Licensing And Open Source 2009.11.03

Licensing & Open Source Droidcon, Berlin - 4 Nov 2009 Volker Hirsch CEO Blue Beck

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

Why am I talking about Licensing?

Here it Comes

Q: Do brands care for open source? A: No. Brands are platform-agnostic.

Licensing rationale Developer License $$ $

How (on earth) do I get a license?

Common Solutions: 1. 2.

The Average Licensing Model (Simpliﬁed Version of how it was, is and always has been)

• 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...

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.

Not very compelling.

Show me the money...

It’s in your pocket... Catchy phrase inspired by Jonathan MacDonald Just ask the right question!

Licensing Q: What do brands look for?

BRAND Licensing Q: What do brands look for?

A: Users. Users are also commonly known as “customers” or “consumers”

Sell or Else... David Ogilvy

BRANDS... • Sell Services & products. • Promote their Image & Message. • Open additional revenue streams... - Licensing!? Licensing is NOT core!

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.

The right question: How can you help them?

Here’s your Pitch:

Use Media to Extend Reach! Digital media advantage vs analogue media: interactive, i.e. multi-directional.

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)

480,000,000

480,000,000 Daily global circulation of newspapers

480,000,000 Daily global circulation of newspapers 1,500,000,000

480,000,000 Daily global circulation of newspapers 1,500,000,000 Number of Internet users

480,000,000 Daily global circulation of newspapers 1,500,000,000 Number of Internet users 1,700,000,000

480,000,000 Daily global circulation of newspapers 1,500,000,000 Number of Internet users 1,700,000,000 Number of credit cards

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

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

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

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

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

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...

... 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

(c) gapingvoid

Change the Language...

Engagement! • Engage, don’t lecture. • Be Sincere. Mean what you say. • Result: users become brand ambassadors. + No Fine Print YOU!

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

Old World vs New World: It works now. 176x208 J2ME games Current-generation iPhone games

01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100

X 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100 10100110010011100101010101110 01100110101101001100100100100

Brands’ and Users’ Perspective: Shine, not tech talk. vs

Damn’ it! This all smells of iPhone! Where’s Android? (c) gapingvoid

It’s here: Well, it COULD be here (if the Open Handset Alliance executes well).

Let’s ask again: Q: Do brands care for open source? A: Yes.

This is why: 123,296,966,069,999,387,456

This is why: 123,296,966,069,999,387,456 The Law of Big Numbers

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

How Android apps compare (2) Flurry Analytics Blog, 6 Aug. 2009

Android is set to explode. Eric Schmidt, CEO Google

Inspiration! $ t

Android’s Weapon OPEN = Inﬁnite scale! Platforms Vendors

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])

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...

Image & Video Credits http://www.explodingdog.com/drawing/ihavenoidea.jpg http://1.bp.blogspot.com/_Vr8Xl0cbUZA/SVJzaekjMQI/AAAAAAAAFWU/gvOyNNzcdis/s400/Image+%3D+clueless+is+no+excuse.jpg http://www.mtco.com/~rkblack/Open-Door_0032a.jpg http://filmgordon.files.wordpress.com/2009/03/conneryaston.jpg http://www.gapingvoidgallery.com/images/talkedjgif002.jpg http://www.iphoneincanada.ca/wp-content/uploads/2008/07/carling_ipint.png http://www.mobileshop.com/blog/wp-content/uploads/2008/10/ipint-virtual-beer-under-fire.bmp http://farm4.static.flickr.com/3250/3074199062_f434be862a_o.jpg http://miraloqueveo.files.wordpress.com/2008/09/david-ogilvy.jpg http://www.nationalserviceexpress.com/mogulus-user-uploads.s3.amazonaws.com/B6A8222A-4B39-2BD5-CF85-179823589EF8.jpg http://gapingvoidgallery.com http://nexus404.com/Blog/2009/10/23/2010-volkswagen-gti-presented-in-iphone-game-play-firement-real-racing-and-win-a-2010-vw-gti-exclusively- on-the-iphone/ http://www.toptenreviews.com/i/rev/misc/articles/old_blog/blog_963_1.jpg http://www.iphonic.tv/assets_c/2009/07/barclaycard-waterslide-extreme-1-thumb-430x285-92255.png http://www.oneighturbo.com/wp-content/uploads/2009/09/01-oneighturbo-sciroccoR-iphone-091509.jpg http://media.photobucket.com/image/papa%20roach/crazyOAgirlFERlife/Papa_Roach.png http://www.youtube.com/watch?v=dPYM-XTqcec http://markhirschfeld.files.wordpress.com/2009/08/open-door1.jpg http://www.freeverse.com/assets/games/9003/screenshots/456/174114905.jpg http://www.firemint.com/realracing/screenshots.html http://i264.photobucket.com/albums/ii187/botvinya/worker_mechanic.jpg

Thank you! +44 7843 599 678 @vhirsch vhirsch@bluebeck.co.uk http://bluebeck.co.uk http://vhirsch.com/blog

Licensing And Open Source 2009.11.03

by Volker Hirsch on Nov 04, 2009

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