#331 – The Licensing Advantage: Building a Moat Around Your Amazon Brand with Paul Miller

#331 - The Licensing Advantage: Building a Moat Around Your Amazon Brand with Paul Miller Speaker 1: Welcome to episode 331 of the AM PM podcast. This week I'm speaking with Paul Miller. Paul is a very successful Amazon seller and he has a unique approach. Instead of just doing simple private label or wholesale, he specializes in licensing. That's right, creating a moat around your product using licensing and that's what we're going to be talking about in today's episode. And oh yeah, one more thing. Helium 10 Elite is open for new members right now. You know, we normally keep this closed and only open it a couple times a year and right now it's actually open. If you go to h10.me forward slash elite three H10.me forward slash elite three. You can check out all the details but basically Helium 10 elite is the most advanced plan from Helium 10. It includes monthly training from myself and other high level experts. It includes monthly roundtables with myself plus other weekly roundtables with the staff of Helium 10. You get a lot more access to some of the tools in Helium 10. You get upgraded access. You can send more things. You can do more things. You get some special software that's not available in the general Helium 10 software suite, plus a whole lot more. So make sure you go and check out Helium 10 Elite at h10.me, elite3, h10.me, forward slash elite3. Get all the details and hopefully sign up if you're not already a member because it will be closing soon. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Let's do this. Here's your host, Kevin King. Speaker 1: Paul Miller, welcome to the AM PM podcast. It's a delight to have you here. Speaker 2: Thank you, Kevin. Great to see you again. Speaker 1: Yeah, I feel like I should be getting, you know, every time I pass Chuck E. Cheese, I think of you. You know, there's a Chuck E. Cheese up by a store that I go to here, a liquor store actually, right next to a Specks liquor store in the Austin area. And every time I pass by there, I see that Chuck E. Cheese on the corner and I'm like, I think of, I think of Paul Miller because back in the day before this whole Amazon thing, you owned a bunch of Chuck E. Cheeses, didn't you? Speaker 2: Well, you're really close. It was actually CeCe's Pizza. Speaker 1: Oh, CeCe's Pizza. Okay, then I need to quit paying attention to that Chuck E. Cheese. CeCe's Pizza, that's the one that's like the $2.99 all-you-can-eat buffet. Speaker 2: It was $2.99 back in the day. When I opened up mine, they were $3.99. And yeah, I own three of them in three different states and I'm glad to say I'm not in that business anymore. Speaker 1: Yeah, that's got to be a tough business. I mean, I look at these fast food places, you know, everything from the Subways to the, I guess, the Cici's Pizzas and whatever it may be, and with a few exceptions, you know, like a Chick-fil-A or a couple of those, these guys, I'm looking at their numbers, you know, they're charging six, seven, eight bucks for a sandwich, and they might be doing $1,000 a day, $1,500 a day in top-line revenue. I'm like, OK, this place is doing these guys spent several hundred thousand dollars to actually buy a license to get into this. Plus, they're paying royalty on all their sales. And here they are scratching for a living. And I'm like, how does anybody that owns any of these franchises actually make money? I think the answer to that is either you go with a Chick-fil-A or one of those top performing ones, or you put together 20 or 30 of these things, you know, in a market and you just take a little bit of scraps off of each one and then you can actually make a living. Is that kind of what you were trying to do with three? Speaker 2: Well, you know, we could do a whole podcast about franchising. And what I think about it, I think there are some very, very successful franchise models out there. And yes, I think that running multi-units is probably the key to serious success. But I can tell you from my point of view of having been a multi-unit operator, With a franchise and being an Amazon seller, I like being an Amazon seller much more. But I did learn something very, very important in my pizza business. And that is kind of a model for manufacturing. You know, when you have to develop kind of products, Forecasting models for how much you're going to sell in the next week. That's really training for how you're going to build up your Amazon pipeline of product and your logistics all the way to when you're going to deliver it to the customer. So, on a day-to-day basis, we had to start with raw ingredients, figure out how many dough balls to make, and then put the right toppings on them and deliver them to the customer just in time. Speaker 1: So when you exited that business and got out of the pizza business, was there a little bit of a gap there before you started doing Amazon? Were you messing around with some other stuff or did you go straight into Amazon? Speaker 2: It was pretty much straight in. I actually started my Amazon journey while I was still running the last of my restaurants. And I actually got my start by listening to a podcast with Ryan Moran. I was in that course in 2015. I think that might have been where we met. Speaker 1: Did we meet at one of the Capitalism.com conferences? Speaker 2: I think the first time we met was probably in Florida. Speaker 1: Okay, yeah, because I remember Ryan used to do those capitalism. He still does them, but he's changed the format. It used to be these big, you know, seven, eight hundred thousand people conferences and I remember he brought in like Gary Vanderchuck and back before Gary was a thing and several other people and it was really, really good. He did like four of them here in Austin and then I think one in Dallas. And then after that Dallas one, he changed the model and kind of cut them back to more of a like an exclusive, much smaller events. But so you started when you came into selling on Amazon, did you do the traditional private label method or did you actually have a product in mind? Like, I have this idea that I'm going to create from scratch. Speaker 