I think we can make at least $100 million per baseball season on premium mobile apps.

That’s 5 million customers paying $20 per season.

60 million baseball fans have mobile devices today.

15 million fans download Major League Baseball Advanced Media’s official mobile app At Bat. We estimate that around 3 million pay $20 per season for At Bat Premium.

3 million fans x $20 = $60 million per season.

These are baseball’s avid fans. MLBAM (sometimes called BAM) has proven that 3 million fans will pay $20 per season for a mediocre app. It makes me wonder how much these 3 million avid fans would pay for an app they love? $25 per season?

3 million fans x $25 = $75 million per season.

Keep in mind: 60 million fans today, with smartphones.

MLB knows these numbers too. Through At Bat, BAM has monetized 5% of them. We are interested in monetizing 100% of them.

I said earlier I think we can make at least $100 million per season on premium mobile apps. We get there by monetizing the first 4 million fans at $25 per season. What about when 40 million fans are paying $25 per season? That’s $1 billion.

And we are still only considering the MLB fan market. Keeping score at a Cincinnati Reds game is one thing but keeping score while your daughter is a player is something entirely different. The scorekeeping process doesn’t change much. Ideally both games are scored in the same app. What does change is the perspective of the scorekeeper, which changes the retelling of the story. The amateur league ecosystem must be designed within a different framework than the MLB one. The commonalities between the two are meanginful and the uniqueness of each one helps contrast them in a meaningful way with each other.

Baseball does not need a pitch clock.

Did you watch the World Series Game 6 last night? The last thing on the minds of any of those 40,000 fans at Kaufmann Stadium (KC 10–0 over SF by the way) was, “Damn I wish this game had a pitch clock.”

60 million have smartphones.

Total fans.

15 million downloaded At Bat. 3 million paid $20 for Premium.

Avid fans.

45 million have smartphone but didn’t download At Bat.

Casual fans.

A better-designed pricing strategy could be a part of the solution here.

My cofounder Jeffrey and I had a contrarian idea about premium app pricing a couple of years ago that is becoming noticeably accepted nowadays. Most people in 2012 balked at the idea of paying $2.99 for an app. Today the idea of a $3 or $9 or even $25 app seems, at the very least, within reason. I pay almost $20 every month to Dropbox and Spotify and I’m happy to continue doing so.

I often describe this business model as premium pricing but I think a better term could be strategic pricing.

A premium car company, for example, has myriad price points. BMW’s 3 series is by far its most popular but they also have the more luxurious 5 series and the even-higher-quality 7 series. In recent years they’ve added an entire category for coupes (2, 4 & 6 series) as well as the i series for the electric i3 (basically an electric 3 series) and the hybrid supercar i8 (Tesla Model S competitor). BMW is an interesting company for us to study for a couple of reasons:

One, I love cars.

Second, BMW is a design-focused company. Example: BMW owners love their cars because they are ultimate driving machines. Chevrolet owners love that their cars get them around. Chevrolet is less focused on making an exceptional product, more on making a good product for a large number of people – which is a noble and important goal.

Interestingly, the app world is currently made up mostly of Chevrolets: good products that satisfy a major pain point in a large market.

There just aren’t that many BMWs in the app stores yet.

BMW owns a 3% market share of all cars sold in the world. They are competing with Mercedes, Audi and many others within that 15–20% premium car market.

Comparisons between the automobile industry and the app industy do degrade quickly, especially when comparing the auto industry to the baseball app industry specifically. There are hundreds of automobile manufacturers competing for drivers wallets. There is one major baseball tech company servicing fans.

BAM is a private company that will make close to $1 billion in annual revenue in 2014. It is collectively owned by the 30 MLB teams. I do wonder how much money is returned to each team each year all said and done? I really have no idea about that but I’m very curious.

Anyway, back to strategic pricing …

What about $3 or $9 per season? What portion of those casual 45 million baseball fans, unwilling to pay $20 for At Bat, would pay $3 or $9 for a lighter, more casual experience?

A lot I think.

One crucial thing to note here is that the design of any Blue Seat product will be a 10x user experience improvement over any current baseball or sports app. That is a fact.

I’ve been a graphic designer for 10 years. I’ve done many freelance design projects (140 invoices in 10 years) for every level of client from Fortune 100 to startup. I’ve worked at design agencies and branding firms and I’ve built a lot of products for a lot of people.

I love design, and I am very good at it.

More recently I’ve interviewed at the big companies: Dropbox (bombed the interview), Path (wanted the job but they didn’t hire me), Airbnb (didn’t make it past the Skype call) and even BAM (not interested in the job). These are all extremely valuable and relevant companies with some of the best design talent in the world but …

I want to design my own company. It’s the next product I want to design and something I’m prepared to work on for the rest of my life.

I study other companies like Apple, Pixar and Disney and consider Blue Seat to be in the same lineage as them. Often entrepreneurs, including myself, are criticized for trying to be the next Steve Jobs or build the next Apple. I am not interested in that. That is the last thing Steve would have wanted anyway.

But it’s important to reflect on and study these companies. We must not forget to learn from the ones who came before us. There are profound similarities between companies like Apple, Pixar, Disney and I’m interested in applying some of those principles to my own company.

Two common characteristics: they obsess over detail and put customers first.

I’d guess that every company in America would say they put customers first. But there are only a handful of companies that care more about making the product great than they do about making money. All companies care about both of these things, but I believe the real difference is seen when you whittle down a company’s motivations into that singular, foundational reason for its existence. There can only be one, and for most it is money.

I’d estimate that, at their cores, 90% of companies are motivated by profits. For them, deciding that profits are the most important thing seems like the only logical path to actually making any money.

The other 10% are privy to a secret unbeknown to the rest. We often refer to them as design companies.

In a design company, the product is king. Design companies focus on building products that their customers really want and they work hard to maintain as often as possible without sacrificing it. The problem is not that companies aren’t interested in or capable of building products that their customers want, it’s that customer focus is too often sacrificed for profits.

“I wish we could make this product great for our customers but there’s just not enough money [or time, but time is money is time].”
vs.
“I wish we could make this product cheaply but it’s going to cost more money if it can be great and it must be great.”

Delicate is the balance between product focus and profit focus. Too far to either side and you either build a company that makes a lot of crap or no one’s ever heard of you because you are taking 10 years to build your first product.

The ideal balance is as close to 50/50 as possible.

This 50/50 split is a fairly new insight for me based on Peter Thiel’s theory in Zero to One that a company should divide its resources 50/50 between product and sales. Build a great product, get it out to customers. He makes an interesting observation that you can get by with only the latter but a great product is nothing without sales.

Product people want to make a great product. Sales people want to make money. The more great products we make, the more money comes in. The more money comes in, the better products we can make.

The current problem in many companies is that the profits people far too often win out over the product people. The solution is not to make the product people “win instead” but to find a better balance where a company is investing enough time to make great products and enough money to keep scaling that process.

Ed Catmull writes in Creativity Inc. about Pixar and how important this balance is, and how volatile.

Although abrupt, that is a good place to finish this entire meandering thought.