Make an Internet Investment Pay

Lessons From Baby Einstein

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This article was prepared for the February 6, 2002 edition of U.S.

1 Newspaper. All rights reserved.

New Streetscapes Seek `Princeton Look’

Suburban sprawl and endless traffic are sending people

back into town and city centers. Seeking pedestrian access to work,

shopping, and entertainment, yuppies, young college grads, and empty

nesters are moving into downtown areas of mixed-use development. This

new trend brings new opportunities and challenges to developers and

retailers both in small towns like Princeton and in big cities like

Philadelphia, where the downtown residential population has grown

by 20 percent since 1960.

Encouraged by the demographic trend, developers are creating new

venues

for street front retailing. The Promenade at Sagemore, in Marlton,

is an example of a "lifestyle center" that features

landscaping,

open air, and an upscale tenant mix. The Washingtonian Center in

Gaithersburg,

Maryland, a Washington, D.C., suburb, created a "main street"

that includes a lake, a public square, dining, two large retailers,

many smaller ones, and parking garages.

Midge McCauley of Downtown Works (a division of Kravco in King

of Prussia, Pennsylvania) has been working on retail and street front

leasing for 20 years. Admitting that when she was young, she was

"trained

to shop," she adds that she has always been interested in

merchandising

and fashion. McCauley believes that her broad liberal arts background

— a B.A. from Penn State and an M.A. from Temple University —

prepared her well for her mission: improving the quality of retail

on the streets.

A former teacher of language arts at the elementary school level,

McCauley happened on the perfect job many years ago: "I was in

the right place at the right time," she says, "when the Rouse

Company in Columbia, Maryland, needed someone to look for quality

retailers."

McCauley speaks on "Streetfront Retailing — A Trend That

Affects

Industry" on Thursday, February 7, at 11:30 a.m. at a meeting

of the Princeton Chamber at the Doral Forrestal. Also speaking is

James Paresi of the Paresi Design Studio. Cost: $35. Call

609-520-1776.

McCauley has lots of hands-on experience in developing retail areas.

Her firm is redeveloping two city blocks in Newark, including the

Hahne’s Department Store that has been sitting empty for 25 years.

Her firm is also developing the ground level of a major apartment

building, formerly a GE missile factory, for the University of

Pennsylvania,

and it is co-developing the an African-American owned strip center,

Progress Plaza, near Temple University. She offers a number of

suggestions

on the process for creating these old and new mixed-use models of

retailing:

Decide on a developer. McCauley believes Princeton was

lucky having a single developer build Palmer Square. "It makes

life easier if one developer has control over a great deal of

space,"

she says. With a single organization controlling the merchandise mix

of stores, the merchandise quality is generally higher than with

individually-owned

buildings where every landlord has an individual agenda. Another

option

is a partnership like the 34th Street Partnership in New York, which

has dramatically changed the quality of retail and the look of 34th

Street over the last 10 years.

Determine the demographics and develop a plan. "You

have to come with a plan for what you want the area to be," says

McCauley. Will it have universal appeal, or will it be dominated by

students or older people? The next step is to create a merchandise

mix that works for the expected demographic composition.

Bring together the stakeholders. "It is very

time-consuming,"

says McCauley, "but over time it can make a difference." She

cautions that everyone will not cooperate at the beginning. "But

if you can get together enough people to get started," she says,

"it has a snowball effect." People whose buildings are

eyesores

eventually get embarrassed, and the supporters of the new project

gain the majority.

Deal with financial issues. She believes that a successful

revitalization eventually resolves the financing issue by increasing

real estate value and bringing in higher taxes and higher rents.

Rehabilitate old structures and create new ones.

Particularly

in city centers experiencing residential growth, developers are

finding

it particularly cost-effective to do historical rehabs, says McCauley.

"Philadelphia has wonderful old buildings," says McCauley,

"but during the fifties and the sixties, dreadful facades were

put on them, disparate from the original architecture."

Create a safe and attractive street environment. The last

15 years have seen the growth of business improvement districts,

public/private

entities developed to address quality-of-life issues in downtown

areas.

Funded by a special tax on all building owners within a district,

these organizations pay attention to cleanliness, security,

streetscape,

and issues of homelessness. They may also market the area and try

to improve quality of the retail.

Ensure sufficient attractive parking. "Today, when

parking garages are being built," says McCauley,

"municipalities

are requiring that developers create retail shops on the street

level."

In these structures, parking begins on the second floor, and "the

bottom level continues the street." Citing unsightly parking

garages

in Philadelphia in which razor wire is visible from the street, she

says that local governments are now asking developers of parking

garages

to hide the cars and create something that is visually interesting.

Train landlords to be proactive. McCauley spends a lot

of time trying to educate building owners about the types of tenants

they should be seeking. "Building owners must seek good retailers

and convince them they should be in the area," she says. They

must change current leasing procedure, in which owners typically just

"sit around and wait for the phone to ring"

McCauley sees Princeton as a great example of mixed-use

development

and emphasizes the importance of a 24/7 residential presence in a

retail area. The result is light, activity, and security. Citing

Princeton’s

active, vibrant downtown, she observes, "towns around the country

are modeling themselves around Princeton."