2: I did not have a product idea when I started. I fiddled around with a couple of Products in the beginning, one of them to me famously are where these little paper popcorn bags. It was just and this is more of a reseller thing to just try to see how it worked. And as I was going through the course and asking my wife, You know, what can we sell on Amazon? She mentioned as the, let's see, what's it called, the PTO, yes, one of the PTO treasure, she was constantly buying these popcorn bags for movie night at the school and, you know, she'd have to buy a thousand at a time and it was too many. So, I looked at the listings on Amazon and I said, wow, there's definitely an opportunity to sell a different quantity, more manageable quantity, a hundred at a time. So I bought a box from my restaurant supplier. A thousand popcorn bags for $12. We broke them down into units of 100 each and sold them for about $12. Each at a hundred, a hundred packs. So we had a nice March in there and it just kind of got, you know, I took some good pictures. I learned all the kind of the elements of building the listing and it, that was successful right away. So, um, that was just kind of a fun product that I was playing with while I was looking for my private label product. Speaker 1: And it's peak, what are those, what were those doing like a month? Speaker 2: Just those popcorn bags, 10 or 12 a day, you know, but I was making four or $5 off of each one. So, I was pretty happy about that just for playing around. Speaker 1: It's more money than you make off a buffet. Speaker 2: That's right. Absolutely. Well, you know, yeah, I, I don't want to get I don't want to take up too much your time about the buffet business, but that's a challenge for sure. Speaker 1: So so you start with the popcorn bags, and then did you evolve into a few other products along the way? Because I know eventually you got into something called cozy phones, which is, we'll talk about that here in a second. But were there a few others along the way before the big home run? Speaker 2: The first product that I decided to really source from China was a product that I had used in the past, headband headphones. And it's something that I still use to this day, sleep headphones for adults. And I found a brand of those, basically a private label brand, and I started selling those. There wasn't much competition at that time. I started selling them as the label that they were branded with. Coming from China, but then as soon as I saw some initial success, we rebranded them with my private label, Cozy Phones, and really just dominated that space for a long time in the adult headband headphone space. And then, as you know, I came up with the idea of making these for kids. And so we kind of pivoted a little bit. I kept the adult business, but we made some new designs focused on kids, you know, fun kids characters. Like, for example, I think the first one we did was a frog, a kitten, and so forth. Speaker 1: So the headphone, wait, so for the people listening, so you start with adult headphones, just kind of some sort of traditional headphones people would put on while they're sleeping, just like they would play, what's the music built into it, or they would have to stream it? Speaker 2: It's basically, it's like about a two inch wide headband, which got a channel in the middle of it, a headband, and then there's some small thin speakers, Thin cushion speakers that go inside the headband and they're held against the head so you don't have anything sticking in your ear when you're trying to sleep on your side or your back or whatever. So and those just plugged into at that time was just a regular old 3.5 millimeter stereo jack into your device or your phone. Speaker 1: Okay, so they weren't even Bluetooth or anything. They just had a cable sticking out. Speaker 2: They're Bluetooth now, but not at that time. Speaker 1: So then those were doing well and you said, hey, I see an opportunity here. Why don't I make these for kids? And so you came up with some designs and you said like a frog. So what did you do? You took the headband and like put frog designs on it? Or did you put like, you know, make it like a three-dimensional frog on there? Speaker 2: Like the front of the headband would be the face of the frog, for example. Okay, and we did this similar thing with a unicorn. So, you know, there was a unicorn face design on the headband itself. And that was, you know, this is just kind of an idea I had. Maybe this would be fun for kids. And I didn't really realize the total benefits it would have for kids. So there are a lot of kids who don't, especially younger kids, three to six years old, who don't like regular headphones, absolutely can't tolerate earbuds. These headphones are fun and comfortable. They feel cozy, like cozy phones and they just solve a lot of problems. When kids are traveling, you know, you fall, say they're on an airplane or in a car traveling, they can fall asleep with them on without them, you know, interfering with the headrest or something like that. Speaker 1: So you did, you did them with frogs and the unicorn and maybe some other designs, but then that evolved into doing something with licensing, which is what we're going to talk about here in just a second. Walk me through that process, how it went from frogs to unicorns to, I need to go beyond just frogs and unicorns. Speaker 2: Right, well, so once I launched these and I found out that they were really working well, especially in the area of special needs, kids with autism and sensory disorders, I was offering these up into different Facebook groups and so forth and they were on fire. I mean, everybody just loved them and I was like, oh boy, this is a real success. And I was, but I was terrified. I'm going to get ripped off. I know I'm going to get ripped off pretty soon on this. As a matter of fact, a coach, and I'm not going to mention, a coach used my cozy phones as an example in his course. Speaker 1: Oh man. That was not good and you know after that was used as an example in a course did all of a sudden a few months later There's tons of I copied like crazy. Speaker 2: Yeah, it's just that's a whole nother story