June 19, 2019

*-- Riverdancing with a Fat Tail --*

By: Jaffer Ali
Originally Published: June 11, 2019

My last missive was about Faces of Death and Antifragility. The goal of these writings is to give concrete examples of sometimes difficult concepts to grasp. I am not a theoretician but a practitioner. Whether particular examples can be generalized will be left to the reader. Subsequent posts will not just concentrate on *successes* but abject failures as well. Unfortunately, volumes can be filled with those anecdotes.

In 1988, two High School friends and I started a direct-to-consumer video catalog company while I was still in charge of marketing for the family home video company. I left the family business in 1991 to create a fulfillment division for the catalog company to offer services for infomercial companies marketing their products via television.

We sold the video catalog and fulfillment company in 1996. Together with my sister and cousin, we immediately created a new company; PulseTV. My non-compete precluded offering fulfillment services or marketing products in print and catalogs. This left infomercials as one of the few marketing avenues left open.

We had all cut our teeth in the home video industry so we decided to market videos via TV commercials. We knew all the studios and they were happy to have us pick up the television direct response rights that would promote their properties. My sister went to a home video convention and saw people standing 3-deep watching on a big screen television of Irish dancers. The video was called Riverdance.

Riverdance was released on home video the year before and 90% of all home video sales usually transacted within the first 90 days of release. This was not a successful release by the studio. Sony/Columbia Tri-Star owned the home video rights for North America. My sister saw how people were drawn to the performance and suggested I speak with Sony about getting the television direct response rights.

PulseTV was a start-up with only 5 of us in the entire company and negotiating with this $3 billion company for the rights was trying. We ended up making a partnership deal with SONY.

We created two versions of a direct response commercial and went on the air testing in late 1996. While we were testing, unbeknownst to us a deal with PBS had Riverdance with Michael Flatley airing nationwide. Viewers could get this for free so now we thought we were screwed.

But because people generally had their VCRs still flashing 12:00, few knew how to tape the performance. Conventional thinking proved wrong as it usually does. In January, 1997, sales took off. We went from spending $25,000 per week to booking $1 million in a few short weeks. There was one problem; SONY was freaking out saying they did not have $1 million per week in the budget for a TV campaign. I explained over the phone that we were "off budget" and we could not spend money fast enough. For every dollar we spent, we were making $1 + in profit.

They demanded we cut the budget immediately. The campaign would be killed because SONY had no clue how direct response worked. So I headed to LA to meet with them. When I arrived, SONY put me in a huge conference room with SEVEN MBAs (not six and not eight...SEVEN!) and I began explaining how direct response worked.

After 3 hours it was clear that there is nothing as dull or dim-witted as MBAs. We broke for lunch and I asked to use the phone to call my sister and cousin. I told them, we had to buy out SONY or the campaign would die. We worked out a deal where we would simply buy finished goods at an agreed upon price and thus eliminated all of their risk.

They were no longer a partner, but it was SONY that had the last laugh. I did not negotiate a royalty on retail sales that would be pumped due to our TV campaign. We sold $15 million worth of videos on television and this drove $300 million in sales at retail with us getting nothing on those sales.

We had experienced convex sales entirely as an accident of people not taping the Riverdance performance on PBS and everyone talking about it at the water cooler. Our commercials fed the hysteria.

We won an award for the best DR (direct response) commercial for the 1997 and I was the keynote speaker at the largest infomercial conference. I would rather have had a royalty on retail sales. But this did lead to us getting the TV DR rights to The Lord of the Dance follow up released by Polygram.

Original Article: Riverdancing with a Fat Tail