Power Play

First to Market

The idea for MovieFone was not about building a better mousetrap, but rather creating the first mousetrap. Having an original idea such as this--instead of an improvement on an existing product or service--almost guarantees you will be first to market. The company's idea was to eliminate one of life's inconveniences, a premise upon which most successful ideas are based--Liquid Paper, telephone calling cards and ATMs, to name just a few examples.

What also comes with being first to market, however, is the difficulty of going where no one has gone before. Finding financing for a new idea is tough. Development tends to take longer and be plagued with stumbling blocks. Meanwhile, there is uncertainty about whether a market even exists--and if it does, whether it's big enough to profit from.

Leatherman and his two original partners mortgaged their homes and maxed out their credit cards to raise initial funds. Though they had shown their idea to potential investors, they couldn't find anyone who would put up money to help develop it.

This is a very common problem for many entrepreneurs with new product ideas--even entrepreneurs with successful track records. It's easy to get money once you have a proven concept. The old adage that banks only loan you money when you don't need it is usually true, and the same holds true when seeking most investment capital.

Fortunately, with all five partners on board, the company had the resources to develop the first BODY system in the Los Angeles area. In addition to money, a lot of time and experimenting went into creating the technology for MovieFone. It was important that customers be charged for local, not long-distance, phone calls. Therefore, Los Angeles needed five data centers to accommodate the region's five area codes.

Another difficulty was obtaining accurate show times for all the theaters. At first, the company had theaters fax them the information--but even when the theater operators remembered to do this, the information was often inaccurate. The partners knew accurate information was essential; offering a "zero defects" service was critical to MovieFone's success. A system had to be developed to electronically transfer accurate data from the theaters into the MovieFone system.

Unfortunately, the company could not afford the advertising necessary to generate enough traffic to satisfy investors. In a final desperate attempt to keep the dream alive, Leatherman persuaded the Hollywood Reporter newspaper to write a small article about MovieFone. The article not only attracted callers but a New York City investment firm as well.

Six months later, there was a proven market for MovieFone. To date, the company has serviced more than 150 million calls.

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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: Power Play.

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