about how we got copied and ripped off and then how I eventually, you know took down probably a hundred different competing aces and collected some money from those guys and. Speaker 1: People started doing their own frog designs and unicorns or they were doing other things and just marketing them in the same way. Speaker 2: Let me answer your question about licensing I guess and then I'll tell you about how. So I was terrified that I was going to get copied and this is early on in probably 2016-2017 and as you remember I was doing the Private Label Podcast with Kevin Reiser and through that podcast we made lots of great connections and one of the guys that we connected with... Speaker 1: What do you mean you were doing the podcast with him? Speaker 2: Oh, I was producing it for him. Speaker 1: Okay. For those of you that are new to this space, Kevin Reiser is one of the original podcasters in the space. He's based in Dallas back in, I guess, 2015 or thereabouts. He was one of the very first ones that a lot of people cut their teeth on listening to his podcast and there's Scott Volker and a few others. Speaker 2: Right. It was basically Scott Volker and us and I had a media background. Kevin and I were part of the same kind of mastermind. I said, hey, I'm happy to help you on this. And so I was kind of in the background, booking the clients, producing the audio for him. And we had a great run. Speaker 1: So through that, you made a connection with somebody. Go ahead and continue there. Speaker 2: We're going way back in the old days. So one of the guys we had on was Mark Hirsch, who was with Q Brands at the time. And Q Brands, a lot of people think that Thrasio and others were the original aggregators, but Q Brands is the first one that I remember. Speaker 1: They bought Ryan's company as a yoga mat company, right? Speaker 2: That's right, they bought Ryan's company. Speaker 1: Yeah, they're out of Chicago, I think. Right. Like, they're the early adapter, or earlier aggregator. Speaker 2: Yeah, and that's 2016, 2017, so it's very early on. And so, we had Mark Hirsch on the podcast at that time, one of the partners. And so, we had hit it off and connected. I called him and said, Mark, look, I've got this product that's on fire. I'm looking to grow and protect it. You know, what are your thoughts? And he said, look, my brother's been in the entertainment business for a long time. I think licensing would be a good way to go. And I had no idea what he was even talking about. I said, what do you mean? And so he explained the concept to me. He said, if I were you, I'd go out to the licensing show in Las Vegas and check it out. So that was probably April, I think. And I booked my tickets for May. I went to the licensing show, learned the basics of licensing, and secured my first license in May. Speaker 1: So, for those of you that don't know, licensing is when you actually get permission from someone else to use their IP. So it could be, you know, a lot of times, you know, you see Disney, for example, they have all these lines of backpacks and Pencils and whatever, the whole line of stuff, they're not producing hardly any of that. They're licensing that out to companies that specialize in producing backpacks or pens. Those companies take care of the actual manufacturing of the product, of the design. They have to send those designs over to Disney to get Disney to sign off on them, say this is okay. The font that you're using is the right font that can be used on our products. The colors are right and so on. There's a process there. Then that company goes out and sells them into the marketplace and then they get a royalty in exchange for that and that royalty could be anywhere from 4% to as high as 15-20% in some cases. Probably around 7-10% more of a general average. And that company that's making them then pays that royalty and there's a whole business around this that's huge. And that's where a lot of people make their money. I mean, companies like Playboy, for example, you know, Playboy, most of you know who that is. They used to be the magazine and the TV channel and stuff. Now most of that's gone and they actually, but they still exist and they make most of their money off of licensing because they became a lifestyle brand. So by people putting their logo on shirts and different things, uh, you know, on lighters and what have you, that they're still actually making money off of that. So that's how licensing works. And there's a big show in Las Vegas called the licensing expo that happens every May or so. And I actually went to the show, Paul and I, Paul invited me out. to the show after he kind of learned the ropes. He said, hey, why don't you come out and join me and show me around. And this is huge. This one was at the Mandalay Bay and it was like the entire conference center was filled up, much more than a Prosper, like the entire place was filled. And there's everybody in there from the U.S. Army to gaming companies to all kinds of, I mean to the biggest brands in the world, movie studios and everything were there. And you could go and you could meet with the different people and perhaps make a deal to actually use your product. to actually license their IP and make it. And one of the advantages on Amazon, a lot of people know that the private label model, which is what Paul started with, as he said, but licensing gives you kind of a moat around everything. And licensing, If you're selling a tactical flashlight, for example, and you're going up on Amazon against a thousand other people selling tactical flashlights, and you come up, you private label it, and you have a great flashlight, and you come up with a cool brand name, it can still be very difficult to compete and to get any leverage. But if you go and you say, instead of creating Kevin's tactical flashlight, I'm going to go to the US Army, And I'm going to license the U.S. Army's name and their trademarks and their logos and everything. I'm going to come out with a tactical flashlight that's a U.S. Army tactical flashlight. Immediately you have instant credibility and you can cut through a lot of the clutter and people will immediately trust it. And that's one of the