THE FOUNDERS
Daniel J. Price, 35, CEO; Timothy M. Price, 32, president
Education: Dan Price -- B.S. in accounting, University of Maryland; certified public accountant; M.B.A., Harvard Business School. Tim Price -- B.S., mechanical engineering, University of Maryland
Personal funds invested: $50,000 combined
Equity held: 46% combined, with options to reach 55%
Family: Both single
Salary: $60,000 each
Other companies started: None
Last job held: Dan Price -- mergers-and-acquisitions specialist, Alexandria, Va. Tim Price -- engineer, Westinghouse electronic-systems group, Baltimore
FINANCIALS
The Send-a-Song Corp. Financial Projections (in thousands)
1993 1994 1995
Revenues $875 $22,000 $56,000
Cost of revenues 350 7,700 18,200
Gross profit 525 14,300 37,800
Expenses 800 12,000 30,000
Pretax profit (275) 2,300 7,800
WHAT THE EXPERTS SAY
Financial Consultant
Richard McCullough, managing partner of Arthur Andersen's Richmond, Va., office, which specializes in services for emerging companies
The revenue projections of $22 million in 1994 and $56 million in 1995 are very aggressive based on Send-a-Song's current call rate. Still, there seem to be no technological barriers to reaching those goals. The company has the infrastructure to handle 10,000 calls almost at once.
This company is not capital intensive in the traditional sense of hard assets. It's more customer-acquisition intensive, and it reminds me of the early days of cellular phones. Nobody knew if people would spend the money and use the service, and it cost hundreds of dollars to sign up a customer. As cellular phones gained acceptance, the cost of acquiring a customer went way down, and you had a strong revenue stream.
This appears similar. Send-a-Song needs to establish a subscriber base of repeat callers. I like the overall concept, and I'm impressed with the strategies Dan and Tim Price are using to build a customer base. The joint ventures with radio stations, the distributorships, and working with companies like Revlon can substantially leverage what Send-a-Song could do by itself. In every case, it is giving up some revenue, but it seems to me those channels will dramatically improve its reach. If this thing catches on, it has the potential to be something that suddenly becomes a normal thing for people to do. It could create some phenomenal numbers. But the success of its marketing approach is yet to be determined.
The cost, at $9.95 a song, might limit customers to the high end of the market, but that's a large number of people. I compliment the Price brothers on the legal effort they put into building some barriers to entry into this field. I also really like the feature of combining the song with a personal message.
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Observer
John Sortino, president of the Vermont Teddy Bear Co., in Shelburne, Vt. Advertising exclusively on 135 radio stations, the $10.6-million business sends customized teddy bears as special-occasion gifts
The song idea is a very good one. The key is how the company markets it, and right now I think Send-a-Song is groping for marketing approaches. My advice would be to spend every single minute raising capital. The Prices need that to experiment with the best ways to market their service.
If you can advertise on radio on a cost-per-sale basis, that's great. But I wonder if the Send-a-Song system is easy enough to explain on the radio that it can generate those 10 to 20 calls a day for each station.
A lot of radio stations do this cost-per-lead advertising and haven't had real long-term stability with it because it's a difficult thing to keep up. Many novel ideas like this seem to have a short life span because the novelty wears off.
When it comes to sending gifts, people are definitely looking for convenience, and this is superconvenient -- you never have to leave your desk. But in my experience, it wouldn't be enough of a gift to satisfy most people -- so it might have to be given in addition to something else.
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Customer
Jorjanne Arnold Gausman of Springfield, Va., who uses the service to send 10 to 20 songs a year
I discovered the company when it was just starting out, and I got addicted to sending songs, mostly because of the reactions of the people who received them. It was a kick for me and fun for them, so I'd get even more excited the next time I sent one. Recipients are just blown away, and they feel special, even more so than if I had bought a card and written a note.
I still send a lot of cards, and I save the songs for really special occasions. To preserve the novelty of it, I wouldn't send songs more than once a year to any one person. But I don't send them just for birthdays. I send them to people I work with, to maybe apologize for a mistake I made at work.
The great thing is that if you have forgotten someone's birthday, you can wire flowers, which cost a minimum of $30, or you can send a song immediately for $9.95.
I think this will catch on. Once you receive a song, you can't help wanting to send one yourself.
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Marketing Partner
Michael J. Valentino, vice-president of sales and general manager of WMXV-FM, an adult contemporary radio station in New York City. One of the most successful stations in New York City in revenues and ratings, it has a listenership of 1.5 million people
We look at our relationship with Send-a-Song as a profit-sharing joint venture in which we feel as if we're part of the company. We do very few deals like this, but we thought this was a good opportunity to take part in a company with great potential, without any major commitment on our part, using advertising inventory whenever we can. We plan to run about 25 spots a week to advertise the service.
A possible downside is that people will think $9.95 a song is a lot of money, or they'll use it once or find it too complicated.
Send-a-Song's goal of signing up 100 stations by late summer seems reasonable. The top 10 markets, however, are really tough with this sort of thing [profit-center endeavor], especially at certain times of the year when inventoried advertising time is scarce.
