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Licensing And Open Source 2009.11.03
1. Licensing & Open Source
Droidcon, Berlin - 4 Nov 2009
Volker Hirsch
CEO
Blue Beck
2. Who is this guy?
Investment Opportunity: Little World Gifts
(redefining digital gifts)
Opportunity
Little World Gifts offers an appealing investment opportunity for
investors seeking significant returns from early stage investment in
high growth markets. Little World Gifts is positioned to maximise
returns through creating a new market for digital goods on mobile
starting with the iPhone platform with deep web and social network
(Facebook) integration. The opportunity builds on the exciting
landscape of the booming (yet still early and undeveloped) mobile
smartphone space, and the potentially enormous (and also early)
digital goods space. With extremely low overheads and high
margins, the company is set to turn over £2m in year 1, 50% of
which is profit. With a valuation of £2m (Year 1 profit x2), Little World Gifts is seeking £150,000 Angel investment
ahead of launch in exchange for 10% equity in the business. This is an opportunity to get involved early in a
dynamic business at the very leading edge of both the digital goods, and the iPhone / mobile 2.0 sectors.
Enormous Market Potential
Corporate Strategy - Licensingmarket M&A / Corporate Finance
The potential - for Little World Gifts is
large now, and growing rapidly. The Digital
Goods Market will see exponential growth in
coming years, and whilst iPhone already
has a strong customer base of content
hungry consumers (70% of customers pay
on average $80/year) for content in the
iTunes App Store), smart phone usage is set
to increase dramatically. Little World Gifts
will be on 50% of smart phones by 2014.
Growth in Global Mobile Marketing Spend
$5.70bn !
In addition there is an increasing demand for mobile marketing
and for digital goods solutions (as a key part of a digital
marketing strategy). Mobile will be more appealing and attract
$2.16bn increased marketing spend by brands. ($5.7bn in 2014).
$1.70bn
2009 2010 2011 2012 2013 2014
Growth in Digital Goods Market
$7B
Digital Goods (and specifically gifts) have
been popularised by services such as
QQ.com (China), Cyworld (South Korea), $4.67B
10. The Average Licensing Model
(Simplified Version of how it was, is and always has been)
11. • Go back to
• Developer looks at roadmap
and realises he needs
another license
• Developer distributes through his channels
AND/OR
• Licensor puts out RFP
OR • Developer finds publishers and/or aggregators to
distribute it through
• Developer approaches licensor directly • See green star...
• Game is finished and filed for
approval.
• See the green star...
• Developer prepares reply to RFP
OR • Developer waits for approval.
• Developer prepares offer outlining creative • Developer goes ahead.
concept and commercial case. Finalises beta build and files
for approval.
• Licensor approves design.
• Developer gets formal design
• Developer manages to get Licensor’s attention document under way and
OR • Kick-off meeting between Licensor files for approval.
• Developer loses... and Developer: will include creative
teams, approval departments, etc.
Look for introductions to other
licensees as it helps with co-
marketing
• In the latter case, go back to
• Deal is signed!
• If successful, Licensor comes back with huge
royalty (“50% minimum!!!”) and MG demands • Period of negotiations between expensive lawyers over every
(including sizable up-front payments; “mid-6 little term (“best efforts” vs “commercially reasonable efforts”,
figures”). etc, etc, etc, etc)
• Developer (or his banker) gets heart attack and pushes back with
elaborate explanation on development effort needed.
• The Parties negotiate hard and for weeks (or
months) until they reach common ground (which
Licensor think is shabby and leaves Developer
wondering how to ever repay his debt...
12. Result
1. Lucky 2. Not so lucky
This game delivered on brand value, execution I am not saying that this is a bad game. But it IS
and commercial success. a poor use of a brand.
20. BRANDS...
• Sell Services & products.
• Promote their Image & Message.
• Open additional revenue streams...
- Licensing!?
Licensing is NOT core!
21. Media vs Non-Media Brands
Non-media (e.g. VW, P&G, Carling): extend
their brand and image.