— Michele Alperin

Top Of Page
Make an Internet Investment Pay

Where do you go — instantly, without any thought

at all — when you want directions to a new furniture store,

tomorrow’s

weather forecast, a great deal on a used DVD, info on how your latest

stock purchase is faring, a last-minute birthday card for your niece,

or a quick look at what’s in the news? The Internet of course. What

in heck did we do without it? At home and at work, the ‘Net has become

indispensable. (Take my refrigerator, my washing machine, my phone

even, but no way will I part with my Internet connection.)

The Internet is a dream come true for anyone who needs information

about anything. But it has been a nightmare for many who have poured

money into the medium in much the same way that children pour water

into the moats around their sand castles. So far, it has proved

difficult

to keep all that money from running out, leaving little in the way

of profits to show it had ever been poured in.

On Thursday, February 7, at 3 p.m. the Trenton Forum on Interactive

Publishing looks at content on the Internet in its second seminar,

"Interactive Publishing: A Look Back and a Look Forward."

Call 609-394-1325.

Among the speakers is Thomas Baker, media consultant, a creator

of the Wall Street Journal Online, and former senior vice president

of Work.com In a written statement he says, "The fact that a

number of successful business models for online publishers were

developed

during the 1980s and 1990s is often forgotten. There’s no question

that the Internet has proven itself a powerful information medium.

The challenge for many of us remains finding the most cost-effective,

if not profitable, ways to harness its power. We’re going to look

hard at the industry’s successes to find the lessons we can apply

to our work today."

Also looking to their experience and giving advice on how to profit

from an Internet presence are Baker’s fellow panelists: Craig

Allsop,

CEO of Newtown, Pennsylvania-based Internet Publishing Group;

Charles

Brady, president of myESP.com, an Internet community-services

company;

and Anne Holland, publisher and managing editor of industry

website ContentBiz.com

The Trenton Forum on Interactive Publishing is organized by Tramp

Steamer Media (www.trampsteamer.com), an interactive publishing

company headed by Mark Feffer, and by Thomas Edison State

College.

Top Of Page
Lessons From Baby Einstein

It’s a classic fairy tale: New mom with small bank

account

creates a product to meet her baby’s needs — and cleans up. The

mom is Julie Clark, a former English teacher and the mother of two

little girls, who wanted them to experience music, art, and poetry

right from the start. She came up with the idea of video tapes geared

to infants that would do just that.

This thinking, and the initial product development, took place in

a basement in Bedminister. Initial working capital was $5,000. Clark’s

husband, Bill Clark, an entrepreneur who founded Optical Data

Corporation

in 1981 and sold it to Cox Communication in 1996, provided the

business

acumen.

The couple produced the first videos themselves in their home, using

a Mac. They borrowed no money, and took in no venture capital. In

its first year, 1996, Baby Einstein had sales of $100,000. Despite

the fact that the Clarks put little time into the company (a few hours

a month), had no staff, and did virtually no advertising, sales

increased

tenfold the next year, and up to $4.5 million the year after that.

More than half of that $4.5 million was profit, Bill Clark says. In

2001, sales totaled $17 million, and on November 2 of that year,

Disney

bought the company for an amount the Wall Street Journal put at $25

million. (Clark says he is not allowed to comment on the sale price.)

The couple have exchanged a New Jersey basement for a home in Lone

Tree, Colorado, but Bill Clark returns to the Garden State on Tuesday,

February 12, for an 11:30 a.m. meeting of the Venture Association

of New Jersey at the Westin Hotel in Morristown. His topic: "The

Saga of a Serial Entrepreneur: From Optical Data to Baby Einstein"

Cost $45. Call 973-631-5680.

Listening to Clark, fresh from a business trip to L.A. and sounding

relaxed and happy in his Colorado home, the story of Baby Einstein

sounds too good to be true. But the company’s success, in at least

some part, is the result of hard lessons Clark learned from his first

business venture.

"Optical Data was a venture-backed company that was troubled for

15 years," he says. He founded the multimedia publishing company

in 1981 while he was working on his second college degree, a

bachelor’s

in physics from Drew (Class of 1991), which it took him 10 years to

complete because he started his company when he was still six credits

shy of graduation. His earned his first degree, in journalism, from

San Diego State, in 1974.

Optical Data was a New Jersey corporation that was headquartered in

Warren before Cox acquired it and moved it to Atlanta, where Clark

stayed on for a short time before accepting a post as president of

the Entrepreneurial Education Foundation in Denver. Among Optical

Data’s problems, he says, is that it was always undercapitalized.

The corporation was a groundbreaker, he says, the first to sell

multimedia,

non-textbook, basic curriculum materials to school districts.