advantages of licensing. And then these license or the licensee ors protect their IP. So if someone is copying it or doing something they shouldn't, they'll spend their money In a lot of cases to actually go after them and shut them down so you're not having to chase them. So that's what Paul did here is actually learned about licensing and then you went out and got a license for your cozy phones and who did you actually get your first license with? Speaker 2: Our very first license was with a very, not very small, but a small author of a A book called The What If Monster. That was my entry. So you don't have to spend thousands to get your license. She had tens of thousands of followers for her book concept, which was called What If Monster. But that kind of, you know, cut my teeth on licensing and was able to demonstrate some knowledge and success in licensing before we got our first major license was with Nickelodeon and Paw Patrol. Speaker 1: Now, it can be difficult to get a license. A lot of people listen to this, oh, this would be cool. I'm just going to go get a license with Disney. But to go after the top tier licenses is not, they're pretty picky on who they take. So usually, like you just said, you start small. You start with the what if monster and prove a track record of payments and, you know, knowing what you're doing and knowing the lingo, and then you can work your way up the chain. And is that a fair assessment? Speaker 2: Yeah, that's a great assessment, Kevin. You made a couple of really good points about the benefits of licensing and I was hoping you were going to make them or I was going to repeat them. Because you do, by being associated with those major licenses, you know, you look at Cozy or if you were looking for headband headphones on Amazon and you saw that I offer the Nickelodeon version and all that, you're going to automatically attribute some kind of quality and success to my brand because I'm associated with Nickelodeon versus, you know, some other kind of knockoff brand. And as you mentioned also, They will help you protect your brand and it becomes a barrier to, say, a foreign seller who doesn't want to mess around with a Nickelodeon. They know they're not going to. You might get knocked off by somebody else on your originals or your own designs, but they do know better than, in most cases, they know better than to try to copy, you know, a Disney or a Nickelodeon. Speaker 1: And if you're interested in licensing, if you go out to just look up Licensing Expo, they have a book that you can buy and then some online courses and then at the event they actually do some training and stuff as well. But it can be a great way to differentiate your product and to get a leg up. And there's actually a whole industry of people that, of agencies and stuff that handle the licenses for big brands. So you're not, you might not be dealing with Disney. For example, like Marquee Brands is one of the big ones out of New York. And they handle like Martha Stewart and Emerald Legassi and several others. And they handle all that processing for those other brands. So sometimes there's a middleman like an agent or something in the middle that handles it. And it's a huge, huge industry. And it's a huge, huge business. And a lot of people just it's there's no courses other than I think you have something that you've done on teaching people on licensing. really out there. So people always think it's either wholesale or FBA and they forget this licensing opportunity. And one of the things on licensing, though, that's important to mention is if you're going to go after a mid-level or higher licensing, and maybe you can say what Nickelodeon A lot of times you have to put in advance. Speaker 2: That's right. Speaker 1: So you'll come up with a line of products and you'll say, this is what we think these products are going to sell over the next three years. And they'll let you ramp that up over time as you're launching. And you're basically committing to either you are going to sell that or you're going to pay them as if you sold that. And then they will require advances against royalties. So a lot of them require quarterly royalty reports. And some of them have some pretty sophisticated software where you go in, you log everything, And they will calculate a royalty and in some cases they may say, we want you to pay $30,000 up front. And then as your sales go up, you know, next quarter, you're going to have to pay $50,000 up front. Then any sales that come in against that will credit it against that payment. And if you don't meet that payment, you still owe that minimum guarantee. And if you go over that payment, you pay them the difference. So it can be tricky in there as well. So you really need to know what you're doing and you need to have a system in place or you can get burned on licensing as well and be paying for a lot of stuff that you actually never sold. What's your experience there? Speaker 2: You hit the main points on that and I was hoping you were going to say minimum guarantee because that's very, very important. And that is, you know, we teach In my course, I teach the kind of elements of the license and the things that you should be aware of when you're negotiating a license. So, and I can tell you right now that I've done, I'm not going to name the licenses that I ended up losing money on, but I have lost money on some of my licenses. And you're, you know, not to be taken lightly, you're creating a contract With the licensor that you're going to pay them a minimum amount over the life of the contract, whether or not you make or sell any product, you still got to pay the rent. And that's what you're doing, you're renting that IP. And so the minimum guarantee is usually an amount, say, of like you said, estimated royalty over the two or three year contract. And then the advance is the portion of that minimum guarantee that you have to pay upfront when you execute that contract. And that's locking you in as basically a manufacturer because the IP holder or the licensor, they don't want to give up this property or give up that license without making sure that you're actually going to make some product and pay the