During the early part of the 90’s, it was a great time to be a member of the professional video technology industry as the transition from analogue to digital was in full swing.  The introduction of the far pricier, Sony, brand-new digital betacam machines, and the M1 and M2 digital format machines from Panasonic began in the early 90’s, but industry acceptance took a long time to catch on. Customers had invested billions of dollars on Betacam and it’s next-gen cousin, Betacam SP, a better analogue video technology compared to U-Matic. There was so much content recorded on Betacam that killing the format would have been a disaster for Sony, the largest player at that time in the professional video market. Sony made it a key selling point that they would continue to support Betacam and even their latest digital products had some measure of backward compatibility. What was the benefit to Broadcasters and Production facilities to upgrade when Sony, Ampex, Thomson, Panasonic, Grass Valley and Ikegami, the leading manufacturers would surely take what their learned on the initial roll-out of digital and in-turn, bring to market a cheaper, lighter and more robust, second generation digital device. Having been burned before by the hype and exaggerated claims made by the manufacturers in the past , most of the industry had an aversion to early-adopter technology. The big broadcasters and studios either maintained a wait and see position or participated only after a big player like Sony made them a sweetheart deal to upgrade. Both manufacturer and buyer would then announce to the trades (usually at the NAB show) the size of the deal and reasons for making the acquisition.

 As new Betacam and Betacam SP only machines became scarce, the demand for used equipment exploded. This gave rise to a fluid and very profitable interim solution, used professional video equipment that still had a few years of life left in it. The biggest player in that business was BCS and the company had some competitive advantages,

COMPETITIVE ADVANTAGES

BCS practically created the market for used video equipment, we were the EBAY of Used video equipment long before the internet was invented.

Number 1- BCS had 3 locations in 3 major markets, LA, NY and London. This meant that BCS could source more equipment than our competitors and more volume meant that we could purchase well below market value. We would then in-turn, sell the equipment at the highest possible margins. Our owner, Lou Claude was adamant about that. He knew what we did affected the market more than all of our competition, so if we left crumbs on the table, we would only be hurting ourselves. In an effort to make sure the price for used equipment was never sold below market value, every piece of gear BCS sold had three prices affixed to every listing, every consignment and every piece of inventory. The pricing was laddered in the database and presented that way within the UI to each salesperson.

The bottom rung of the ladder showed the cost for that piece of gear. It was the price the company paid the seller if it was being held in inventory. Lou tacked on another 5% to account for the cost to buy that item, have it shipped to a BCS location, and have a complete diagnostic done by a service tech to determine condition. The second or middle rung up from the bottom was the lowest possible negotiated price Lou would accept for that given piece. That price was based on a formula that included market value, derived from competitor sales, historical data within our database and loset acceptable margin Lou felt was sufficient to cover cost of goods and general overhead. We also kept a separate database for the same unit if it were available new. We had the benefit of knowing what the average margin was on a new piece of equipment based on the dealer pricing provided by manufacturers and distributors.

Number 2- Curt, our amazing programmer wrote a piece of code that tracked the whereabouts of used equipment being offered for sale. Data would be entered into fields derived from phone calls made to all three stores from customers. Customers would tell us what they had for sale, its condition, and what they hoped to get for selling their device. Many customers were looking to get rid of their gear before it dropped in price. Naturally, the Sales Engineer tried to secure the product for the lowest possible price and customers trusted the “blue-book” valuation we usually provided.

One clever thing Lou did was provide a 12% commission to any salesperson who listed a piece of equipment for sale. He termed the procedure, a listing. The entire salesforce would see these listings instantly after the data was entered into their terminal and it also appeared in the daily report, we’d review every morning. Often customers would express the need for a certain component and if we didn’t have at that time, we would create a “Want”in the system. Wants helped Lou determine demand for specific items. If you worked both ends of the Want to Listing process effectively, you could make more money for yourself, by selling your own listings and we did. When the transaction went through, the lister got 12% of that deal and the seller got anywhere from 15% to 18% depending whether you sold at the Low or High price. The percententages were calculated on gross profit and if you were both lister and seller, you could recieve 30% commission on that sale. Now here again was the genius of Lou Claude, he dropped the commission on items he bought with cash to 15% because they had to be purchased and held in inventory, an expense to the company and a decrease in available cash flow. Lou would look at want records to determine where the high demand items were when buying inventory. Some items sat on the shelves for weeks even months before finding a buyer. Lou was willing to give 30% of the gross profit away because a sale made by securing a listing from a previously recorded Want, was pure brokerage. The Sales Engineer did most of the heavy lifting over the phone by acting as both the buyer and the seller on that transaction. It cost the company next to nothing other than the wages paid to employees. No listing was ever paid in full until the machine was sent to either our New York or LA, location, tested and it’s serial number recorded in our database. Finally, we repackaged with BCS branding, insured and shipped the product. Of course, before any of that took place, we already had the money from the client. It’s the EBAY model without any major competition, 10 years ahead of its time.

Number 3-Customers loved listings because the equipment would remain in the seller’s hands until it was sold. The system kept track of listed equipment, equipment consigned and equipment purchased for inventory. Any Sales Engineer could also put a hold on a piece of equipment once it appeared in the daily listings of acquired or consigned stock ( in-house EQ at either our NY or LA facilities)and also listed equipment from the day before. So if I was putting a system together and I needed that piece to complete the deal, I could put a 3 day hold on it and that hold would fall off automatically on day 3 if I didn’t complete the transaction. The company had a number of full time engineers on both coasts, that would perform routine diagnostics on everything we had for sale so we could warranty the equipment for a limited period of time unlike most of the mom and pop brokers doing similar business. We always had a major presence at the big shows in Vegas, including the NAB show which created a lot of new business for the company. Once the data was entered (either as a listing or a consigned piece), the software would generate a match, and notify the sales engineer that they have a potential sale. I respected the automation and the clever way that the system pulled all of the disparate pieces of information together, it was ingenious. It was all about the data and the extent the company relied on that data to make informed decisions was genuinely responsible for year over year growth. I’ll explain how that all unfolded later.

Number 4-BCS didn’t just sell used equipment exclusively, it was also a leading representative of over 100 highly acclaimed companies like Panasonic, JVC, Ikegami and many more. This provided an air of legitimacy to what many perceived as “a bottom feeder business”, true for the mom and pops but not true for BCS. We did huge amounts of volume with very few problems. Sellers got paid in a timely manner and customers released tens of thousands of dollars to us without any anxiety. It was our software that kept the company light years ahead of the competition.

In 1996, I met Lou Claude out at the NAB show, the one time throughout the year that the majority of the company came together to compare notes, discuss the plans for the show, set up our booth, meet customers and make sales. Lou offered a bonus the person who sold the most gear at the show. We also did a lot of socializing. Lou had made several visits to the New York store prior to the annual NAB show and I got to know him well. He was very competitive and we would always get together to play some ping pong whenever he came to town. I was pretty good at the game and would usually win and then all of sudden, I couldn’t beat him anymore. I learned that he was determined to be the best player in the company and started practicing every day until he became great. That was Lou, he hated losing.

At NAB, Lou asked me to join him out in LA and become the V.P. of Sales, I was thrilled by his offer. He even offered to put me up in his house for a couple of months until I got settled. He not only did that, he also provided a Mustang convertible to get around while in LA.It was a great experience and his wife Sandy, his son Jean Paul made me feel like a member of the family. Natutally, I wanted to return the hospitality with big time results. Some of my achievements are listed below.