Optical cards hit the right note

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For David-Joseph Brown the moment of truth came one evening in 1997 on the busy streets of Soho in central London.

He and his wife Kathy Heslop were preparing to play a jazz-fusion session at a local club, with him playing piano and her a Violectra five-string electric violin. But as they tried to load up their van, they found themselves menaced by the threat of a parking ticket that would take a sizeable bite out of the evening’s takings.

“We looked at each other, and we decided to give it up,” he says, although they had clocked up hundreds of gigs a year as professional musicians since leaving Birmingham Conservatoire, one of the UK’s leading music schools. The couple decided they would concentrate on the digital-recording business they had set up that year.

A decade on, 34-year-old Mr Brown is the straight-talking president and chief executive officer of Serious, a digital-publishing company that employs more than 60 people worldwide, with US offices in the other SoHo in New York, where Ms Heslop is chief marketing officer. The business has doubled in size annually over the past few years and has forecast revenue of about $30m this year.

Its diverse list of business partners includes Disney, Campbell’s Soup, ESPN, Nickelodeon, Manchester United soccer club and McKesson, the largest US drugs distributor. All have been customers for the company’s core product – optical cards with a compact disc or DVD on one side that can be slotted into a computer.

Last month, for example, Manchester United mailed out DVD-readable postcards to its season-ticket holders, with material including team screen-savers and an interview with Sir Alex Ferguson, the team’s manager, to encourage fans to renew their season tickets. In the US the cards have been used to promote ticket sales by the Indianapolis 500 motor race and by the US Tennis Assoc­iation.

Also in May, Circuit City, the consumer electronics chain, released a stored-value Pirates of the Caribbean gift card, produced with Disney and Serious. Linked to the release of the third Pirates film, the card includes a standard magnetic strip so it can be used to pay for merchandise in the company’s stores. It can also be slotted into a PlayStation, X-Box or tray-loading DVD player, and used to play the trailer from the film as well as related computer games, or to link to film-related products on the Circuit City website.

Meanwhile, McKesson, the drugs distributor, is using the same format to produce credit-card-sized cards for patients, which work both as a loyalty card and for carrying additional information on medication, with the possibility of registering for refill reminders and to obtain discounts.

In the early 1990s the couple set up their own record label, King Pin Music, but were plunged into debt after their main distribution company went bankrupt. In an effort to pay off the debts, they worked as musicians on Brittany Ferries’ services across the English Channel and the Bay of Biscay for two years. “We worked out that we sailed [the equivalent of] around the world twice,” Ms Heslop says. “We could do everything,” Mr Brown says. “We did the afternoon recital, we worked as a jazz trio, we played as a function band in the evenings.”

He says professional musicians have skills that suit them for business: “They create everything themselves; they’re responsible for their own performance; they do their own legal work; they do their own accounting; and they have to produce a product that differentiates themselves in a highly competitive market... Then you go into the business world, and you say to yourself: ‘This is easy.’ ”

The ferry job led to meeting some of their first investors, who lent them the money to set up Serious Sound in 1997 – establishing what became one of the first digital recording studios on Bateman Street, Soho – while still playing and writing music and jingles, including for the trailer of the 1999 film Notting Hill.

But after the parking ticket incident they became increasingly interested in the use of digital storage, which led to their first patent for readable “CD Cardz”. It also brought their first substantial financing in December 1999, when they raised $1.3m in about two weeks from some 70 individual investors at the height of the internet bubble era.

“My mantra was always global domination, because we brought the product to the market first,” says Mr Brown, of the long struggle that began to buy up scores of rival patents around the world, including an ill-fated joint venture with a patentholder in the US who initially wanted to focus on interactive business cards.

Mr Brown says he has sometimes had to fight to keep the focus on the cards: including the time he made the unwelcome discovery that one of his now former executives had started developers working on a web portal.

Serious stuck to the original proposition and the focus on value-added card-based material. “We consider our core business is to be a publisher with a globally unique medium,” Mr Brown says.

In 2000 it produced its first products – a set of 24 collectable soccer stars cards for the Euro 2000 tournament, and a series of five cards featuring members of Westlife, the Irish boy band. Armed with the cards, the two set off for New York, with their eyes on the collectable sports-card market, hoping to raise $9m. But they arrived just in time for the meltdown of the Nasdaq stock market with the end of the technology bubble.

Eventually they secured $3m in funding commitments from Siebels tech funds, but a second tranche of the money was delayed by the catastrophe of September 11 2001. A further $27m was raised subsequently, including, recently, $18m over three months.

With its fundamental proposition of being “a technology-enhanced service provider”, Serious has fitted into the growing search by consumer companies in the US to find ways to link online experiences to the physical world of their customers – a notion epitomised by the DVD gift cards. The cards can also be used to carry wireless RFID chips.

Last year Serious reached deals with some of the biggest gift-card providers, setting itself up for further projects, while the company continues to develop its collectable, promotional and pharmacy business.

Mr Brown says Serious is on the brink of rapid growth. But he and Ms Heslop are adamant that they don’t see themselves at the top of a big corporation, and eventually expect to sell the business.

“For Serious to become a multibillion-dollar enterprise, it is prob­ably bigger than us,” says Mr Brown, who adds that he has a strongly “vocational” approach to his work in business, where he says he has sought a “non-hierarchical” approach.

“There is going to become a point when this has become a machine that churns out cash, and at that point we’re not really going to be interested any more.”

At any rate, they no longer have to worry about parking tickets.

US investing environment beats ‘really sleepy’ UK

After seven years establishing their business in the US and living in New York, David-Joseph Brown and Kathy Heslop joke that ideally they would “like to work in the US and to live in Europe”.

Mr Brown argues that while persuading US investors to part with their money in the years after September 11 2001 and the collapse of the tech bubble was tough, it was still less frustrating than his experiences in the UK, where even getting to see an investor was a struggle.

His US investors include New York City’s pension funds, Capital One and Greenhill: it was much easier to get access to investors prepared to listen to his business presentations in the US than in the UK.

“Small private equity funds tend to be accessible, and the large-cap investors are tough, but open,” he says. The UK investments, he argues, also required more work afterwards: “The couple of million pounds we have raised in the UK probably takes more administrative time than the $30m we raised in the US.”

As a self-made business man, he is also critical of the overall attitude towards business in the UK. “We find the UK really sleepy,” he says. “It is still like pulling teeth to do business there. It is hard to get people excited.”

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