licensing fees. Speaker 1: Yeah, I mean I've had my own experience with licensing as well. We did some dog life jackets for one of our brands and we actually licensed it with a big surfing company and that surfing company Made us a lot of promises that said, Hey, we're going to support you. We're going to get you into Walmart. You know, they sell $20 million worth of life jackets a year. We're going to get you to make the introductions into Dick's sporting goods. And, and we have all these influencers. We have these athletes that have a million plus followers on their social media. We'll get them to take pictures with the product and send that out there. And we're like, man, this is a, We don't even need to do a launch. I mean, we can just use leverage their whole whole system and just crush this thing. You know, we got to have some minimum guarantees. We'll produce a really good product. We'll take care of the Amazon side of things because they had someone doing Amazon before and it just wasn't working. And so they came and said, hey, you guys look like you know what you're doing. And that's what we we did. But at the end of the day, they didn't live up to their side of the bargain. They actually did not do their influencers with a million that that person never did anything. And then they ended up going out to one of these like FameBit websites and actually just looking for some influencers. And they did get us a mention in like a I think Martha Stewart's online web blog or something like that. And we got like three sales off of it. You know, it's one of these nothings. So it turned into nothing. And we're like, look, we're not we're not going to continue this. This just is it's not working. So we actually, and they came back to us and they said, Hey, you know, you have a three year obligation here. You got to, you know, we've already booked this revenue on the books. You got to pay us. And we're like, we're not going to pay you. Come after it. We'll bankrupt the company. Cause we set this up as a whole separate company if we need to. And so at the end of the day, we negotiated where we just turned over the inventory that we had to them. And then they ended up putting that on their website, you know, and counting that against some of the royalties. And we just kind of parted ways. And so that's a tricky thing in it because one of the things that I always say is if you're going to get into licensing, you want to be able to leverage the name of that brand. So if you're an Amazon seller and you're thinking about, hey, this is a pretty cool idea, and it can be a great idea, it can be really good, go out and go on Amazon and see if people are searching for that brand name as a keyword. And my rule, and this is just, I just made this rule up, it's just, you could have a different number here, If there's not at least 3,000 searches per month on that specific brand name by itself on Amazon, that's not a brand and that's not someone you want to actually probably do a license for if you're an Amazon seller. Speaker 2: Yeah, that's a great, great point, Kevin, you know, and so obviously, licensing can be a two edged sword. And there are those kind of clauses in a licensing contract of who's going to do what on the marketing. And I'm glad that you had that in your contract so that you could use that on the keywords and licensing the search results. It's really interesting. And this is another opportunity for people who are Going with licensing, you open up a new world of keywords. So if you think about it, especially when you're shopping for kids, kids have, you know, things that they like, Power Rangers, Paw Patrol, whatever. And when you go to gift for those kids or buy something for them, You're not necessarily looking for a PAW Patrol cozy phones because you probably don't know that they exist. But you are looking for PAW Patrol gifts for boys, PAW Patrol gifts for girls. And so you, if you can leverage those keywords properly, if they have the right search volume, you can open up this whole new world of keywords that are associated with that brand or that license instead of just associated with your product. And that also Leads to a similar situation if you're, say, like you said, introductions to Walmart and these other retailers who already have confidence in that license, they already know that they sell a ton of, say, PAW Patrol toys, then they have more confidence in taking on your products if it's, say, a PAW Patrol Cozyphones because they know that that license already sells. Speaker 1: Yeah, so you went to Nickelodeon and Paw Patrol was probably one of the ones that you did, right? Speaker 2: Yeah, that was at the time it was the third largest preschool brand in licensing. Speaker 1: Wow. And then you did something interesting with yours. So you did a whole line of these and you licensed and then it's starting going so well that I think, you know, it became a cash flow issue at one point where you're like, I need more inventory and I'm having to get more and more and this is just, I'm on fire here. And you're like, what can I do? You know, I have a huge success here, but I can't I can't maintain this thing. I need I need some help. So then you decided you came up with this brilliant idea was like, you know what, instead of going out and raising a whole bunch of money, you're taking on investors. You said, why don't I license this out? And why don't I actually give this to somebody else? I have this right. Let me give this to somebody else and then let me take a cut and not have to fund all this inventory and do all this stuff. Something like that happened, right? Speaker 2: Well, yes, Kevin, I wish I could claim the title of being brilliant, but actually that that was the idea of my licensee. And so what happened was we were selling wholesale to a few people and one of the folks that I was going to looking for some problem solving Yeah, as you mentioned, investment was I went to this guy and I said, Hey, look, you know, you believe in the product, obviously, you're reselling for us. I'm looking for a partner who can help us scale the brand. No, he was doing a ton of his own manufacturing. At that time, and so I was basically going