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2012 The fifth ‘P’ in the marketing plan of animation and media business ‐ IP Management in MediaFreaks Fong Hoi Yan Anna Chai Kah Hin Institute for Engineering Leadership National University of Singapore 7/7/2012 The case study is a joint work between the Intellectual Property Office of Singapore, Intellectual Property Academy and Institute for Engineering Leadership, National University of Singapore as part of the larger campaign to raise awareness in IP management in Singapore companies. The case is for educational purposes and does not illustrate the effectiveness of the companies’ practices or policies. MediaFreaks: The fifth ‘P’ in the marketing plan of animation and media business At the end of the day…if it is a game, it’s still an IP…the moment you sell, even if it is 99 cents, you still get 99 cents…and the advantage of it is that if you sell enough copies of it, people start knocking at your door to ask for licensing rights. - Aldric Chang, Managing Director, MediaFreaks Introduction ‘WE ARE CLOSED, SORRY – “The Travels of Wiglington and Wenks Virtual World” is currently closed indefinitely…we have found it difficult to raise economic finance for further development and 2 marketing. Without such finance we cannot sustain operations… (we need) to keep costs down.’ This is currently showing on the website of the latest cartoon series ‘The Travels of Wiglington and Wenks Virtual World’. This is not the first cartoon series that MediaFreaks has put its hands on. In 2006, MediaFreaks started their first in-house cartoon creation of a caterpillar character, Katakune. It was an early childhood educational series targeting children from 2 to 5 years old. This cartoon series had an encouraging start. Its DVDs have been sold to US, Thailand, Taiwan and the Middle East. This success boosted MediaFreaks’ confidence to work on a second cartoon series, Sedo Dog, immediately after the Katakune series. Again this cartoon series was promising, and had also been commercialized, and can be found in various merchandise like notebooks, stickers, toy and stationeries. Yet, why were Aldric and Adrian, the General Manager of MediaFreaks, determined to take this drastic move of discontinuing the game, which has a fantastic storyline and an interactive platform, indefinitely for now? Isn’t the gaming platform a wonderful combination of a traditional cartoon platform and a trendy online gaming platform? Haven’t they spent a lot of money in developing this platform? Have not the first two cartoon series given them the confidence for this game? What made MediaFreaks decide on this discontinuation? 3 Background Prior to establishing Mediafreaks, Aldric wrote and produced music professionally. Some of his works include composing and producing songs for singers like Sun Ho, Jade Kwan, Skye Chan, Zhou Ling, Huang Ming Hao, etc. From producing music to producing animations, it seemed to be a huge detour. However, from a closer look at the two industries, it wasn’t difficult to realise that both rely heavily on intellectual properties to generate income. Building up an IP portfolio MediaFreaks started off in 2003 by doing freelance jobs on animation, graphic designs, web design and multimedia work. A year later, MediaFreaks received their first local project of $30,000 to produce a medical animation CD-Rom for a nutrient company. Subsequently, they were involved more and more in other medical animations, documentary projects and TV commercials. However, all these works were commission-based. MediaFreaks did not and still does not own any intellectual properties doing these projects. Aldric and his team were fully aware that for an animation company to survive in the longterm, MediaFreaks had to have their own cartoon characters, meaning their own intellectual property, so that they could earn from the licensing. 4 In 2006, MediaFreaks started their first in-house cartoon creation of Katakune. This venture was the first step MediaFreaks took towards a long-term, high-risk but yet potentially highreturn investment. And it was from there that MediaFreaks started to formulate their current business model. Katakune was a prize for MediaFreaks. Following its success, the second series Sedo Dog immediately followed. The road towards licensing cartoon characters was being paved. With the creation of their own cartoon characters and the help of the Singapore Media Development Authority, MediaFreaks started to be aware of the importance and means of protecting their very own intellectual properties right from the birth of their first cartoon series Katakune. Contrary to the beliefs of many, the initial cost of IP management was not high. In fact, some of the costs involved in trademark applications were subsidized. With the help of various IP seminars from SPRING Singapore and the Intellectual Property Office of Singapore, MediaFreaks managed to leverage on the professional advice of recommended lawyers and became equipped with the technical know-how of IP management. Armed with book knowledge, Aldric and Adrian slowly began