I think the biggest problem VideOvation will have is its assumption that it's not cutting into the yearbook market. From the point of view of yearbook faculty advisers, that's not the case. They'll see it as a real threat to student interest in working on the traditional yearbook. We've had a couple different video companies try to pitch us, and our yearbook adviser was not in favor of it at all.
No principal in his right mind would guarantee the sale of 200 videos. And getting a principal to allow an all-student assembly to demonstrate this video is pretty unlikely, too. Just look at the controversy Chris Whittle got into by offering 10 minutes of news a day, free equipment, and televisions in every classroom in return for two minutes of commercials. There's a hue and cry about that. Imagine a principal saying, "Yeah, I'll take instructional time to have an entire student body sit as a captive audience for a sales pitch on this commercial product." Not many right-thinking principals would agree to that.
A better approach would be to simply offer this as a flat-out fund-raising activity. To let, say, the junior class sponsor it. Then you charge $35, and the students keep $5. If the kids felt they could sell 200 or 300 videos, that's a lot of money, more than they'd make selling candy or pennants. Getting student leaders and a class adviser saying, "We can make this work," and approaching the principal would be a better marketing strategy.
OBSERVER
ROCCO MARANO
Associate director, National Association of Secondary School Principals, division of student activities, Reston, Va.
What the company did right was hook up with QSP. It went with somebody who really knows the school establishment and has the sales force to go and talk to principals. QSP's got a good reputation; it's a good organization for fund-raising, and it's trustworthy.
I know that yearbooks are not looked on as a way to make money, but reading all this I wonder, What does a school get out of this? These days a lot of school people are saying, "Why should we be doing it unless we get 50%? Why should we try to make you money?" If Gruenberg is looking for a partnership with the schools, he may have to let them make money on it.
The company should consider offering varied services, not just one package. Some schools already do a fantastic job with video and may think, "We can't print our yearbooks, but we can probably edit our videos." They may not be top quality, but may be just good enough. So if schools have their own equipment, the company could provide training; yearbook companies, for example, hold workshops. Then even if schools get more sophisticated, they don't have to dump you.
COMPETITOR
MARTY ALLEN
President, Scholastic Video Inc., Exton, Pa., a one-year-old video-yearbook company; former marketing director for Jostens Inc.
Operating in the school market takes a lot of patience, and I think Gruenberg is finally beginning to see this. He's figuring out who to talk to, although in my experience the buying decision isn't very often made by the principal.
Structurally, I think he's making a mistake by having two sets of people -- field producers and outside sales reps -- servicing the same schools. At this point, it's important that schools build loyalty. They're going to be working most closely with the field producer, and that person should have a very big stake in seeing to it that the school is happy and gets renewed. In the yearbook industry, sales reps handle both sales and service; their necks are on the line to get schools renewed.
Editors can make or break you in the quality of the final product. Gruenberg's chosen to use free-lancers to keep costs down, but because he pays them a flat rate for the tapes they edit, the incentive isn't for quality but speed. If they can do something in 10 minutes, I doubt they'll spend an extra half hour to make an OK tape into a really great tape.
In terms of the overall market, I think he's optimistic. I doubt if we're talking about a $500-million market -- it will probably be closer to $250 million or $300 million. The number of schools he hopes to sign is doable. But getting penetration within schools is going to be harder than he thinks. I think this will be a slow-growth industry in terms of unit sales.
FINANCIER
KEVIN DOUGHERTY
General partner, The Venture Capital Fund of New England, Boston, who in his former capacity as a commercial lender worked with yearbook companies
Gruenberg thinks they now have the right way to sell -- and they might. But I'm skeptical. Whenever you rely on an outside group whose business is different from yours to do the sales, you have to worry about whether the partner will give it the attention it requires -- and whether its interest will be diverted to something else next year. We see it all the time in the high-tech field: something looks like a natural add-on product for a third-party selling organization, but it doesn't always pan out.
Is QSP's expertise the kind VideOvation needs most? QSP's business, as I understand it, is helping schools set up fund-raising drives; its bread and butter is really teaching sellers how to sell. To help VideOvation inside schools, it will have to get buyers to buy. Yearbook and ring companies already know how to do this, but I'm not sure QSP does. It's a very different skill, and it makes me wonder whether the company will get the penetration it expects.
I give Gruenberg a lot of credit for being flexible. He's been sharp enough to see what hasn't worked, and he's changed his marketing focus a few times. He hasn't been dragged down by a strategy that wasn't clicking.
Will he succeed? I don't take a lot of comfort in his financial projections. Investors already have more than $3 million in this business. If I were Gruenberg, I'd do what I could to make sure expenses are held down until revenues develop. If he can do that and react to what's happening in the market, I think he can survive. But I have real questions about whether this will be a $20-million business in three or four years, which is what it would have to be to justify all the investment.
