CASE STUDY 1
Command Audio: Three Startups for the Price of
One
SUMMARY AND AUTHOR’S NOTE
Don Bogue began his career in corporate America working for Ampex Corp. in the early 1980s
broadcast material—for example, an NPR show. Then a technician would go through the
broadcast and provide segment markers so that listeners could choose the parts they wanted to
listen to. This could actually be accomplished in a matter of seconds.
Bogue believed that his target group consisted of 18 million people represented by those who
In 1996, when Bogue wrote the Command Audio business plan, a few companies had announced
intentions to bring satellite radio to market through point-to-multipoint systems that would
transmit music and other programming to cars equipped with special receivers. However,
satellite radio does not give the users control of what they listen to, how much, and when. A
significant advantage that Bogue saw for CA was its low infrastructure costs, which reduced its
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to business model number 2, which was licensing the company’s tools and technologies to digital
radio pioneers XM Satellite Radio, iBiquity, and Motorola. Initial results were encouraging, but
then his licensees began to suffer development delays that would put the use of CA’s technology
off for three years, during which CA would not receive any royalties. To raise capital, in August
2002, Bogue sold the software development business to iBiquity Digital but retained the
exclusive rights to license its intellectual property in every other field of use.
With digital and satellite radio already under license, Bogue turned his attention to personal
video recorders, the sort of device pioneered by TiVo and ReplayTV. This market was very large
this latest business model; and, in any case, the amount that Bogue needed was significantly
higher than they might provide. An exhaustive search produced the answer: an insurance policy
that covered the cost of offensive patent litigation and provided several million dollars of
financing at a price the company could afford. CA would pay an upfront premium and, upon
settlement of the lawsuit, would repay what had been put out plus a premium.
WHERE TO USE THIS CASE
• Chapter 4: Use to discuss how business models evolve with the needs of the market and the
company.
Case 1: Command Audio 81
CASE ANALYSIS
This case follows an individual who becomes an entrepreneur after serving in executive positions
at two technology companies. Meeting John Ryan at Ampex Corp. was a critical connection in
Focusing on the Customer
A follow-on discussion could focus on how the technology met the needs of the customer—in
other words, how it was designed to solve a problem for customers: how to control what they
listened to during commute time. From the initial design, Ryan and Bogue had identified the
Finding the Right Business Model
Command Audio presents a unique opportunity to examine the issue of business models,
particularly how the business model evolves throughout the life of the business. Often, the
entrepreneur starts with a business model that seems to work but doesn’t think about changing it
to suit the evolving needs of the marketplace. Then that same entrepreneur wonders why the
business is struggling. Fortunately, Don Bogue did not fall into that category. He had the courage
and foresight to make changes when the current business model was not working. Perhaps this
came from years of corporate experience, or perhaps he simply was superior at scanning the
environment for changing trends. When the IPO market fell out of favor with investors, Bogue
wisely did not rely on the predictions of Morgan Stanley and Credit Suisse that the market would
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Intellectual Property and Marketing Strategy
Another good discussion could take place around the third business model, which was the
riskiest of all. It was at this point that Bogue’s ingenuity and risk-taking capacity came into play
in an important way. The marketplace was moving toward personal video recorders as the next
logical step after the launch of TiVo and ReplayTV. Bogue reasoned that one of the major
consumer electronics companies would be interested in licensing and claiming for itself all the
patents in the area. However, large companies sometimes don’t want to be bothered with license
agreements, and since Command Audio was now a very small, struggling company, the large
companies figured they could last until CA eventually went under. On his third business model,
DISCUSSION QUESTIONS
1. What was the source of the opportunity for Command Audio?
The source of the opportunity was the relationship that Don Bogue developed with John
2. What were the problems with the first business model: building and selling the CA box and
service to consumers?
The problem with this business model was that it required the company to be responsible
Case 1: Command Audio 83
3. Why did the second business model fail? Could that failure have been avoided?
The second business model failed because Command Audio did not have the capital to
4. Was it necessary for the company to go through three business models before it found the
right one in order to build a sustainable company?
If Bogue had not changed the business model the first two times, the company would