to him as an investment or partner and he said, well, how do you feel about licensing the product? We'll just license it from you instead of investing. And I had never honestly at that time ever considered it. But you know he put together some deal points and it sounded pretty phenomenal to me. He would basically take over the manufacturing utilizing his scale and they had a lot of scale for manufacturing and then they would take care of the cash flow and the marketing. Even to include selling on Amazon and they would just pay me a per unit royalty. Speaker 1: And you could do that with the license from Nickelodeon? That you could actually have like a, you could re-license the license in effect? Speaker 2: That was, that's a little sticky. And so we maintained our position as the manufacturer of record. You could have tried to transfer that license, but then you have to, and that's part of the licensing contracts. If there's ways to do that but it could get really sticky so I maintained myself, my company as a manufacturer of record so we didn't have to transfer the license but we could still use them and there's things called sell-off periods and all kinds of things where I could just take and resell those products to him as my distributor and that's totally legit. Speaker 1: So you were having to still be the one doing all the reporting and everything? Speaker 2: We still had to do all the reporting, which can be like, as you mentioned, it can be pretty time consuming and you got to do it on time. Speaker 1: Yeah, you gotta do it on time or there's penalties involved. Speaker 2: And we still had to pay the royalties, of course. Speaker 1: It's not just send them a statement, you know, here's a little accounting statement. It's like some of them have some pretty sophisticated software where you gotta go in, you gotta put like every freaking invoice and like line item stuff out. It can be a full-time job for somebody if you're... Speaker 2: Yeah, well, you know, that's again, it's it's kind of you talking about building that moat, right? It's if it was easy, everybody would probably be doing it, right? Yeah, it's not easy, but it can be very rewarding. Speaker 1: So you think it's something that more people that are selling on Amazon as Amazon gets more crowded and the space gets, it gets harder and harder to launch. Is that, is this something that you think some people should actually consider? I mean, even, I'm not saying go out and get a Disney license necessarily. You got to have some pretty deep pockets and experience for that, but like the, what if, you know, what if there's some, uh, you know, you find some Facebook, some author or something on a, on a Facebook site, uh, that's got 20,000, 30,000 people following them or Instagram or Pinterest or whatever. And you go to them and say, Hey, You got all these active, really engaged people. Let me create something for you. Speaker 2: Exactly. Could be, you know, it doesn't have to be in the kids space, right? Could be in the chef space, for example, you know, or the kitchen space. One of my favorite examples that I use in my course and I'm holding it up for you in video right now. You can see that the audience can't. This is the Star Trek Pizza Cutter. This item was made by a company called ThinkGeek at one time. And Star Trek, these days, is not a major license anymore. But that's something that's in the kitchen space. They found something that appeals to Trekkies, and they made this Star Trek Pizza Cutter. Again, you can use a license that's maybe not so well known, or like you just mentioned, an author like the What If Monster. Basically, licensing is kind of like the ultimate influencer, right? You're using the license to influence the brand. Speaker 1: I mean George Lucas, on the Star Trek thing there, George Lucas with Star Wars, he became a billionaire not from his movies, he became a billionaire from licensing. Speaker 2: Yeah, I'm sure. Speaker 1: That's where all the little dolls and toys and everything back in the 70s and 80s, that's where he made his money. And it wasn't from, you know, the movies did well, but the bulk of his cash came from all of his licensing deals that he had. Speaker 2: That's basically what the industry does now. I was at that same Las Vegas licensing expo a couple of years ago and I was with a big brand name that you would recognize. And they were having a behind the scenes look at what's coming up in the next two years. And they would invite all the manufacturers into this room and you'd have to seal up your phone in a bag. You couldn't see what's happening. Or you know, couldn't share what's happening. You had to like have a confidentiality statement even to see the stuff that they're doing the next two years. And they say, look, here's all the new entertainment shows and all the stuff we have coming out in the next two years. And the audience are all a bunch of manufacturers and brand owners like you and I. And they said, we want you guys to make stuff to match our entertainment and our content that's coming out over the next two years. Speaker 1: That's cool. Did you end up doing anything? Speaker 2: Not on that one. It was a big fish and I wasn't, yeah, no, we didn't. But I found stuff, you know, it's fun because we then, you see stuff coming out on the market that was a result of that meeting, you know, say a year or two years ago. Speaker 1: So what would you say is, why should you not do licensing? If people are listening to this and they're like, this sounds pretty cool, what's a reason to not do it? Speaker 2: First of all, you shouldn't do it if you don't have enough sales to support it. You know, if you, it's one thing to do licensing if you're doing, you know, five or six million dollars a year and you can make the MG's, you got to be, you need to be completely confident that you can make the minimum guarantees. And that if you don't make them, you can still absorb You know, absorb that expenditure. To me, it was not only about selling and making those MGs, but the opportunities, all the other opportunities that came along with licensing, like I said, protecting the brand through the IP opportunities to get into a brick and