Diving Deep Into The Crazy World Of Licensing, Royalties, And YouTube With Sef Chang

All great things start with an idea. However, breathing life into that idea is often a struggle that many find themselves in, most especially in this day and age where ideas could easily be stolen. Helping you with that through demystifying the world of product licensing is product developer and YouTube creator, Sef Chang. Sef takes you into the crazy world of royalties, YouTube, licensing, and advertising and shows you the ways to own ideas even as you bring them to the market. Sef then talks about virtual systems, how they come into play, and who best to hire.

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Diving Deep Into The Crazy World Of Licensing, Royalties, And YouTube With Sef Chang

I am here with a special guest, Sef Chang. Sef, how are you doing?

I’m doing great. Thanks for having me on.

Thanks for being on. I’m excited to talk to you. I know you’re a big YouTube creator. For those who don’t know, he’s a product developer, a daydreamer, innovating straight out of Los Angeles, California. He successfully licensed ideas to companies and gets paid royalties, living the dream. He’s a YouTube creator that runs a YouTube channel called House of Royalties. His goal is to document and demystify the world of product licensing, one licensing deal at a time. Thanks so much for coming on.

I’m happy to be here. Nathan, I’ve been following you and your company for a while. It seems like you’re constantly doing some amazing stuff. I’m super happy to be chatting with you.

I want to talk about all that. I want to dive into the crazy world of royalties and YouTube. First, let’s take a gigantic step back. What were you like growing up? Were you a rebel? Where your straight-A student? Did you know that you wanted to become an entrepreneur?

I still don’t consider myself as an entrepreneur. I just do stuff. I do remember when I was young especially in high school where I always wanted to be on the side of making and creating things. I always found my own path to doing things. Me being Asian, having Asian family and parents, they’re like, “You’ve got to go to college. You’ve got to go to this college.” They’re naming all these schools. I’m like, “What’s the whole point about choosing your college when the real question you should be asking is, what do you want to do after college?” Then choosing which college I should go to from there. I realized in high school that I should start feeding more and more energy and time into doing creative stuff and making things that I ended up finding my path into an art school. The stereotype amongst Asian parents is, “Going art school? Why don’t you want to be a doctor or something? It costs the same. It’s just without the blood.” That’s something that I always wanted to be on the side of making stuff.

Your patent doesn’t mean anything if it’s not selling and it’s not proven.

I quickly found out that advertising was a little trick to getting a taste of making everything, being a specific creative in the advertising field. You work with designers, you work on graphic design, you work on photography, you work on film, you work on coming up with ideas, coming up with product ideas. I thought that was all fascinating. I went down that path and went to a school out here in Pasadena, California called Art Center. I dedicated good amount of time to do an advertising. It was the last semester, right before I graduated, there were some classes that I needed to take and prerequisites. One of the classes that I took was an Intro to Entrepreneurship. I was like, “That sounds fun. I don’t know too much about this entrepreneurial world. I know advertising is for me.” That’s what I thought back then.

That class messed me up in a good way, completely altered right at the last minute, like pivot change. It took some time for me to commit to doing everything that I’m doing. I was able to find this thing called licensing. The instructor of that class was saying, “If you have an idea, there are two ways to bringing that idea to market. One is venturing or creating a startup, doing it on your own, using your own money or finding money, borrowing money, getting all the team and resources together and shipping your products out. Make it, ship it. The other path would be licensing. That is where you come up with ideas.”

You find companies that are potential makers of this idea. You would want to go and ask them, “Is this product or idea interesting for you?” “Yes, we love this idea.” That’s the ideal goal with licensing. If they like it, they make it, they sell it, they do everything for you and they send you royalty checks. I was like, “That’s very interesting.” Licensing is a model where I come up with ideas and I leverage the resources of other companies. I partner with them, have them do all the heavy lifting and all the work for me and they still pay me and I get to spend my time doing whatever I want. What I like to do is spend more time coming up with ideas.

