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MEMBER
SPOTLIGHT:
INTERVIEW WITH RIGHTSLINE CEO, RUSSELL P. REEDER
Interview
by Jennifer Beever
RightsLine,
Inc. is an up and coming software company that survived the downturn
of 2000 and 2001. RightsLine now has twenty-seven employees and
last month was awarded a patent for intellectual property database
navigation.
What exactly
does RightsLine do?
What we
do is very similar to a manufacturing environment. We help companies
keep track of all their intellectual property - their trademarks,
their patents, and their copyrighted information. The first vertical
we started in was media entertainment. Now that Media and Entertainment
products are going digital, there are many new avenues of distribution.
Before RightsLine, content owners had to go back to the filing cabinet
to see if they had rights to distribute content. So, really, the
Internet is almost like the Wal-Mart for this content distribution
and all intellectual property distribution. But content owners now
need to implement new back office solutions to keep track of what
rights they have and what royalties they collect and pay out.
What's an
example?
A great
example - EMI Music is one of our customers. They keep track of
all of the rights that they have with all of their artists. And,
before they do a deal, they can look up what approval process they
have to go through. RightsLine generates the contract and keeps
track of all the terms and conditions and does any royalty payment
processing as well.
How did you
come to start RightsLine?
I started
the company six years ago when I left Oracle in 1999. I ran Oracle's
West Coast Application Sales for Oracle's Major Group and brought
this opportunity to Larry Ellison. When he passed on it, I left
to start RightsLine. Before I got into sales at Oracle, I used to
build financial and manufacturing systems as a computer engineer.
A developer
that went into sales?
Yes -
I built manufacturing systems out of college. I worked for Mobil
Oil Corporation as a COBOL programmer. From there I went to AMS,
American Management Systems, and I was a systems analyst/consultant.
I found out that, for me, it was more fun to sell the systems than
to implement them. In 1995, I went over to Oracle and was promoted
up through the ranks. I was one of the youngest managers at Oracle
when I ran West Coast Application Sales.
That must
have been an interesting environment!
It was
very cutthroat, but very good - you'll never be able to be a young
manager in a company that wasn't cutthroat.
You started
the company six years ago. How did RightsLine evolve?
What -
you mean starting at the height of the market [laugh] and surviving
the crash? I started in October of 1999 and we raised our first
one million dollars in April 2000, right before the crash. We've
gone up and down on the funds, but because we had a good product,
we were able to survive the downturn. We actually signed on Universal
Studios back in January of 2001 - our first big client. One of the
keys to our success was finding very large beta customers that would
help drive the product functionality.
Beta customers
are so important to start-ups. How did you sign them up?
There
are two types of start-ups. There are start-ups that build a technology
and go look for a market, or there are start-ups where there's a
need, and they build the technology to fit that need. We're definitely
the latter. The Media Entertainment Industry came to Oracle asking
for this type of product. When Larry Ellison passed on the opportunity,
all the senior executives in the Media Entertainment Industry said,
"Listen, Russ, this is exactly what we need. It's mission critical,
we can't do our business without rights and royalty management.
If you quit, we'll personally fund you to get started."
So, I got funding
from the senior executives at many of the studios and music companies.
With this funding came access to the best requirements so we could
build the best system. We were able to build a prototype and a beta
application based on the existing issues and requirements from a
multitude of customers - from Warner Brothers to Universal Studios
to EMI Music - we were able to gather requirements to figure out
what they needed. Then we went back to them and said, 'This is how
the application works.' Basically, we had them pay more on the back
end, if the project was successful, than they did on the front end.
Just last month
we were awarded the patent for intellectual property database navigation.
Now, if SAP and Oracle want to come to this game, they have to license
our technology.
What is the
market opportunity here? How big is this space?
Just in
media entertainment and content aggregation - whether it's T-Mobile
or Verizon or Infospace or any of the content aggregators - they
need to use a rights and licensing system to distribute their ring
tones, songs, call backs: the whole nine yards. That's our main
market - it's very large, and it's very hot. You can't deliver ring
tones unless you know who has the rights to them and what royalties
you have to pay. You can't provide a 99 cent song for download unless
you know who has to get paid for that. Right now, people are doing
it with Excel spreadsheets!
The vision of
RightsLine is to have every company, whether it's a high tech company
with patents, or a pharmaceutical company with copyrights and patents
on drugs, use RightsLine to help them track and license their intellectual
property.
The music industry
is very similar to the pharmaceutical world. The Media Entertainment
Industry licenses the right to a song, they sell the song, and they
pay a royalty. Pharmaceutical companies license intellectual property,
and, based on how it's sold, they pay certain royalties. The intellectual
property world is ten times bigger than CRM!