mortar retail. But you really need to be comfortable that you can make those MGs, that you're comfortable working with a licensor who's going to have final say over your product. They have to approve those designs that you design. And so it's like having a partner in your business and you're paying them royalties. You've got to be comfortable with all of that. And we go into my course about, you know, the product development and having other people involved and how long, how much longer it takes with a license. But there are quite a few factors to consider. Speaker 1: Now, like you said, the license still has ultimate say. And like when we did our our dog life jackets, we had an insert card that was going in and with them. And they didn't like the font that we used and didn't like one of the pictures or something. So they ended up having their design team redo the entire thing. And I'm like, no, this is we did it a certain way. I can understand. I'll make some changes. You know, if you don't like something, you will change the picture or whatever. But we did certain things for to help it sell on Amazon. And so they took they helped actually get leads and stuff. And they took all that away and they're like, no, you can't have the leads. You can't use our brand to generate leads. They took some of that stuff away. So there are some restrictions there as well. And then you're on their brand registry on Amazon. So your product generally is not going to show up on your storefront. So if you're already doing five or six million in sales, And you already got a whole bunch of SKUs and you're going to put this up and thinking this is going to show up and give you some sort of credibility on your Amazon storefront. It's not. It's going to show up because it's the brand registries through them and they'll have to, the way that works is they'll give it approval. They send a letter into Amazon that says you're authorized to sell this. And so then you'll list it on your Amazon seller account, but it actually shows up on their storefront. Speaker 2: Yeah, like I said, it's not really for the faint of heart. You can do a smaller license, you know, with easier terms for sure. But, you know, again, I think that's part of what builds the motor on your brain when you do hard things that other people aren't willing to do. Speaker 1: And just think if you had that J.K. Rawlings license when she came out with her first book, you know, I think she was like 42 years old when the first one came out. It sold like 11 million copies. And if you had gotten in before that, she was just, you know, she had a few books and stuff that came out, but wasn't a big author. And if you're able to ride that wave, that would have been a nice one. So if you can find someone like that, that's an up and coming or something, that could be a really good opportunity to. Speaker 2: Yep, and there are, you know, there are a lot of companies and consultants that help people try to uncover those brands. Speaker 1: A lot of your business experience is actually used in other people's IP, from franchising to licensing and selling on Amazon. Speaker 2: It's a good point because the franchise is basically the same thing as license. It's a right to use those people's intellectual property, be it the name, the marketing, the recipes, the design of the store and all that. It's basically a license. You're right. Speaker 1: So now, what are you up to now since you've licensed your license? Are you just going out and checking the mailbox every couple of weeks and seeing how big the check is and just gone fishing? Or what are you doing now? Speaker 2: Not at all. I do kind of an advisory role to CozyPhones now. And my goal is to help them grow the brand even bigger and bigger. So we see more royalties come flowing in. And I also want to build the brand because I still own a hundred percent of equity of the brand. So I'm letting somebody else build the brand for me and they have much more capability than I did. And that was another big reason why I did the license. So they're already in retail. They already have kids products in many different channels. So as the licensee, they can Bring my products in alongside their other products. So that's another good reason to license. But so I'm doing some advisory work with them. As you know, I consult with one of the aggregators and helping them to find brands that work within their portfolio. I recently launched a new brand of my own. In the game category, and I'm helping some other big Amazon brands out there, figuring out how to navigate and improve their business on Amazon. Speaker 1: Let's talk about that aggregator space for just a second. I mean, in 2020, when it became a hot thing, You would actually, you kind of got involved there and actually started a podcast to educate people and to bring people up to speed. And as this aggregator market has kind of cooled off a little bit, where do you think it's going? Where do you think this whole thing, and you think that half of them are going to disappear and consolidate? Or what are you seeing since you have your foot kind of, or your finger on the pulse of that a little bit more than a lot of people? Speaker 2: Yeah, boy, it's really tough. It's tough to be a prognosticator in the aggregator world now. I do think it's going to be, you know, I think a lot of them are really suffering now. They took a lot of money from investors, made a lot of projections on how fast they could acquire and grow brands. Things obviously changed post-COVID. There are a lot of brands that did very well and some of the aggregators took credit for being able to grow these brands when really maybe the credit belonged to COVID. And so now they're having to deal with reality. I do think that there's going to be, you know, a big consolidation and some of them will fail, so hopefully those brands will get picked up by other aggregators, but I'm expecting quite a consolidation. Speaker 1: So does that mean that at Prosper here in a couple weeks, there's not going to be a quarter of a million dollar aggregator dinner somewhere? Speaker 2: Yeah, and free Teslas. Speaker 1: Free Teslas. Speaker 2: I think we've seen the best aggregator