to flex their muscles in managing their own intellectual properties. The hands-on allowed Aldric and Adrian to fine-tune and internalize their book knowledge into a strategy of its own. They started off ‘overprotecting’ their cartoon characters by applying to many classes of trademarks and eventually realised that they had no plans to extend their merchandise to those categories. And it was from this point 5 onwards that the fifth ‘P’ – IP, started to be assimilated into the marketing plan, on top of the well-known ‘4P’ in The fifth ‘P’ – IP, started to be marketing plans1. From then on, unconsciously and yet assimilated into the marketing critically, the IP strategy of MediaFreaks has never been plan, on top of the well-known disengaged from their marketing strategy. This was a ‘4P’ in marketing plans. lesson from their hands on experience in managing IP. IP strategy Balancing the financial risk In an animation company, the extra ‘P’ is inevitably intertwined with the ‘P’ of ‘Product’ in marketing, so much so that there is no way not to think about it in the marketing plan. Firstly, Aldric and his team are now more strategic in applying their trademark coverage after the over-protection in Katakune’s case. Aldric and Adrian realized from the experience of Katakune that many of the Trademark classes that they have applied for were not eventually 1 The four ‘P’s of marketing plan are Place, Price, Promotion and Product. 6 utilised in merchandising. Over-protection can be a common pitfall in many companies that are new to IP management. Strategically placing the I‘P’ in the marketing plan on top of the traditional 4‘P’s might save the company substantial amount of expenses. The Katakune experience has aggregated to a new strategy in Before they apply any class for MediaFreaks. Before they apply any class for protection in their trademarks, protection in their trademarks, Aldric and Adrian Aldric and Adrian would first would first decide on the target customers of the decide on the target customers of cartoon characters and the potential merchandise that the cartoon characters and the best suited their cartoon personalities as well as the potential merchandise that best corresponding group of customers. “(We’ll) see what suited their cartoon personalities is manageable for us, in terms of where we go, where as well as the corresponding group we want to protect, like the territories we want to of customers. explore, the classes, because we simply can’t afford everywhere, we’re not Disney…for a small company, this is the kind of strategy and approach we have to take”, as Aldric humbly put it. In fact, from the experience of Katakune, Aldric and Adrian have also concluded that they need a flexible marketing plan. In the case of a cartoon series, it may not be necessary to apply for trademark in all the potential target countries immediately following the cartoon production. Instead, one should assess the market response to the carton series before deciding whether to file a trademark. After all, it would not be good use of money to file a trademark in a country 7 where the trademark is of little value. This dynamic nature in the fifth ‘P’ - IP in the marketing plan comes from the nature of the animation product. This dynamic IP calls for timely deployment of IP strategies. Another financial risk related to cartoon production that calls for a good balance is the platform that carries the product. No doubt Katakune, Sedo Dog and In fact, developing a cartoon other licensing did generate significant revenue for platform for licensing is a MediaFreaks over the years, and who knows if one of these high-risk, slow-return or all of them would be the next ‘Hello Kitty’ from investment. Balancing these Singapore. This would truly be a dream-come-true for high-risk projects, there are, Adrian in profiting continuously from the IP generated. on the other side of the scale, However, cartoon production may not be the most reliable lower risk and faster returns means to get the bread and butter for MediaFreaks. In fact, options. developing a cartoon platform for licensing is a high-risk, slow-return investment. Balancing these high-risk projects, there are, on the other side of the scale, lower risk and faster returns options. Extreme cases would be the familiar commission work for developing TV commercials, architectural and medical animations and documentaries. Although these assignments are one-off deals, these assignments not only can be the bread and butter but they may also be the capital for the next mega projects like cartoon series. With MediaFreaks’ industry position and experience, they can even be more selective in these projects to optimize their manpower and revenue. 