Profile of a `Train Fan’

Steven Haase

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Published in U.S. 1 Newspaper on May 31, 2000. All rights

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E-mail: barbarafox@princetoninfo.com

A New Kind of `Training’:

The co-founder of Princeton Learning Systems follows his passion down

a different kind of track

In August, 1995, Steven and Nadine Haase had a

one-year-old

and a brand new baby and had just signed a mortgage on a new home.

At that point Haase had a good job, and his wife was at home with

the children. One month after they moved into the house, Haase quit

his job and went off to found a dot-com company, Princeton Learning

Systems, to do online training for financial services firms. With

no income at all for the first year, they would soon come to be on

intimate terms with their creditors.

Haase landed Merrill Lynch as his first paying client one year later,

in July, 1996. Then Donaldson Lufkin Jenrette’s Pershing division

signed on to a branded version of the firm’s "Financial Services

University." Four years after quitting their jobs Haase and his

partner, William Healy, sold their firm to another hot young dot-com

— younger than theirs, but better funded and about to go public.

They can’t reveal the sale price, but Haase does say it was

"millions

of dollars."

Now the Haases’ bills are paid, the mortgage is taken care of, college

funds have been established for the children — and what is Steven

Haase doing now? He has bought his stepfather’s business and is having

the time of his life. The new business — selling railroad videos

— seems worlds apart from training stockbrokers over the Internet,

but it presents the same challenge: How to persuade a very

conservative

industry to make pioneering partnerships with a new media firm.

"The first couple of years," says Haase, "the financial

industry did not see themselves as needing us. The Internet was brand

new and not widely available across the major companies. It took a

lot of persistence in convincing them that Internet delivery of

mandated

training was much more efficient."

The train market is similarly conservative. "This industry is

very slow in adapting to the Internet," says Haase. "But both

competitors as well as providers of other products and services are

looking to us as the online experts. It’s a nice position to be in,

and I feel very confident that we can now go to the various railroads

and work in partnership to elevate public perception of railroading.

We look forward to establishing a leadership position and helping

the hobby reach a wider audience by leveraging the Internet."

Top Of Page
Profile of a `Train Fan’

Stop the train. Pull the emergency brake and come to

a screeching halt. Just what kind of market is this, anyway? Hardcore

train video fans are almost totally separate from the model train

builders.

Most are men. Some chase trains — they pile in a car with their

friends and follow a train for an hour or a day, always trying to

beat the train to the next stop. Some are trackside watchers —

they bring picnic lunches and set up for the day to log in the trains

that go by. There used to be a third kind of train fan, the ones that

would try to ride in the cab with the engineers, but the federal

government

levied severe penalties and put a stop to that.

Haase has a library of more than 275 train-related videos appealing

to both the trackside fans and those that like the cab rides, called

"head-end" rides, plus some vintage tapes. "For the train

fan, experiencing a ride in the engine cab is the equivalent of a

football fan watching the Superbowl," says Haase. "Through

our videos they can step back in time and relive the excitement of

an early steam engine in full operation."

"The size of this market is one of the better kept secrets

around,"

says Haase. He just returned from a trade show in Massachusetts that

drew 25,000 people over two days and figures the train and railroad

hobby industry is $2 billion now and growing.

Harold H. Carstens, publisher of the 50,000 circulation trade

magazine,

Railfan & Railroad, estimates there are 200,000 hardcore train fans

who regularly buy videos, and that does not count the 300,000 people

whose hobby is model trains but occasionally buy videos. Haase says

the fringe market is even bigger.

"My father was a techie," says Haase, "and my stepfather

was a lifelong railroader, and I was exposed to a lot of both."

He grew up in Rahway but when he was 11 his family moved to Lancaster,

Pennsylvania. His stepfather worked for Amtrak as vice president of

communications and signals and started Railroad Video Productions

in the mid 1980s, almost by chance. "He got on a GG-1 (a type

of engine) that was making its last run from South Amboy, and he took

a video from the engine cab, looking out, for his personal use. Word

got out, and he ended up selling several hundred copies. Putting two

and two together, he realized that if he did other `head-end’ trips

there would be a good market."

"He took a classified ad in national railroad publications and

got phone calls on an 800 number. My brother, myself, my mother, and

friends would help out on replication and fulfillment. I started doing

local train shows, setting up racks of our VCRs with monitors and

highlight tapes. I got a chance to go to another city, finance my

evenings out, and make a little money on the side."

