Smiling for the camera - MVP Home Entertainment - Company Profile

Nation's Business, Sept, 1996 by Michael Barrier

We like small businesses that have darted successfully through narrow openings in markets that aren't especially hospitable to little enterprises. We ran across one of them recently on a visit to Los Angeles. The 15-employee company is called MVP Home Entertainment, and it's based in suburban Canoga Park, in the San Fernando Valley. It sells video-cassettes.

MVP's breakthrough cassette is called "Babymugs!" It consists of 27 minutes of dozens of cute babies grinning at the video camera, one after another, with appropriately sweet-tempered music on the soundtrack. MVP has sold more than a quarter-million copies of the $9.95 tape.

British-born Philip T. Knowles has been the half-owner and CEO of MVP for a little over three years. "Babymugs!" was not his idea. As his assistant, Meredith Emmanuel, says, "We don't actually produce anything."

MVP is in the business of licensing and distributing tapes that other people put together. "Babymugs!" was the brainchild of two young mothers in the San Francisco area. They sold about 1,000 copies on their own before MVP released it late last year.

Knowles, who is from Liverpool, England, moved to Los Angeles in 1989, "I used to come to L.A. on vacation every year" he says. "I thought that as soon as I sold all my businesses, I wouldn't mind retiring in America."

He owned an assortment of businesses in England - hair-dressing salons, rental properties, a nursing home. They were linked only by Knowles' keen interest in effective marketing of whatever product or service he happened to be offering at the time. "My real strength has always been in selling," he says.

When an attractive offer came along, he says, he wound up selling his businesses sooner than he had expected - and for less money than he needed to retire - "so I had to come here and work. I'm married and have a couple of kids, and my wife and I decided that America was where we were going to go." In California, he tried his hand at salons again for a while, but by 1993 he was in the business of putting up temporary buildings.

"When I was in construction here," Knowles says, "all the secretaries used to walk past me, thinking, `Phil doesn't do anything,' because I'd sit all day reading newspapers." He was, however, looking for opportunities - an article might reveal that a city needed temporary housing for the homeless, for example.

Knowles went into the video business, he says, because an associate had bought a line of about 20 instructional videos - on how to play musical instruments - at a bankruptcy sale. The associate offered Knowles a 50-50 deal: He would put up the video titles, Knowles would put up himself, and together they would start a company, then called Music Video Products.

"The trouble with the video field," Knowles says, "is that it's very crowded" - but not, as it turned out, with companies that were selling videos on how to play the guitar, say, or the piano. "If I'd had any other type of product," he says, "the major accounts wouldn't have looked at me, because everybody has those other things."

Videocassettes, he suggests, are like breakfast cereal: Success is largely a matter of winning shelf space, and that, in turn, is a matter of making the product and the margins attractive. A constant flow of new titles is also very important, he says, "because the mass merchants want to know that if they go heavy on something and it doesn't work, they can swap it out when you come in with the next one." He thus expanded the line to embrace instructional tapes on snowboarding and in-line skating.

Because the instructional tapes did well, Knowles says, "my relationship strengthened with a couple of key accounts very quickly, to the extent that I was able to say to the buyers, `What else does really well for you?' They would make suggestions, and I would seek out product."

What made "Babymugs!" such a neat fit with Knowles' strategy was that children's videos already accounted for a huge segment of the sell-through market - videos sold to consumers rather than to video stores for rentals. With "Babymugs!" the mass merchants could extend their sales reach down past toddlers, all the way to infants. Three- or 4-year-olds park themselves in front of the tube and watch "The Lion King" 40 or 50 times; but what 6-month-olds like to watch, it turns out, are other 6-month-old.

In July, MVP released three videos based on the Fox TV series "Cops." For that series, camera crews ride with real police officers and tape their pursuit of bad guys, so the videos are full of wild car chases, salty language, and bruising encounters with the law.

"A tremendous amount of merchandising" is accompanying the release of the "Cops," videos, Knowles says, extending to baseball caps, coffee mugs, and T-shirts. In addition, he says, "we have some very cute packages we've put together, with Christmas in mind, that look sort of like miniature jail cells." He expects to sell a million of the "Cops" tapes by the end of the year.

MVP's rapid growth has "not been without its cash-flow hazards," Knowles acknowledges, but that growth has been entirely self-financed, so MVP has not had a bank breathing down its neck. It has also been cautious about shipping too many tapes to its customers, who may, after all, order lots of tapes secure in the knowledge that they can return what they don't sell.