"We were forward positioned," says Clark. "We

miscalculated

how willing the world was to change." In addition, the cost of

training educators to use the new materials was high, and the response

of standard textbook companies was swift. "We thought we would

dominate the next generation of publishing," Clark says of the

company’s dreams. This grandiose thinking is common among start-ups,

he says, and is often fatal.

"It was a mistake," he says. "We should have stared at

our balance sheets rather than at our press clippings."

This hard-won experience stood Clark in good stead when, after a year

as its president, he left the Entrepreneurial Education Foundation

to join his wife in building Baby Einstein. Here are some of the

reasons

he gives for the phenomenal success of that enterprise, with which

he and his wife remain associated.

Start with a good idea. The concept behind Baby Einstein

is that little humans who can not yet walk or talk — let alone

beg for the latest Rug Rats movie on DVD — are capable of

enjoying,

and learning from, videos. But only if the video is created for the

world in which they live. Backgrounds need to be simple, preferably

black and white, and pictures need to fill the entire screen because,

Clark explains, babies do not have well-developed peripheral vision.

Material must be kept simple, and short. For the mega-hit Baby Mozart,

for example, the Clarks did not use a full orchestra, but rather a

sound designer and "a couple of classically trained

musicians."

And the first movement was trimmed from six minutes to one to fit

a baby’s attention span.

In understanding what babies like, the Clarks created a buzz from

an audience that, for the most part, is not yet able to say much more

than "dada," if that. The pint-sized critics gave the Baby

videos rave reviews by saying nothing. Adults who have observed tykes

watching the videos report that they do not squirm or fuss. They sit,

or lie, transfixed.

This reaction, of course, is a striving parent’s dream. Even parents

who recoil from the tube under nearly every circumstance are delighted

to have their babies get a leg up on the rest of the pre-nursery

school

set by absorbing classical music and art via video.

Distribute wisely. At the very beginning, the Clarks sold

their videos by mail, stuffing them into mailers and licking stamps.

In the first year, they did $100,000 worth of business this way. In

the second year, they signed a one-year, exclusive contract with

upscale

specialty toy retailer Right Start. "It was the right move,"

says Clark. In the store’s well-heeled, education-conscious

(obsessed?)

clientele, Baby Einstein found its perfect customer base.

When other retail outlets were added, they were of the same caliber.

Zany Brainy, for instance, sells the videos. Presumably, casting the

enrichment tools before the masses at supermarket checkout lines and

in discounters’ bins would lessen their appeal among their target

market.

Pick a great name. The name "Baby Einstein" was

Julie Clark’s idea. Bill Clark says his reaction was "you’re

crazy!"

Now he gives credit to his wife’s insight. "She’s the English

major. I’m the physicist," Clark says to explain his wife’

superior

insight into the power the name conveys. Who was more brilliant than

Einstein? And what do conscientious upper middle class parents seek

for their children more than brilliance?

Protect that name. In fact, be scrupulously vigilant in

protecting every scrap of intellectual property. Clark says his

company

began using the Baby Einstein name without obtaining permission, but

soon heard from Hebrew University in Jerusalem, to whom the great

man bequeathed rights to his name. There is now a body of post-mortem

law governing the use of the names of even long-deceased persons.

Clark doesn’t think his company broke any of them, but nevertheless

struck a licensing deal with Einstein’s estate.

From that point on, Baby Einstein used expert legal representation

to trademark every one of its titles. So diligent was the company

that, says Clark, the U.S. Trademark office will not give any other

company rights to any name that combines the word "Baby" with

that of a famous person. Other companies have tried, but have been

rebuffed. This lock on the names was a big reason that Disney wanted

to buy the company, says Clark.

Build slowly. Zero to $25 million in five years may not

seem like a slow rate of growth, but Clark says he and his wife were

careful to keep cash flow ahead of growth, and to resist the urge

to release too many videos. It is unusual for a start-up to fuel

itself

entirely from product sales, but that was a prime goal. The company

built its profits steadily, but without moving so fast that it had

to incur debt.

Plan an exit right from the start. Clark was sorry he

hadn’t gotten out of Optical Data Corporation long before he did,

and was not going to make the same mistake with Baby Einstein. "A

year in," he says, "I sat down with Julie and said `if this

continues to grow, it will require added investment, more staff.’"

The couple asked themselves whether they wanted the life that would

go along with that commitment. With two small children, who Clark

says are their number one priority by a wide margin, they had no

trouble

arriving at a quick answer.

The plan would be to build a strong balance sheet, lock up

intellectual

property rights, and find a buyer.

Have fun. Remarkably, building this business took little

of either of the Clarks’ time, leaving them free to focus on their

two children. Aspen is now seven, and her sister, Sierra, is four.

Both Clarks are staying on with Baby Einstein. Julie Clark will

write books and videos for company, and Bill Clark will help with

the business transition. In addition, he looks forward to putting

his multimedia background to use on some online projects for Disney.

Now, if only the couple would put out an instructional video

showing would-be entrepreneurs how to duplicate their success —

and their family-centric Colorado lifestyl


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