Wednesday, July 6, 2011

Fortune Telling

I attended an industry function last week. Everyone was milling about discussing the biz: who's working where and on what, to who, etc. The topic turned briefly to a small studio owner. He's got a decent business providing service work to larger studios and making TV commercials. Great for him - he's living the dream.

Now let's flash forward 15 or 20 years. Our studio owner is ready to retire and wants to sell his studio. What is a studio - and what is it worth?

If he's bought the building that his studio occupies in downtown Toronto - he's sitting pretty on some prime real estate, so he's set. Let's not worry about him. If he's renting his studio space - then the asset is the studio itself - so let's look at that.

What is a studio?

A studio is made of up three things: People, equipment and intellectual properties.

You can't sell the people. That's kinda, sorta... against the law. The new owners would have to keep the key talent from leaving. But that's a variable - they might stay. They might not. So that's not an asset.

The equipment. The hardware and software is outdated the moment it hits the store shelves. So the gear itself isn't worth much. Maybe 1/2 of it's list price at best. Maybe there are some rare and collectible pieces of art or autographed tchotchkes lying around. Who knows? But overall, the stuff ain't worth much.

And then there are the Intellectual Properties. What characters, shows, logos, trademarks does the studio own? These little gems are what holds the value in the future. This is what people want.

I was watching Dragon's Den the other night - that's the show where people pitch ideas to Venture Capitalists. The lady who created Woofstock (a dog festival) was offered $500,000 for 50% of her business - with the opportunity to grow it bigger. The key interest to the investor was that she had worldwide trademarks on the name and the brand. A name and a reputation for quality is worth a half million dollars - and she turned them down.

I was chatting with the founder of a local festival yesterday. Someone has started a competing festival - calling it a "summer version" of the original. I advised my friend to trademark the name which she had originated and was now being widely used. Its one of those things that could be very valuable in future years.

Create something new and original. Grow it. Own it.

I met with a very smart man yesterday. He gave me some good advice - the equation for wealth.

Innovation + Harmony = Money

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