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Anna Healy Fenton

Dotcom pioneer returns with his second pop-culture venture

Back in 1997, John Wong Tak-cheung and his business partner turned a passion for pop culture into a dotcom so promising it had a Nasdaq listing in its sights - before it was snapped up.

But now he's back with a variation on his original idea, adding experience to the same enthusiasm for videogames, kung fu movies and comic strips.

ActionAce.com sold pop-culture toys, collectibles, videos and video-games online in 1997.

Then, a year later, PCCW, ING Baring Equity and others arrived with bags of funding and the start-up ballooned from two staff in Hong Kong to 120 in the United States.

'We ran it for a few years,' says Mr Wong, referring to his partner and himself. 'But everyone was more interested in taking it public than building a viable company.'

After disagreements about the company's direction, they pulled back from a planned Nasdaq listing and  sold the firm to PCCW in 2000.

'Everyone was let go,' says Mr Wong, who at the time was Action-Ace.com's senior vice-president for product development.

Two years ago, he decided to give his concept another go.

The trigger was simple, he says. Someone asked him why he had left his pop-culture entertainment business and he remembered how much money ActionAce had made when it was just two people.

The new venture, Action-HQ.com,  has a similar name to the first for marketing reasons, says Mr Wong, its managing director.

There is, however, one fundamental difference, he says.

'The difference in the two companies being millions in investment and working the company to go public, versus angel investment and building a viable business.'

ActionAce and Action-HQ.com are similar in that they both focus on online retail, licensing and content creation, Mr Wong says, adding that the units are both 'independent and symbiotic'.

He describes the completed process as such: the content-creation unit develops a marketable pop-culture product; a brand is built around this; the product is licensed to the licensing unit; and then this unit sells the product to the online retail unit.

In 2003, Action-HQ began with online retailing. This year, it will move into licensing and production and next year it will add content creation, Mr Wong says.

He has a wide definition of creating content. 'It can take many different forms. The most important thing is to develop a property that has a following or a pop-culture gimmicky concept,' he says, pointing to the Tamagotchi  electronic pets from a few years back.

Mr Wong expects about US$2 million in business this year and  has already got off to a good start, 'in growth mode', as he puts it, but growing organically at  10 per cent  month on month at the moment.

Action-HQ is close to finalising a deal with Warner Brothers' DC Comics to create 're-imagined' designer models for characters like Superman and Batman, he says.

It already has the licence for I, Robot and is working on acquiring up to three more licences this year.

This is not cheap. Each licence costs US$15,000 to US$20,000 for Hong Kong rights alone.

'That's just to start, and the same again for modelling and manufacturing. But if it works out, it's a three- to four-digit return,' Mr Wong says.

'We're interested in licences for cult properties that have a strong fan base. Star Wars [characters] and Transformers have been very good for us.'

Fans pay up to US$80 for an intricately detailed 30 centimetre-high I, Robot model with moveable joints.

Action-HQ, which has three staff here and one in the US, targets 14 to 40 year olds.

Like any retailer, cash flow is crucial for Action-HQ, but especially because 50 per cent of its revenue comes in the last quarter of the year. 'But that's better than someone like Toys R Us,' Mr Wong says. 'They do 80 per cent of their business in the last quarter.'

The company promotes itself by advertising on action-figure websites, and in newspapers and niche magazines.

Anxious to avoid the venture-capital trap of 'pumping the bubble until it bursts', Action-HQ's growth has been cautious and tempered by cash flow, Mr Wong says.

'That way you can only go so fast,' he says. 'We have been talking to private sources and boutique investment funds and houses.'

Obtaining funds is not easy for an online action-hero retailer.

A balance needs to be struck between a boutique house, which might sell the company, and a private investor who will take a long-term view because he has a factory or simply enjoys pop culture and likes developing products, Mr Wong says.

'If we are sold off, it gives us a chance to release our capital. But with a private investor we can make US$2.5 million a year and do well for them. I am open to both.'

At least 60 per cent of Action-HQ's business and most of its competition comes from the US, where Mr Wong was raised by his Shanghai-born parents.

The firm's competitive advantage is its location, says Mr Wong.

With the products made in China, Hong Kong allows quick access to manufacturers, he adds.

'[Location] puts us three to five weeks ahead of the game because we usually get the products first.'

For example, toy-giant Hasbro might order a product for March release, but it is made in January. 'Local distributors often get access to new lines early, so we get it first.'

Whatever the funding source, acquiring licences and making new products takes up to six months.

Moreover, not all movies generate spin-off products, so careful thought has to go into each project.

'We've been offered the TV series 24 and we know we could do it,' Mr Wong says.

'We could do a clock for 24 and people would buy it. If someone the size of Wal-Mart was our distributor we'd do it.'

But with their step-by-step approach they will not take on a Wal-Mart project anytime soon.

'We must expand our distribution channels till we are able to do something like that,' he says.



Another ace.com up his sleeve