How I Helped Create Hollywood Blockbusters While Making $Millions Selling a $300 iPhone App

($300 for this?!)

($300 for this?!)

Warren Buffett says “price is what you pay, value is what you get”

But would you pay $300 for an iPhone app?

Jessica Livingston and Paul Graham are famous in the tech world. They were the first people  to start a tech “incubator” where investors put money into a lot of different startups at once and advise them through the early years. Today their incubator is worth an estimated $500MM and has produced companies like Reddit, Airbnb, Survey Monkey, Heroku and Dropbox.

Paul also writes about startups and has a famous drawing he loves to shares with founders:

(small group of very urgent users)

(small group of very urgent users)

Finding small groups of users who urgently want or need a product to solve their problem is more important than making something that seems useful to a lot of people, but isn’t.

Microsoft started with a small group of customers urgently demanding their product (an Altair BASIC interpreter), Facebook started the same way, &c. Because once you have traction with those users, you may be able to scale, as Google did. His drawing points out that although it is tempting to think a site like a social network for pets sounds like a good idea, it is better to solve problems for a small group that throw “things” at large groups of people that won’t use them (Pet social networking).

(this sign is in 3D in the hills above LA)

(a 3D sign in the hills above LA)

2010 was the age of 3D, remember? No one could get enough. It was everywhere and our company went public that summer, at the height of the fervor.

I flew to New York for some business meetings and to attend an outdoor screening of “Monsters vs Aliens 3D” in the new Brooklyn Bridge Park. I did a deal so our technology would be used in the first outdoor 3D movie screening of its type. 1,000 people were expected, 5,000 showed up including the mayor who gave a little “I like 3D, this is awesome” speech.

(unfortunately he wasn't there)

(unfortunately he wasn’t there)

Then I went to Tribeca Film Center and did a deal with Robert De Niro’s team. Everyone at TFC became my friends, as did 1/2 the studio and post production world in New York. And the New York Technical Institute, Brooklyn Academy of Music and all the screening rooms, even the private ones of famous directors and producers.  And I got to know everyone at SoHo House and did a deal for their screening room, too, so I’d be at SoHo every time I went to NY seeing all the famous people do the things they do.

I was hustling deals with every studio or production company I could find, and got the same feedback: 3D is hard to make. We need it to be easier. Our screening rooms need to show good content.

But did you ever stop to ask why 3D came back so strongly? It’s a very hard medium to work in, to film in, and to produce/post produce.

Shooting live 3D (like “Gravity” or “Avatar” or “Hugo”) is more expensive and time consuming. Using two cameras simultaneously is aggravating.

(it was powerful and saved $$$)

(powerful, interactive & solved a huge problem)

Companies were raising huge amounts of money to provide a 3D production service where they’d send vans full of engineers to sets and “assist” shooting. But they’d wing it. Most of the work still happened in post production and these vanloads of engineers would charge $hundredKs.

The public didn’t know and didn’t care about the difficulties. All everyone knew was 3D is huge and “the future.” We checked our stock price in the cab to the airport – $18 – $20 – $21 – it went up and we counted our money (even though we were locked up for 6 months).

The windows were down and the sticky New York air hugged us.

It was summer.

It all felt right. If I closed my eyes I heard “Empire State of Mind” in the background, distracting me from the smokey piss smell in the cab. There were challenges but we were riding the high tide and I kept my eyes open for more opportunities.

And in the middle of it I got a call from a friend who said “hey so I’m building this app and I wanted to see what you thought of it.” Of course I said “I’d love to see it.” It was early but he modeled the complex calculations and instructions of filming movies in 3D on an iOS platform – as an app. It was amazing.

(simplified complex calculations

(simplified complexity)

It wasn’t super pretty and clean yet but it was beta and its potential was clear:

An iPhone app that makes filming in 3D easier by giving Directors of Photography and Cinematographers the calculations they needed to properly shoot. It reduced setup time and improved shot quality, saving huge $.

I’ve been on tv and movie sets since I was a teenager. My oldest brother has made films and tv shows in Hollywood for almost 30 years and I’ve hung out with him at 3 of his 10+ shows, getting to know the organizational structure and watching filming take place. I found out what each person did.

Cinematographers and Directors of Photography make the important technical decisions for directors and producers.

(interactive virtual set)

(interactive virtual set)

So when my friend Ken Shafer of Innoventive Software showed me his idea we immediately partnered and a few months later launched “The RealD PRO Stereo 3D Calculator for iPhone”…then the iPad version.

We had what Jessica and Paul would call a “small, urgent group of users.” Because we were solving enormous problems for them. This app literally helped make some of the modern 3D blockbusters, which is partially why 3D took off so heavily, and made Cinematographers’ jobs easier. They could shoot and adjust real time.

We priced the app at $300. One of the top 10 most expensive iPhone apps ever. At that price, we didn’t need 10 million downloads to make som money. But the price was significantly below the value it brought to the users.

We sold thousands of them within months.

All the filmmakers and cinematographers bought it. 3D enthusiasts bought it. Braggarts bought it to show off.

Most of the 3D movies you saw in 2010-2012 used the app on-set. It saved them tens-of-thousands of dollars, sometimes that much daily, so $300 was a bargain. We probably could have charged more.