Media (e.g. FT, Hasbro, Fox):
(also) building additional verticals.
24. Use Media to Extend Reach!
Digital media advantage vs analogue
media:
interactive, i.e. multi-directional.
25. Use Mobile to Extend Reach!
Mobile is the most powerful digital
medium to date.
Why?
1.It’s Big (numbers)
2.It’s Personal (nature)
3.It’s really personal (Identification
of needs)
34. 480,000,000
Daily global circulation of newspapers
1,500,000,000
Number of Internet users
1,700,000,000
Number of credit cards
2,250,000,000
Number of tooth brushes in use
35. 480,000,000
Daily global circulation of newspapers
1,500,000,000
Number of Internet users
1,700,000,000
Number of credit cards
2,250,000,000
Number of tooth brushes in use
4,600,000,000
36. 480,000,000
Daily global circulation of newspapers
1,500,000,000
Number of Internet users
1,700,000,000
Number of credit cards
2,250,000,000
Number of tooth brushes in use
4,600,000,000
Number of mobile phone subscriptions
37. The Nature of Mobile: It’s a 1st!
• Personal mass media
• Always carried
• Always on
• Built-in billing system
• Always present at the point of creative impulse
• Accurate audience identification
Tomi Ahonen, Mobile the 7th Mass Media, 2008;
Alan Moore & Jonathan MacDonald, The Glittering Allure of
the Mobile Society, 2008
38. Significance of Mobile to Users...
• 91% of people have their mobile within arm’s reach 24/7.
Morgan Stanley 2007
• 64% of Americans are not willing to share their mobile with anyone. 60%
of married people will not share their mobile with their spouse!
Wired Magazine 2006
• I takes an average of 26 h for a user to report a lost wallet but only 68
minutes to report a lost mobile phone.
Unisys Survey
• 8 out of 10 German men would rather lose their wife than their mobile
phone.
Jonathan MacDonald; Survey of 10
German men at 1am in a bar...
39. ... and how Brands use it...
• In 2008, Procter & Gamble spent 0.17% of their advertising
budget on mobile.
Informa/Acision/OgilvyOne
• Volkswagen spent 1% of their DIGITAL budget on mobile
(that was 2008...).
VW CRM Manager cited by Andrew Grill
BUT
Volkswagen also just announced that the ONLY campaign for
the 2010 VW Golf GTI will be an iPhone Game (“Real Racing
GTI”)... Quick learning!*
* This is autumn 2009
43. Engagement!
• Engage, don’t lecture.
• Be Sincere. Mean what you say.
• Result: users become brand ambassadors.
+ No Fine Print
YOU!
44. Engagement!
• Games & apps are perfect for this!
- Interaction.
- Less intrusion.
- Brand takes centre stage: shine!
- Love it, recommend it.
74% of all purchases are made because of
recommendations by friends!
Bain Consulting
45. Old World vs New World: It works now.
176x208 J2ME games Current-generation iPhone games
54. How Android apps compare (1)
APPS AVAILABLE FREE AND PAID
Total # of apps Paid vs Free
Apple Android BlackBerry Free Paid
12,000 Apple App Store 23% 77%
2,900
Google Android Market 64% 36%
88,000 BlackBerry App World 24% 76%
Distimo, CTIA San Diego, 2009
59. The Equation:
Brands want users.
+ Users want good stuff (and don’t care if it is open/
closed, widget/app, this/that... as long as it works)
+ Brands want big numbers.
+ Android has (OK: will have) big numbers.
+ Android can deliver kool-aid.
= Great Opportunity for Brands
(= $$ $ for Everyone [incl. Developer])
60. Summing up:
• Engage, don’t lecture.
• Treat licensing as a brand extension, not as a
(presumed) means to sell 0.x% more.
• Forget tech-heavy preaching. Just deliver
compelling stuff to your users.
• Deliver it in big numbers.
Got all that? You have a winner!
BTW: Winner means that the user wins! The rest (incl. $$$) comes then almost on its own...