8 In between these two extreme platforms, there are online games and mobile applications. As games do not need a massive storyline, neither do they require mass production, so they would not be as big a bet as a cartoon series, where substantial upfront investments are needed. With the convenience and popularity of the internet, online games also have a low-cost platform to be sold on. Gone are the days when all games would cost more than a movie. Nowadays, games can be bought with just the cost of a drink. This low-retail-price, large-volume business model fits perfectly with MediaFreaks’ current low risk, fast return IP and marketing strategy. Safeguarding the Intellectual properties In a knowledgeTied closely to financial risk is the risk of ideas appropriation. In fact, IP based economy, law was set out to protect the expressions of ideas traditionally. In a it’s all about knowledge-based economy, it’s all about ideas. Ideas can be potentially ideas. Ideas can equated to money. Preventing ideas from being stolen should be a natural be potentially response. Aldric and Adrian would probably be closing their eyes in their equated to money. years of experience in the animation industry if they miss out this important point. They are astutely keeping their ideas confidential when discussing with clients. Of course, their industry position now would make it a breeze for them to do so and still clinch a deal. For some companies, they may need to devise further plans to deal with this risk of idea appropriation. That would then be their adjusted IP strategy. 9 IP Infringement and Enforcement Being in the business of media, intellectual properties are the main assets of the company. Aldric and his team are highly aware of the potential infringers lurking out there. These infringers come in forms ranging from pirated versions of their cartoon series to replicates of similar cartoon characters on merchandise. In most cases, Aldric would try to settle the issues with the infringers in a peaceful way. And Aldric is not afraid to do business in China where infringement is known to be rampant. China is just too huge a market to miss out. With a population of 1.3 billion, even if there are infringers out there and it is necessary to compete on prices, the number of potential customers still makes China a lucrative market. In fact, reacting to IP infringement with a positive attitude, Aldric actually thinks that it's a good sign when people are infringing his products. This is because it is only when the products are famous will others infringe them. Merchandise bearing logos like ‘Hello Kitty’ would face endless cases of infringement. He would be happy if his companies' cartoons can reach that stage. However, he is aware that he needs to be on alert for the Not only is he aware that activities out there and to be on the guard. He and his team do he needs to be on the set up internet alerts when similar names come up. They also guard for potential monitor characters available online in order to keep themselves infringers, he is also informed. Not only is he aware that he needs to be on the guard for potential infringers, he is also conscious that his company does conscious that his company does not end up infringing others. not end up infringing others. He and Adrian would perform their due diligence on all their 10 designs and if they find that their designs are very similar to others; they would change their designs to avoid potential infringement. This has happened to the initial protocol of the Katakune design. Through keywords searches, they checked out on major search engines to see whether their cartoon character Katakune resembled any other silkworms already available. If so, they would redesign to make sure that their designs are original. In naming their cartoons and media animations, Mediafreaks is also conscious of potentially infringing others. One such case is a mobile game developed by MediaFreaks. It features a lamb that later mutates to a zombie killer. MediaFreaks wanted to name it L-A-M-B-O. They realised after a due diligence check that Lambogini had already registered similar trademarks. Not wanting the risk of being sued in the future, MediaFreaks used the name L-A-M-E-B-O instead, “as it is still quirky... and …got through, no problem”, as Aldric jokingly revealed. Despite all these efforts to prevent infringement, the cost is reasonable. Ultimately, it’s about balancing the cost of IP management and its benefits. “It is essential (to factor in the manpower to perform the due diligence in the planning stage), because without doing that, we should not even start on the project”, as Adrian emphasized. However, Aldric and Adrian use easily available tools such as Google to perform their searches and will not overspend in prevention. “This is equivalent to how much manpower you have…and your ability to search for similar products. So even if today you consult the best lawyer in the whole world, the best IP lawyer in 11 the world, they have very limited tools… when you talk about something as subjective as image…it’s limited to the amount of time he can actually spend looking into this… We are not doing more not because we don’t want to, but because we’ll have to hire more people to do that and that doesn’t make economical sense anymore”, when asked about whether additional efforts are needed to prevent infringement. But is IP just all about protection, so much so that the ‘P’ in IP means ‘protection’ solely? It’s all