What is the value of an idea?

Thomas Edison once famously said that “Invention was 1% inspiration and 99% perspiration”. I’ve been led to think about that again since the response to my recent post on our new competition “There’s not an App for That… Yet!”.

Andy Mees in our comments, and Anthony Burokas in response to Scott Simmons post at Studio Daily both raised the question that “a free copy” of the application seemed to be unfair compensation for the idea for an application. They raise a fair question: after all we’re asking people to submit the idea and hand over rights for the developed application to Intelligent Assistance.

So, how valuable is an idea? In practice pretty much nothing. Consider:

Ideas vs Execution “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.”

Ideas vs Execution (different site) “Startups – your idea isn’t nearly as important as you think it is.”

Is Execution More Important than Vision? “… the visionary is usually the one that gets the shaft in Silicon Valley.”

Or consider the Winkelvoss brothers who could be reasonably considered to have had the “idea” that ultimately became Facebook. They sued to prove it and did, indeed win a $65 million judgement (in Facebook shares, not cash). Given that Facebook was valued at $5 billion at the time, that’s just 1.3% for the idea and 98.7% for execution.

So let’s take a practical case: our Transcriptize application. Like almost all of our applications this one came as a suggestion from a friend, Larry Jordan. At his 2009 business Christmas gathering, Larry suggested the idea to be able to read and convert Soundbooth transcription XML to something more useful. Good idea Larry, so let’s make it.

Greg (my programming partner) had to learn how to read Soundbooth XML (which is a different format than FCP XML, of course) and then build an algorithm to convert it to text, spreadsheet and Final Cut Pro markers. The basic conversion was done the day after the Christmas gathering after about six hours work. (For reference, a programmer with his experience bills at $150 an hour or more.) But that wasn’t an application. It was still useless, but has incurred a “cost” of $900.

To turn that algorithm into a real, shipping product took another week’s work between us (that’s another 40 hours or $6K) to design and build an interface, to troubleshoot and test multiple outputs for Final Cut Pro, to add extra features as we thought of them, to add in updating frameworks, security framework, feedback framework, design an icon, write copy for and design a website page, set up serial numbers and the product into the Intelligent Assistance store, write and send out media releases and start marketing and promoting the application.

That’s with a full e-commerce site already developed that automatically talks with the payment processor so that, when payment is confirmed, issues serial number, and with a robust security system already developed and in place. Neither were developed specifically for Transcriptize bu together they represent another 60-80 hours of work that has to be amortized across all sales.

Opportunity cost for us to create Transcriptize (without allocating any from the store or security) was over $8000. We have yet to sell 10 copies at $149 each. The value of the app free is $149, the return to Larry at 5% to date would be $37.25 as we come to the anniversary of the apps release.

Pretty much every one of our utility applications to date have been suggested by friends and associates as you can see in the credits for any application:

Transcriptize was suggested by (as I said) Larry Jordan;

Sequence Clip Reporter suggested by Les Perkins who had to wait nearly a year to be able to run it on his system after he upgraded with a massive number of feature requests from early adopters;

Sync-N-Link was suggested by Ted Schilowitz of RED Digital Cinema;

Finisher was suggested, during the First Cuts beta, by Loren Miller

ExceLogger was suggested by a First Cuts Studio customer;

Log Note Replicator came from a suggestion of a LAFCPUG user who had been using ExceLogger in a convoluted way to do what Log Note Replicator became;

Clip Info Titler was requested in various ways by multiple people, including Shane Ross

Is Clip Used? was a multi-wished feature request over at the LAFCPUG forums.

The question of a royalty never came up: these people were just happy to see the application created so they could use it, so we thought the same would apply to the competition.

The other applications: First Cuts (originally The Assistant Editor); prEdit, Matchback Magic and miniME came from internal ideas, because – quite frankly – no-one much thinks that far out of the box.

The “idea” is important, but if you have to choose between the idea and execution, always bet on execution.

On the other hand, if you do have an idea you’re convinced will sell thousands of copies to Final Cut Pro users and you’re prepared to put in a whole lot more than just the idea, come talk with Intelligent Assistance. We do a lot of custom programming for workflow support and we could likely build the app for you. But the reality is that few products sell a thousand copies, even fewer thousands. Of the nearly 300,000 applications in the iOS store, there are 290,000 that are making their developer nothing.

But, so that no-one can feel that they are hard done by, the winner of our “There’s not an App for that… yet” competition will have the choice of either getting the application for free, or taking a perennial 5% of net sales (after credit card charges and fees are deducted from the income). In most cases you’ll be better off taking the free app, but to be fair, the details of expected return, compared to the returns we’ve made on apps, will be set out for the winner so their choice is well informed.

10 thoughts on “What is the value of an idea?”

  1. Philip,

    100% yes!

    Here’s a quote that’s been on my mind recently:

    “The gap between ignorance is knowledge is much smaller than the gap between knowledge and action.”

    Your is a terrific contest. It sucks that folks think the initial idea is where all the value lies.

    – patrick

  2. To be honest i saw the initial post on facebook and was a little shocked. I actually thought it was a joke linking to a blog you had written about ideas and how much they were really worth.

    Digital Reb’s new app Cut Notes for iPad looks great. I don’t think they will make more than $30k off it after Apple takes their slice, but i think the idea originated with an assistant editor who thought “you know what would be good?…”

    The competition wasn’t a bad idea, the initial free prize was. Some sort of percentage of the app is definitely a must even if it is only $37. End of the day if it is going to cost more money to make it than you are going to get back, don’t start!

    Our first app Pro Surfing did ok, enough to pay my rent. I didn’t quit my day job tho, but it did lead us to create another game, Stick Skater which reached number 2 in the US app store. Thats where you get into grey areas with competitions like this. 1 idea sparks another, feelings get hurt and lawsuits get filed.

    cheers

    L
    @badboyofediting

  3. Yeh, $37 instead of $149 application sounds like a great idea 🙂 I hope the Cut Notes app does do $30K but that would be way beyond my expectations for an app. Glad you did well out of Pro Surfing.

    Philip

  4. Liam, no it will be a choice – either the free app OR the royalty. Of course they could still buy at the 50% off.

    I want people to think about the reality here. It’s unlikely that an idea will, at the 5%, return the value of the app to the person who suggested it in the first two years. So it is definitely either/or. Put your belief in the future of the idea where the $$ goes. After all we’re putting in a whole lot more here than any “idea”. Either you believe in the widespread applicability and therefore salability of the app and take 5% or you decide you want it and don’t believe in it going to sell.

    Philip

  5. Hmmm, it just doesn’t seem to make sense at all. i understand the work that goes into it but why would u guys bother to make an app that will more than likely fail? Have you revisited your price point?

  6. To date we’ve made apps that were suggested or we had an idea for. We have no idea ahead of that whether or not an idea will sell. Some sell very well at good price points (Sync-N-Link for example) others we have done a poor job to date of getting the word out. And some we make because there’s a need. In all cases we’ve learnt more about how FCP XML deals with video (and believe me there’s a world of hurt there) and some have just been interesting to do.

    And some, are revolutionary and will completely change the way post production is done.

    But now we’re looking to see if the wider community has any better idea of what will “sell” and what won’t.

    And we constantly review price points.

  7. Checking out Transcripterize, I see lots of potential there. I was just trying to figure out how to get PPro/Soundbooth speech analysis into CatDV (which can work with FCP XML).

    I hope you sell lots of copies. Of course, it does require both suites… but that’s not uncommon in post.

    Best wishes! I’ll be watching.

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