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How do you measure success? Is an ROI metric important?
Millett: It's good to have people define success before you even start. On every business case, we say, "How do we know this is successful when we're done?" We have a scoring sheet [to evaluate projects]. Is this a project for your group? Is this a worldwide requirement? Sarbanes-Oxley? We audit it 60 days after the fact.
ROI ends up being so much funny money. The calculation isn't worth doing. Soft measures are more important: Is this strategic? Will this help grow the business? Will it make life simpler for us? If you have a good ROI template, I'd love to see it.
Schummer: We manage the [Via] business by our own profit-and-loss statement. The administrative fee [we collect on patents] is our income, typically 10% of the royalty. We're contributing $8 million in profitability to the bottom line of Dolby.
But at Via, the numbers don't begin to tell the whole story. We're talking to the world's largest corporations to administer patents for them. The new opportunities are patent pools and open standards that Dolby has nothing to do with. It has to do with the reputation that Dolby has built up. We have to be trustworthy, like a bank. Companies come to us with their most trusted asset: their intellectual property.
How complex is the licensing business?
Schummer: A [consumer] product could have one Dolby technology or seven or eight. Plus the number of processors results in a royalty number. It's a complicated calculation on each product. Imagine thousands of products, each with a slightly different mix of patents. And everyone reports their numbers in a different way.
What have you done to mitigate complexity?
Millett: One of our largest licensees is going live in April with a new system called ELF, which stands for Enhanced Licensing Financials. It's online royalty reporting. We're starting with our top eight licensees. Those top eight are a significant piece of our revenue pie. Hopefully, this makes their lives simpler. We used to send a spreadsheet that was fairly complicated. We almost needed the engineering department to figure it out. Now they report the information in an easier way. We have a product database, which we didn't really use before. Now licensees just have to tell us what the model number is and how many products they shipped, and ELF does the rest.
Online reporting is going to be a huge win for us. But it also gives us an extra challenge with our Web sites connecting all the way back into our financial system. It didn't used to have to be a 24/7 system. Now it does. We have to re-architect our system. I don't know when someone somewhere in the world will log on.
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