Shane Yeend: How Imagination Entertainment survived

Shane Yeend’s idea of a fun game is creating and building a new enterprise. The sort that is worth millions on a poor day, and millions more on a typical day. Enter Imagination Entertainment.

If you play board games, watch TV or play games on your mobile phone or PC, chances are you’ve come across Imagination Entertainment. It’s a South Australian success story, headed up by co-founder and CEO Shane Yeend, who has achieved wide acclaim for his business savvy, including Yeend‘s latest accolade as the 2007 Ernst & Young Entrepreneur of the Year.

Imagination Entertainment has become a world leader in interactive entertainment, and while best known for pioneering the DVD game, Yeend‘s company has interests across all media platforms.

Yeend is the creative ideas man behind Imagination, but he can just as easily start crunching the numbers required of a successful entrepreneur. Having started his first business at 15, it all comes naturally to Yeend, who likens starting a new business to a game. “Once you’ve done it a few times, even your hobbies become businesses. It doesn’t whether it’s managing property portfolios or, for example, I started an aviation company with some friends and now it’s a serious business and we’re buying $10 million businesses.”

In 1984, after completing year nine, Yeend left school and started his own production company with Kevin McLean (still his business partner today). McLean ran the business, which focused on wedding videos, corporate films and commercials, while Yeend learned the ropes behind the camera. Before long he scored a string of freelance film work, travelling the world for major TV networks. “I really learnt the power of media through those current affair-type programs,” he recalls.

Looking for a new challenge, the business partners decided they wanted to work on their own productions, not just other people’s. They explored a variety of TV concepts, as well as complementary websites so people could interact with the TV show live. “Put those things together and it’s what we do today, we’re an interactive entertainment company,” says Yeend. “From then on we created brands we own and we’ve learnt how to make money out of multiple platforms.

“We did lots of other TV shows, we brought American franchises here, we brought the E-Entertainment franchise to Australia, and in the mid-90s I started doing research into, and looking at, what people interacted with. We were fascinated with how the media was going to change back then.”

Yeend’s study revealed that in America the most popular things interacted with on radio were games. “So from games we basically went ‘well, let’s take one of the most popular games played on radio and build different platforms of revenue’. So we started off with a board game, CD-ROM, TV and internet for a game called Battle of the Sexes.”

Getting the game into retail stores was a challenge but persistence paid off. His first call to Kmart was met with rejection, but the second approach scored him a meeting with a buyer and he walked out of there with his first 10,000-unit order. “I don’t take no for an answer,” he says. But then came the challenge of funding the production, with cash flow always an issue for such a fast-growing business. “National Australia Bank wouldn’t give us $80,000 to do it, on top of a business that they’d been banking for 10 years. So my business partner and I mortgaged our houses, and we got it and did it. It’s no different today, it’s just got lots more zeros.

“In 90 days this thing outsold Monopoly in Australia. We’d never made a game in our lives so we learnt a lot about printing very quickly.”

With the number one game and website in Australia, Yeend decided to try his luck in America. “We rented an apartment, bought a $4,000 car and started dropping off games at places up and down California. We knew the US consumer machine was a monster, and we set about using innovation to break through and get ourselves noticed. It got picked up and today we’re the second or third-largest supplier of games in the US retail business.”

Yeend’s business officially became Imagination Entertainment in 1999, taking the name from a previous joint venture he was involved in, Beyond Imagination. “When we left they took their Beyond name back, so I took Imagination.”

But it wasn’t all plain sailing for this entrepreneur. With the number-one Australian website—bigger than ninemsn and the AFL at the time—by 1998 they had a bunch of venture capitalists knocking on their door wanting to take the company public. The co-founders did sell a share of the business in 1999, but the company never did get to listing in what Yeend recalls as a “sad story”.

“We were like everybody else, we had lots of popular websites and were getting ready to list as a big online media company with no revenue, but the market collapsed and the company collapsed. By 2001 we were basically broke and had 21 days of money left. We’d spent all the venture capital money and we had a bunch of people from a consulting firm getting ready to turn this thing into a listing entity, but the market crashed and it was all over.”