Don't you
think it's going to get even bigger with SOX (Sarbanes Oxley)? Companies
are going to say - "Let's not even go there - we're going to
license it."
That's
exactly right - there's a statistic - Price Waterhouse Coopers estimates
that, "by 2007, as much as 90% of the value of the world's
top 2000 enterprises will consist of intellectual property."
What's happening is that SOX is making people pay attention to how
they track their intellectual property. Before, intellectual property
used to be tracked on Excel, but you can't audit Excel! That's the
big issue. Before, if they licensed something and they didn't have
the rights to it, they'd say, "Hey, we made a mistake, we didn't
have the rights to it, we're sorry, we'll write you a check."
Now, you go to jail. So, you really have to know. And, the more
we outsource - the more America becomes the country of ideas and
less about manufacturing - the more we have to keep track of those
terms and those contracts. That's what RightsLine stands for.
With everything
that went on from 1999 to 2001, did you have to rewrite your business
plan?
I
had to scale way back. We raised our first million, and we were
on the "fast track." Then in December 2000, everyone realized
there was a recession, I had three investors pull out of the company,
so we had to scale back from 25 employees to 6. Then we closed Universal
Studios, signed on additional customers and built back up the company.
The flexibility of the management team to adapt to the changing
marketplace is key in RightsLine's success. The two sources of funds
for a start up company are customers and investors. The best source
is definitely revenue, but you need a product before you can generate
revenue.
What has
been your biggest challenge as a company?
I
think we were a little bit ahead of the marketplace six years ago.
Napster was one of the best things for our business, because finally
people understood what intellectual property was. You just can't
use content and ideas without the rights to them. I think that people
are seeing that the more we outsource to countries like China and
Vietnam, the more we are just a country of ideas that we have to
track. We're still in the very early stages of this marketplace.
What has
been the company's greatest success?
Number
one was surviving through the downturn! Number two is building a
brand - we're seen as the up and coming software company in this
space. The third thing is winning the patent.
What would
you advise other software CEOs to do?
The
number one thing is persistence. The definition of a market leader
is the person with the most arrows in their back. You're going to
hear a thousand times, "It's not going to work - why would
you need that?" The successful entrepreneurs are the ones that
didn't listen to comments like that, but listened to the customers
and had the right vision. You have to be a visionary to see it,
and then you have to believe in yourself to make it happen.
In addition
to being the CEO of RightsLine, you were the President of Entrepreneur's
Organization in California and are now the Area Director. How do
you do it all?
Well,
I'm also a triathlete. Staying in shape helps keep the head clear!
If your body's not working right, your mind can't, either.
How do you
have time?
I
don't sleep! One of the hardest races I ever did was when I took
a red eye to the East Coast because I had a meeting for the company
that just came up and I had to change my schedule. After the 24-hour
mountain bike race in the pouring rain, I flew back to Los Angeles
to have a meeting, and two days later I was in the Los Angeles Triathlon.
A week later I was in the Malibu Triathlon. There are different
classes for the triathletes, and I always thought that they should
have a CEO class, in which you have to take two or three red eyes
a month to be eligible!
How have
you benefited from your membership in the Software Council of Southern
California?
I've
definitely benefited from having access to peers. It's a great peer
group of technology leaders. I'd love to get more involved with
Southern California and the Software Council. The message to all
the CEOs is that we need to pull together to make sure that the
laws change in our favor with the right taxes and the right access
to the right resources. It's unfortunate that there are not more
corporate headquarters in Los Angeles. Once a company gets big enough,
they move headquarters. The message that the Software Council needs
to give to the local government is that we need to "incentivize"
the larger companies to stay and newer companies to move here.
RightsLine,
Inc. is a leading provider of business applications software, enabling
companies to increase revenue and lower operating cost from licensing
content, trademarks, and copyrights. In a time when shareholders
are pushing management to do more with less, RightsLine provides
the first software solution focused on increasing revenue from intellectual
property while driving down overhead costs. From automating licensing
and sales divisions to improving financial accountability, RightsLine
provides a proven set of rights management, licensing and royalty
products, allowing our customers to increase revenue, satisfy compliance
requirements and improve efficiencies. For more information about
RightsLine, please visit us on the web at http://www.rightsline.com
or email info@rightsline.com.
Interviewer
and Software Council member Jennifer Beever spent 14 years in the
ERP software industry prior to founding her marketing consulting
firm, New Incite, in 1997. Jennifer helps companies create and implement
systematic, planned marketing strategies. Contact Jennifer at 818-347-4248
or jenb@newincite.com.
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