OK, let's talk about licensing faceplates.

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

---

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.

-----

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?

-----

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).