Surviving Disaster

With a never-say-die attitude, the team reflected on what they were good at in order to rejuvenate the business. “We’re really good at interactive entertainment and we’re really good at games, so we basically wrote the software to make the DVD box interactive, and started a seven-year mission to launch DVD games around the world.

“I used to go to the toy and game fairs and I’d sit in the corridors and wait for someone wearing a Target or Walmart tag to come past. I’d drag them into an office the size of a toilet we’d rented off the corner of someone else, and everyone thought I was mad. They’d ask why anyone would want to do that, but that one idea changed the whole industry by 30 percent in less than five years.”

Yeend admits that the company grew too quickly, and had to pull back business in areas outside the US until they scored distribution deals with some of the big guys, such as a deal with Hasbro to partner with them 50–50 in DVD games across 43 countries outside the US.

Other deals with Universal Pictures and Disney cemented the company’s position in the global entertainment industry. But Imagination is now able to handle its own distribution with offices in the UK, Germany, France, Toronto, LA, people on the ground in Chicago and New York, and an office about to open in India this year. However, content-owner partnerships with the likes of NASCAR, Disney, and the BBC are key to the business. “We do have lots of license partnerships around the world and they’re quite important to us. Those licensed brands make up about 60 percent of our revenue.”

Not bad considering the company was up against some pretty heavy hitters to score these deals. “I went up against Hasbro for the worldwide Disney licence for our games. To go against a company that is $4 billion in size and you’ve just got three people in a rented room in Santa Monica—to win those things is amazing. It was the right decision. A corporate like Hasbro wasn’t going to do a better job, we were, and we were more passionate and responsive.

“Our biggest weapons are innovation and speed-to-market. Even if these big companies thought they wanted to do something, it’s just so hard for them to do it. And it gets harder as we get bigger as well.”

While there are many arms to the Imagination business, its biggest seller is DVD games with the company owning some IP in games they created themselves—Fact or Crap and Battle of the Sexes—as well as the licence to distribute brands such as Deal or No Deal and Family Feud. Deal or No Deal was the number one game in America last year, and Yeend is proud of having such brands in his stable. Imagination products can now be found in 85,000 retail stores worldwide.

Business Challenges

Describing Yeend’s day job is like rolling a dice. “There’s no typical day for me, my job keeps changing,” he says. “I’m a creative guy, I started off as an art photographer and cinematographer, and now I’ve just come out of a meeting with KPMG dealing with five-year cash flow and governance. I spend six months a year in America, three months in Australia, and three months on planes.”

Yeend and McLean still share an office and the load of running the business, but they’re happy to be handing over most of the day-to-day to their new CEO this year. “We’ll start looking at consolidation plays and possible listings, possible sales. I’ve got three or four different businesses we’re building.

“I think I can turn anything into a business. The hard ones are more challenging and sometimes it doesn’t always work, sometimes you can’t get them cash-flow positive and you go ‘I just blew half a million bucks trying to set that up’.

“You run a portfolio approach and you win more than you lose, you can’t expect everything to work. We do try a lot of things and we’re constantly pushing the boundaries of things that haven’t been done before, which is always hard.

“I understand why people buy businesses rather than starting them because they’re not easy, but we know there’s always a solution to problems.”

Yeend also likes to give back, with a whole division of Imagination dedicated to charity work, which has raised about $4 million over the last few years, and he also mentors young entrepreneurs, taking them from Australia to the US to set up and run million-dollar businesses.

For Yeend, winning in business isn’t about making loads of money. “It’s about paradigm smashing ideas and being able to look deep into businesses and understand where they’re going creatively, where the trends are, where the opportunities are, and if you can map those. It’s a sport, it’s fun,” he says.

And while Yeend estimates Imagination to be worth around $150 million now (on a poor day), “there’s lots more growth to go yet”. With many more global markets to infiltrate with such a broad range of media, perhaps it is beyond ‘imagination’ what this dynamic entrepreneur will achieve next.

Did You Know?

Imagination’s first board game, Battle of the Sexes, outsold Monopoly in Australia in just 90 days.

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