each of the six movies in a displayer in stores. Nobody collects ***** like Star Wars fans collect *****. Or just great moments in Star Wars, like the "A long time ago..." plate I did, or the AT-AT snow walkers, or the Falcon, or the X-wing, or the Death Star Attack or the Ewoks or Cloud City. Lots of options there, but the licensing requires payment of offspring.

Go look at the wall of t-shirts hanging in a Hot Topic, and imagine if every one of those was a faceplate. Family Guy, Napoleon Dynamite, Fairies, Pirates, Goth-ites (whatever), rock bands, punk bands, Labyrinth, Evil Dead, anime, Hello Kitty... the ideas are endless.

omfg.. omfg omfg omfg omfg omfg omfg....

What you're basically getting at space is the very basic principle of supply and demand, high demand equals higher cost, low demand equals lower cost, high supply equals lower cost, low supply equals higher cost. Basically whatever ghost was trying to say, company B had a larger inventory than company A. As company A only had 100K worth of inventory they had to jack the prices up to cover manufacturing costs and to make a profit. Where as Company B invested more money to make more goods thus being able to lower the price of their wares due to the amount of stock they had but keep it at a reasonable price so that they earn back the money invested and earn profit from that. Very simple concept of supply and demand, I hope that was what you were getting at.

Also space the questions you just asked is basically questions governments ask itself *well a bit different but nearly the same thing you're asking*

What to produce?
How to produce it?
And how much to invest to produce said product?

*just thought I'd say that*

If you're seriously looking at investing in some sort of faceplate creation company you have a little more you need to factor in:

1. The Microsoft faceplate is protected by a slew of patents. Microsoft might be willing to give you a license to replicate their faceplate style... once you pay them a nice licensing fee. The bad thing about fees like this is that they don't assume they will be collecting royalties, they would rather have a huge chunk of money up front before allowing you to create replacement parts for their system. Of course 'rather' is a soft word for it... they will probably 'demand' money up front.

2. Video game consoles are still a niche market when compared to the overall global retail industry. And faceplates for the 360 are a niche market of that niche market. And a custom faceplate is going to only appeal to a niche market of the faceplate niche market of the system niche market. On top of that you will have well established companies D, E, F and G pouncing on the idea while you get everything organized.

Don't get me wrong, I am really awed by a lot of the faceplate collections I see on this site... but if I had money to invest, this would probably be one of the last places I looked it.

Well, I'm thinking at least two of you read my late night rambling.

It was a little more complicated than supply and demand. THAT part I understood going into the business class. What made an impression on me was purchasing more than you might think necessary in order to get your cost down, and then when your competitors came in with a lower priced product, you could be ready for them with the good version, at a lower price.

I do know there's an upfront cost. You can't wait until you get your five bucks, and then pay Microsoft twenty-five cents of it. I'm also aware that it's a niche market. I worked three years in a boutique industry called Christian Music. Christian Music is similar in a lot of ways to video games. There's a set audience for it, people's interest in the industry will come and go, there's always a breakout title/artist or two who gets the whole industry some extra attention, and there will always be a large number of people who are not interested and will never be convinced, no matter what you do.

FYI, I was on the sales team who sold the first Christian album to ever ship 500,000 units to retail, or ship "gold." I even got a gold record for it, and I later got a double platinum record (yes, with my name on it) for the crossover hit "Butterfly Kisses."

So while most everyone has a music player, not everyone has a 360, yet some 360 titles are selling right up there with the hottest CDs. What's more, only 10% of the ten million people who own a 360, own Guitar Hero III, and yet, there is a LARGE vareity of band faceplates for the guitars. The assumption is that people willing to pay $99 for the game and guitar, will not only have $15 to spare for a faceplate, but they're fans of music who will likely collect multiple plates.

There wasn't really a point I was trying to make, beyond starting a discussion, btw. I'm not here defending the decision to go corporate or anything like that. Kamshaft checked into getting plates for the site and it was insanely expensive because he didn't have an outlet for the sheer number of plates it would have required him to purchase.

Oh, and I would never take customs "corporate." I can't keep up with the minimal demand I have now (150 plates). I can't see any justification for hiring a dozen artists to crank out custom plates to sell at retail. It would be about finding a manufacturer who makes plates, acquiring a license that appeals to the largest number of people yet remains a low enough cost to not kill your margin, and THEN securing retailer orders/interest before plopping the dollars down.

Like space ses the best way is to get into the crossover markets, thats where the big money is, ie: star wars fan who is a 360 owner = a person who wants a starwars faceplate. This type of person is obviously more common than say someone who owns a 360 and likes Bob Carlisle's music, this person may not be willing to buy a butterfly kisses faceplate(obviously this is a way extreme example).

When thinking about an idea for a faceplate that's what I take into account, will this spread widely enough across both of the markets I'm looking at to get a nice profit. That, and do I enjoy the subject matter of the plate enough, so that I have fun making the actual plate. If I don't have fun making the plate I won't put the utmost quality into it. ie: I would not have fun making a pokemon faceplate.

interesting concept, do i smell a new business venture?

Probably not. More money than I care to risk right now.

Quote:

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Originally Posted by SpaceGhost2K

Probably not. More money than I care to risk right now.

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Well if you decide to risk it you can put me down for 1 space ghost zapping something plate, one zorak and a brak plate as well.