After a year or so we dropped the price to $69. Today you can get it in the app store for $54.99. We launched a lower featured consumer version for $29 which now sells for $9.99.

The app made over $1MM in revenue within the first 18 months, and is still selling.

We created a tool that virtually eliminated vanloads of engineers and ushered in the production of 3D content everywhere.

We could have leveraged the app and created other similar filmmaking or entertainment products to grow our user base but didn’t. That’s another story I probably won’t ever write about (and since I did this on behalf of a company I was not receiving the windfall from the sales of the app).

It proves you can throw out what anyone tells you about how to do something and focus on the value, not the price.

Find a product-market fit with a solution to a problem, serve those customers well, then scale.

Even starting with a $300 3D app for your iPhone.

Download it in the iTunes store here.

How A Garbage Man Became Your Broker

(this was not in the truck)

(Cosmo was not in the truck that day)

Raunchy porn magazines littered the dashboard. It smelled like rotting fruit, stale beer and dirty diapers.

“The other driver loves to keep the dirty stuff. He picks it out of people’s trash” he said. “I wouldn’t touch those without gloves on.”

We were 19 sitting in the sweltering cab of a recycling truck in suburban Chicago, in August. The grass was tall in the ditches next to the roads and the humidity held our sweat to our skin beneath our shirts. Something for the stench to cling.

He invited me “On The Route” so I went, now regretful, nose burning.

recycling_truck.jpg

(what goes around comes around)

My friend confessed “it’s a good job but I don’t want to be doing this my whole life. I just can’t go to school. It’s a waste of time. Who are these teachers? They just throw stuff at you. This is real education.”

(all the gold, guns and girls. is it ever gonna be enough?)

(all the gold, guns and girls. is it ever gonna be enough?)

My friend was the epitome of the James Dean type. Every girl ogled him but he was faithful to his girlfriend, contrarian, reckless but smart (once crashing his Dad’s new Mustang while driving underage, ditching it to avoid the police), questioning authority philosophically, appearing always like he stepped off the pages of a JCrew catalog (the most influential mail order of the time). I was not much like him, but we became best friends. I wanted to start a jazz club in Chicago called “Birdland.” We were obsessed with jazz. We had big plans. Always circling around how we’d leave our mark on the world, not sure how to start. Uncertain when our break would come, chasing.

We’d both dropped out of high school the same year. I tested into college and he went to work driving a recycling truck.

(we wanted to go back in time)

(we wanted to go back in time)

He drove the route every day while I tore through classes, tripling credit hours to graduate early.

But I didn’t have a job plan. I felt like I should. Anxiety was growing.

Sitting in the parlor of the house I shared with 4 girls and another guy, watching ticker symbols stream on CNBC two weeks before graduation, I had a flash: “can someone trade for a living?”

I graduated in December with two interviews at brokerage firms.

“Hey man I’m going downtown Monday to interview. You should come.”

“What are you talking about. I’m not going with you to your job interview.”

“Dude, it’s just an interview. You can introduce yourself and see if they have anything else. Seriously, no big deal. Come with.”

He agreed.

We took an early train from Barrington and met a guy in the office of Eurospread Associates, where some of my cousins un-coincidentally worked. “I didn’t expect two?” he said. We acted dumb and shrugged. He ushered us onto the trading floor. “People are gonna say shit. Just ignore them. Don’t take it personally.”

It was nothing we’d seen before: mass chaos, colored jackets, hands in the air, faces screaming, spitting and sweating. The floor was littered with paper.

Traders & clerks laughed and pointed at us chanting “fresh meat,” flipping trading cards our way like flat paper bullets.

We were overwhelmed by stimulus, captivated. You could feel the money.

“I didn’t know we were hiring two” one broker said.

My friend and I looked at each other “I guess you are” I said.

“Okay, fill out these forms. You can start January 3rd. I’ll put one of you in Yen and the other in the LIBOR pit. You’ll start as runners.” He got Yen, I got LIBOR.

We rolled out of the building laughing, high-fiving. “What just happened?!”

Two weeks later we walked onto the CME floor and started our future.

A year later I was hired at Michael Stoltzner’s Futrex Trading, training with Jeff Goldman (one of the largest EuroOptions traders) on weekends and went on to develop trading systems at Specialists DPM and Edge LLC until I left to pursue my dream on the West Coast.

People will tell you the better path is the path in pursuit of something they can see. The path that looks good on paper and reflects well when you tell your new girlfriend’s parents. They don’t like recycling trucks they like money and power and sophistication and houses in suburbs.

But when you climb the unfamiliar trail in front of you to the top of the first mountain, only then can you find the next mountain beyond.

16 years and witness to suicides, rehabs, parties, stories, more money than God, investigations, lawsuits, lies and fistfights, he’s a successful options broker at the Chicago Board Options Exchange. He didn’t need a college degree to get educated but he had to have the guts to hang on.

(this place smells like the cab of a recycling truck on a hot day)

(this place smells like the cab of a recycling truck on a hot day)

And I’ll tell you the secret they don’t want you to know: it’s not the cab of a recycling truck but it’s still filled with raunchy porn, smells like stale beer, rotting fruit and dirty diapers. There’s just more money and more pixels, and looks better on TV.

Me? I just like to watch.