parties we'll probably ever see at Prosper. Speaker 1: Yeah, it reminded me of the late 1990s and the dot-com era. I had a buddy that worked at a software company that ran a Super Bowl ad back in, I think, 1999 or 2000, maybe it was the 2000 Super Bowl. Year 2000 Super Bowl and they spent, back then the ads weren't seven million or whatever like they are now, they're like a million and a half, two million bucks, still a nice chunk of change. By the time they ran the ad, they had seven paying customers, he told me. And within six months of running that ad, they were out of business. Actually, and liquidating, you know, all their furniture. And we actually went over and bought some of their servers and stuff for pennies on the dollar for one of my other businesses. But I see this aggregator space kind of reminds me of that. They came in hot, spending money, advertising, sponsoring everything. Throwing big parties and everything now is recoiled and the multiples are down. A lot of them aren't even buying right now. There's consolidation. Some of them are on life support. So it's going to be interesting to see where it goes. Speaker 2: You're seeing exactly what I'm seeing. It's definitely the other side of the bubble, right? Speaker 1: Yeah, I know someone I just met in New York at an event in January and she was saying she had a nice healthy exit from an aggregator and she had a buyout on the back end of it and They have not paid anything and it's one of the big ones. It's one if I said the name you would know Almost everybody here would know the name She hasn't received any money on the, and she's like, should I, you know, I'm, I'm here in New York. I'm going to meet with attorneys to actually see what I can do. Uh, and it's like, I don't know if it's even worth it, you know? So that's, that's what's happening to a lot of people too, that didn't get all their money up front. That's why I was, I was always saying back when it was hot, you know, back when clubhouse, you know, everybody was on clubhouse, the app, you know, for during the COVID and the aggregators would come on there and have their little sessions. And, you know, I was calling, I was, you know, they're saying, no, we will give you 70% and, you know, 30% on buyout because we're going to, you know, our average goes up 50% or 60% or they make some sort of claim. So you're going to make more money. And I'd always tell people, I don't care how good things are right now. Be happy with that 70%. If you don't get another penny, think this, I got a good deal and just consider all that a bonus that you weren't counting on. Otherwise, most of you won't ever see it. And that's turned out to be the case in many situations. Speaker 2: Yeah, that's a sad situation for a lot of people who didn't get everything they wanted up front. Speaker 1: In fairness, most of those people got a three, four, five, six X multiple also, which they, so they were overpaid. So versus what people are getting now that may, may sell their business. It's still great. I mean, there's still businesses being sold, you know, quiet line, all the brokerages, they're still selling business. You go look at their page, you know, things are still selling it. It's, but it's not so much to aggregators, it's to other folks. And now that interest rates are high, you know, that cuts down on a lot of the, uh, the money that's available for people as well. Speaker 2: That's right. Speaker 1: So it's, uh, I still would build a business to sell. And even if you do a licensing, I mean, you gotta, if you're going to do a licensing deal, you gotta make sure that, that if you're building a company and doing a lot of licensing, that license can transfer to a new, new owner. So when you're doing that upfront, uh, negotiations, you need to make sure you cover that, uh, and as a clause in your agreement as well, that's transferable. Speaker 2: A hundred percent. Speaker 1: Well, Paul, I really appreciate you coming on, man. If people want to reach out to you and learn more about licensing or about your services for helping sellers, how would they do that? Speaker 2: Well, I like to use LinkedIn because even if my email changes, you'll always be able to get me on LinkedIn. So just look up Paul Miller, Amazon, and you'll find me or Paul Miller Cozy Phones on LinkedIn. You'll find me there. I love to connect with you, connect with people and stay connected via LinkedIn. That's great. You can always send me a message there too. I also monitor those. Speaker 1: Awesome. I'm looking forward to seeing you at the next event. I think last time I saw you was at a Helium 10 event. Speaker 2: That's right. Speaker 1: And I'm sure I'll see you at another Helium 10 event or something else out there in the space soon. Speaker 2: Yeah, I look forward to hanging out with you again, Kevin. Thanks a lot for the opportunity to come on the podcast. Speaker 1: I appreciate it man. If you've got a little bit more experience selling on e-commerce on Amazon or Walmart or some of the other platforms, I think licensing is one of the big opportunities that can actually create a moat around what you're doing and give you a leg up. It's not an easy thing to do but it's I think a great opportunity that a lot of sellers just haven't explored whether that's starting small with like what he said with the what-if monster or going after one of the mid-level companies that are licensed in their brand and using that on your product. I think it's there's some great opportunity there and take a look at that if that's something that's interest you. We'll be back again next week with another great guest but before I go I've got something for you the little nugget of the week. Sell outcomes and not features. In your marketing, you should always sell outcomes, not features. For example, the iPod doesn't just play music. That's a feature. It plays music. But it's music at your fingertips. It's an artist in your hand. It's mobile enjoyment. But most famously, the tagline that they used, which is the outcome, not the feature, it's a thousand songs in your pocket. So sell outcomes, not features. Don't sell a music player. Sell a thousand songs in your pocket. Have a good week.