Top Of Page
Steven Haase

At Rider University (Class of 1989) Haase majored in

management and organizational development and change. In the summers

he worked for on Wall Street, where his father was vice president

of technology for several financial services companies. Haase worked

at Citicorp for four summers and took a liking to the financial

services

space and New York City.

"My senior year I got the entrepreneurial itch and decided to

focus on Railroad Video after graduation. I saw it as a wonderful

opportunity to expand the business. My stepfather, Walter Berko, had

kept it to a level where he could manage it as a two-person operation.

When he got too many phone calls he would reduce the size of the

ad."

For six months, commuting from Lancaster to the home of his fiance,

he built up the video business by opening wholesale outlets. "It

was my opportunity to repay my parents for picking up my college

tuition,"

he says, "and we expanded to 100 retail hobby shops." Back

in New Jersey he went to work for Prudential, selling financial

services

products for a year.

Here comes the "it’s a small world" department. Through his

future sister-in-law, Judy Tocatlian, who was managing the HQ shared

office space at Forrestal Village, he met his future partner, William

Healy, former vice president of training for American Express,

Shearson

Lehman, and Merrill Lynch. Haase left Prudential to join Healy and

start up the United States arm of a distance learning provider,

Toronto-based

VMI Communications and Learning. He sold Prudential a $12 million

contract for VMI to standardize its training by putting it on a wide

area network. "It was very timely. After I had gone through the

new hire training process, a year later we won the contract,"

he says.

Implementing this contract taught them a great deal about distance

learning. Four years later, and right after they had landed another

big account, they started Princeton Learning Systems. "We had

just bought a house and had two kids under the age of 14 months. I

was due a whole lot of commission money and did not get that money.

This account would have provided a lot of stability," says Haase.

"But I had my wife’s full support, which is a lot of the reason

I have had some success. We had no revenue, no clients, and a lot

of vision, but vision doesn’t pay any bills. We got to know all of

our debtors over the years."

A competitor threatened on the horizon, Yipinet, now known as e-Mind.

"We decided we were better off selling to e-Mind because they

were going to do the IPO a year before we were. We saw a premiere

management team — from Disney, Activision, and others — and

we saw the window closing. We could have competed with them, but they

were much better financed, in that they had raised four times the

funds that we had," says Haase.

E-mind’s corporate headquarters is in Los Angeles. On its web site

(www.e-Mind.com) are the current E-learning offerings: a course

library,

a learning management system (for assigning courses and tracking

progress

and scores, an E-mind product), a custom course service (for

integrating

a company’s proprietary learning material), and a customer service

team. The customer service team and any of the courses relating to

financial services are from PLS.

Haase and Healy expected to continue with the e-Mind, but that did

not work out due to what Haase calls "different management

philosophies.

We ended up leaving some very good folks at PLS as well as at e-Mind.

e-Mind is among the top three learning providers and upon doing their

IPO will be the leader, and I know that space very well." Healy

lives in Clark and is doing some consulting.

Now Haase relishes having more time with the family — as

chauffeur,

soccer coach, and baseball coach — and mixing family with

business.

"When I go home in the afternoon versus evening and have

dinner with the family I can talk about how we are doing a video on

Conrail engineers and show some sample footage and the children can

give a thumbs up or a thumbs down. Believe it or not they can take

a very active role. I see myself doing this for quite some time."

His "proof of concept" was a series of presentations at his

children’s school. "Never in my life have I seen a group of

children

so focused. We let them be engineers and got them dressed up in hats

with wooden whistles, and then showed the video. For two hours we

had the undivided attention of the classroom without the aid of any

teachers. That is pretty unusual."

Kids, he points out, do not like narration or head-end rides. They

like the trackside films, so they can stand in front of the TV and

see the engines go by. Videos aren’t as good as being there "but

it mesmerizes them and they enjoy the electric engines and the diesel

engines."

Today his company has two employees, Debra Vorp, manager of service,

and Barbara Wasylyk, vice president of sales, plus seven freelancers

in such areas as graphics and site development. His graphics, in tones

of sepia and gray, draw from a library of ’60s photos but have a turn

of the century aura. From his stepfather he has a library of more

than 275 train-related videos plus hours of stored train footage and

prospects for new video shoots.

