With one foot in the past and another in the future, two brothers-in-law build a media business out of CD duplication.
It is a measure of my flight into geezerhood that I am now regaling you with the exertions of a second generation of entrepreneurs.
So, say howdy to Joshua Wert and Steve Javinsky. They're the son and son-in-law of Sheldon Wert, a financial and real estate mogul whose holdings have included Century Bank and Shelard Corp., developer of what is now called Metropoint, the sprawling office and commercial park along Hwy. 169 and Interstate 394.
The two relative whippersnappers might have outdone the old man in the area of entrepreneurial novelty, however, having figured out a way to squeeze continuing growth out of a dying industry while also developing an uncommon diversification strategy with built-in growth incentives.
Javinsky, 36, and Wert, 39, are proprietors of CopycatsMedia Inc., a Minneapolis company that has found a growing niche market for the duplication of the CDs and DVDs that are heading rapidly toward extinction because of Internet competition. Their clients include independent musicians and corporations.
They also are the majority owners of several related companies started since 2006 to provide post-production services for music and videos aimed at the Internet. The group also includes a record label and film distribution company, also with a focus on Internet distribution.
Add it all up and you get a stable of enterprises that grossed a collective $7.2 million last year, six times the revenue generated by Copycats alone in 2002, the year before Wert came aboard.
The elder Wert is impressed: "They've got their hands in a lot of things and they've done a really good job," Sheldon Wert said. "They're energetic, really hard workers; I'm very proud of them."
Javinsky is a college dropout who was managing a local rock band in the mid-1990s, when he went looking for someone to duplicate the band's CDs for distribution at concerts. Unhappy with the service he was getting, he invested $5,000 in a CD burner and in 1996 went into the duplication business.
He built the company to $1.2 million in revenue by the end of 2002, but that was about the peak to which he figured he could take the business, said Javinsky, who described himself as "a hustler, a salesman, not a manager." And he was killing himself in the process.
"I was selling during the day, burning discs at night and working 14 to 16 hours a day," Javinsky said. "There was no way I was going to be able to grow the business any further." That's when he persuaded Wert to buy into the company, perhaps the most important selling job of his career.
Wert came to the party with an MBA and law degree, plus a résumé that includes a stint with the McKinsey & Co. management consulting firm and a variety of management positions with Simon Delivers.
The new partners found a road to double-digit growth by avoiding the Internet competition facing record labels and focusing instead on short-run, quick-turn CD duplication for independent musicians, who sell the discs at their concerts and to local retailers.
As for DVDs, the company does some business with independent filmmakers, but the emphasis is on a larger market: DVD duplication for corporations, which increasingly are using the discs for internal communications, catalogs and other marketing materials.
The combination hoisted Copycats' 2007 sales to $5.6 million, representing a 36 percent annual growth rate in the previous five years.
Nonetheless, Javinsky and Wert aren't fooling themselves about the long-term future of the core business: They figure it will go away in the next decade. And so, since the beginning of 2006, they have been diversifying with the founding of "sister" companies owned in equal shares by Javinsky, Wert and the companies' CEOs.
A few good partners
Why that approach to diversification, rather than new divisions or subsidiaries?
"We wanted partners instead of employees," Wert said. So they recruited entrepreneurial types as CEOs and gave them a one-third share of the business as a growth incentive. A rundown of the results:
• Rare Form Mastering Inc. is an audio engineering service that puts the technical polish on music before it is distributed via retail CDs or the Internet. The company grossed $77,000 last year.
• Cine-O-Matic Inc. is a video postproduction service that edits material into a final version and encodes the formats for digital distribution. It grossed $725,000 in 2007 and is on track to reach $1.2 million this year.
• CC Entertainment Inc. is a record label and film distribution company for independent artists and filmmakers, with a focus on Internet distribution. The company grossed $750,000 in 2007 and is headed for $1.3 million this year.
If all this sounds savvy and sophisticated, I have some comic relief for you: Their latest diversification ploy involves a men's shampoo packaged in a quart-sized plastic motor-oil container that bears the tag line: 10W30 shampoo. The target market: motorheads who frequent truck stops, where they figure to market the product.
Javinsky and Wert turned down a partnership with the entrepreneur involved five times before he waved what they described as "thousands of orders" in their faces.
The product now is in test mode.
Dick Youngblood • 612-673-4439 • email@example.com