about ‘profits’ The evolved business model with a firm IP in the marketing plan has allowed MediaFreaks to be lean and more agile in The evolved business model reacting to changes. Not only can MediaFreaks find with a firm IP in the equilibrium in managing these technological and financial marketing plan has allowed risks, this model also allows MediaFreaks to shift the pivot MediaFreaks to go lean and to react to market change. The discontinuation of ‘The be more agile to react to Travels of Wiglinton and Wenks Virtual World’ can be changes. seen as a brave decision made using this dynamic marketing strategy. The investment on the platform had been done and the IP had been developed. It was a choice for MediaFreaks whether they wanted to continue to plan, and in doing so use up more financial and human resources. Yes, profiting from IP needs to be planned. With the evolved marketing plan, Aldric and his team are very clear that this I‘P’ is clearly in their business plan; it’s just a matter of shifting the resources for now to focus on other projects that may be closer to 12 the low-risk, fast-return side of the scale. The shift in pivot would allow MediaFreaks to find a new equilibrium to optimize profits. This ‘P’, be it properties, or protection or profits, will not disappear from the company. If opportunities come, Aldric and his team would spring back to it for sure. Business Results – ‘I Profit’ From a two-men-team in 2003 to the current team of over twenty people, MediaFreaks has grown to be a well- Secrets of the Battleship Yamato shown on Discovery Channel known and award-winning 3D animation company with its specialized and well-defined core business. Its clients are famous local and international brands. Their works have been used in National Geographic Channels, Discovery Channels and many more. Brands like Nippon, Clorets and the local soya bean brand Mr. Bean have all engaged MediaFreaks to produce their TV commercials. MediaFreaks’ services now range from providing animations for TV Commercial for Mr. Bean architectural, medical and documentary purposes to cartoon series and characters licensing. With the current hits on mobile and web applications, MediaFreaks has also spotted this new market 13 and ventured into this area with their Lamebo vs Zombies mobile game and apps. The Travels of Wiglington and Wenks Virtual World is also an example of such products. It has been ascertained by the numerous awards that it received, eg. Disney Family Fun Top 10 Fun Websites, Mom’s Choice Awards: Gold Winner, Nappa Awards: Gold Winner and Parents’ Choice Award Winner. In fact, the demand for mobile and web programming services is so huge that MediaFreaks set up a separate arm, SwapSoft LLP, to provide one-stop solutions for addressing this market. This spectrum of services provided by MediaFreaks is a precipitation of carefully blending in the IP element into their marketing plan over the years. 14 Documentary on Art Science Clorets TV Commercials Museum Mobile applications Source: http://www.media-freaks.com/ Medical animations Moving forward From a novice to an award-winning 3D animation guru, Aldric planned his path diligently and meticulously. Right from the beginning, Aldric did not choose to go through the traditional path of attending a course in digital design and animation in any design school. Instead, he chose to lay his hands on digital design through plowing on books on 3Ds Max and the downloadable trial versions of the software. After getting some fundamentals on 3D modeling, Aldric went for a two-month-course in animation in China. Not only has the course helped Aldric to improve his 3D animation skill dramatically, Aldric has also established useful contacts with the instructors. 15 One of them became the Creative Director of MediaFreaks' China office and the co-creator of MediaFreaks' cartoon series Katakune when MediaFreaks ventured out into the Chinese market. This unconventional trait allowed the 5th ‘P’ to take hold in their marketing plan. With a clear vision and faith in what intellectual properties can do for him, Aldric and his team would continue to charge forward towards establishing his “entertainment behemoth vehicle that will not just provide quality animation services to broadcasters and producers around the world, but also create multiple streams of revenue through the creation and exploitation of our (their) own original intellectual properties”. Sources, References and Related Links 1. Interviews with Aldric Chang, Managing Director of MediaFreaks and Adrian Chye, General Manager of MediaFreaks 2. http://www.media-freaks.com/ as last assessed on 2nd May 2012 3. http://www.media-freaks.com/ebooks/mediafreaks.pdf as last assessed on 2nd May 2012 4. http://blog.media-freaks.com/getting-started-in-3d-animation-my-way/ as last assessed on 2nd May 2012 5. http://www.wiglingtonandwenks.com/ as last assessed on 2nd May 2012 6. http://www.swagsoft.com/ as last assessed on 8th May 2012 7. http://www.katakune.com/ as last assessed on 8th May 2012 8. http://media-freaks.com/sedodog/ as last assessed on 8th May 2012 16