"We are also acquiring content from smaller video producers who

don’t have the knowledge and resources to get a site up," says

Haase. "That is very similar to the relationships we had with

Princeton Learning Systems, where we had a percentage of the sponsor’s

revenues."

He has about 6,000 customers who buy videos "fairly actively,"

and they are divided between those who like narration and those who

don’t, and by those who prefer trackside to head-end (cab) rides.

About 25 percent of model train collectors are also railroad video

enthusiasts.

"People do not buy the tapes for the scenery," cautions Haase.

"Ninety five percent buy it for sounds of the various engines

and to experience the conversations with the signal towers. For the

most part you are seeing track with maybe 100 feet on each side and

you will go from point A to point B and see oncoming trains and live

what the engineer lives."

A second series of trackside tapes films from various points on a

route so the viewer can see the engines go by. "Millions of rail

fans are doing that these days, spending a weekend in Johnstown and

watching the various freight trains and Amtrak engines come by,

logging

in what they are seeing, and that’s their hobby."

His site will have chat rooms related to products, videos, books,

calendars, on-line customizable photo albums, and personal home pages.

But no mugs or hats. "The margins are not there but the headaches

are," says Haase.

A typical customer is the 45-year-old male who, on Friday afternoon,

will place a series of videotapes on the TV and decide to

"travel"

from Boston to Miami over the weekend by watching 20 or so tapes,

one after another.

Flush with funds from the sale, Haase is his own venture capitalist

for now and plans to invest an initial $250,000 plus an additional

$100,000 to $150,000 before getting another round of financing. His

major costs are $60,000 to $70,000 for launching the site and a

$50,000

marketing and advertising campaign including full page ads in two

industry publications.

Within the next six months he plans a round of financing and thinks

he will have an easy time of it. "In hundreds of discussions,

regardless of who I tell about this, there haven’t been more than

five people who didn’t know a train enthusiast, for the most part

— in the family or a good friend."

His major competition, a West Coast firm named Pentrex, has a

similarly

sized video library and a huge advertising budget, but Haase says

Pentrex does not serve the hard core train fan because its videos

are larded with narration. "The hard core fan doesn’t appreciate

a lot of voice-over that takes away from the actual production. They

also don’t have much of a presence in the online world."

Haase has chalked up an excellent track record on inking alliances

with big companies for online space and he hopes to leverage this

with big companies like Amtrak. His dream goal would be to get rights

to videotape Amtrak trains on a national basis. "Public perception

has been better of late but for the most part, people associate Amtrak

with negatives," says Haase. "We can get people involved,

starting with children. The companies in this space have done a very

poor job on the marketing side, but when children ride a train they

typically never forget."

His server is Interland in Atlanta and he has various freelancers

working on the back end of the site — many of whom are also avid

train fans and are getting a combination of options plus money. He

will add a few full-time employees soon. Buchanan Ingersoll is his

attorney and J.H. Cohn is the accounting firm. He answered a Coldwell

Banker ad in U.S. 1 to find his office.

"We are doing the fulfillment in house. My experience tells me

that the best case scenario is where you do fulfillment internally

and hold client satisfaction in your hand," says Haase. For now

he stores everything in a 2,000 square-foot office.

In June he plans to go live with online video samples using

RealNetworks

and stream up to 15 seconds each of 30 videos. But he is careful not

to antagonize ‘Net newbies. "Our average customer is a 45-year-old

male who is still exploring how to use the Internet. You will lose

a percentage of the customer base if you force them to download

something.

So we have an offline strategy. We are sending out 10,000 postcards

to customers and retailers."

"We are not looking for an IPO," says Haase. "I am

enjoying

this too much. With an IPO comes a lot of pressure and time away from

the family. I am interested in building up a nice business, very

similar

to Princeton Learning. We have a great team here and we will be

attacking

this market very aggressively."

"What my parents instilled in me, fortunately, was an `always

believe in yourself’ phrase that has come in handy in the

entrepreneurial

world and the roller coaster. Those with that upbringing certainly

do better as far as ventures go because they are able to get through

the downtimes. I am trying to do the same with my kids, to always

believe in themselves."

Trainfans.com, 83 Princeton Avenue, Hopewell 08525.

Steven Haase, principal. 609-466-0880; fax, 609-466-8114. Home

page: www.trainfans.com.


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