Going back to advertising, that’s what I thought advertising was. Being surrounded by other types of designers and specialized technicians of design, there are graphic designers, designing all things graphics, there are transportation designers, designing all things for transportation. I thought of advertising as not making an ad but designing ideas, and they just happen to be advertising. I was able to connect the two worlds and principles together. I was like, “Licensing is me designing ideas and I’m going to a company having them do everything for me.”

The interesting thing is that I own the ideas. Advertising, you got a client, you come up with ideas for them, you’d give it to them, you put it out, it’s their ideas. You could put it in your portfolio but technically they own it. Licensing, I own it. I was like, “Fascinating.” Right after finishing school, I’d spent all these years and investing a lot of money into my education of advertising. I tried to push into that world. At first, I started as freelancing then I continued to freelance for a few years. If you want to have something successful and you grow and become something meaningful and significant, you’re going to have to put your chips all in on something. I can’t split it halfway. I was like, “I’m not going to put my chips into advertising. I’m moving into licensing.” That’s where I’m at now.

What prevents these companies from stealing the ideas? Do you have a patent? Do you have something in place before you go to them? 

That’s always the concern with your ideas. That’s the first question that people always ask, “Do you need to get a patent?” Patents are still important until this day but right now, there are other tools and methods for you to be able to “protect your idea.” Patents, let’s call it the old school patents or traditional patents, they require a lot of money and time for a patent to get approved. You’re going to have to hire an IP attorney. You’re going to have to file a patent application and that’s going to take about 3 to 4 years for it to go through and to get something back, get some word back from the US PTO office. They may approve it or not approve it. The IP attorney would cost $10,000 alone to go and file something. Me going to an art school and getting student loans, I’m not going to invest $10,000 of my own money on an idea that hasn’t been completely validated yet. Sure, it will be cool to go and say I own a patent on something, but your patent doesn’t mean anything if it’s not selling, it’s not proven.

The modern-day version of it is the patent pending. You see that on products everywhere, As Seen on TV, you see it on products and you see it on the packaging. A patent pending means that you’re in line to get a file for the actual patent. What that does is it gives you a year of patent pending status to put on your product, to give a perception of your ownership of that idea. Companies would be hesitant about taking those ideas. The way to do that is you file a thing called the PPA, Provisional Patent Application that costs $65. You could do it all by yourself. You hear back whether or not if you’re approved within three weeks to three months at most. Once you’re approved, you get one year patent pending. You could shop it around to any companies. Another little trick is putting a copyright onto it.

The biggest thing is I want to remove any negativity and doubts that people have when it comes to the ideas because that’s when they get stuck. That’s when the paralysis by analysis kicks in and they overthink and they think of like, “What if this company steals my idea?” That’s a possibility and that has happened and it still continues to happen until this day. Your idea is not going to go anywhere if you don’t act upon it and send it to a company that would be interested in it. If you think about companies, the model that this licensing world is called open innovation. It means that companies open their doors, allow anybody around the world to submit ideas to them and they could go and make it and sell it and say that it’s their own, when it’s your idea that you’re rented to that company.

There are companies that operate and rely on an open innovation model and they’re heavily dependent on people submitting ideas from outside the world to go and stay competitive and relevant and constantly putting new products out. They’re going to be quite careful to make sure that they treat them in our world. I call them the product developers, not quite inventors. Inventors tend to have a kookiness perception to it like in their bathrobes, in the garage. Product developers, they’re going to not be as malicious and they won’t do anything like that because there are a lot of risks to that comes onto their part. If you get caught stealing an idea, I could sue you.

Most likely they’re going to have a bigger army of lawyers, but I’ll go and put everything that I can do and fight to make sure that, “That’s my idea, here’s the proof.” They don’t want to go into that. They don’t have time for that. They don’t have the money for that. They don’t have the resources. They rather put that resources into creating new products and making money with it. For example, a big, heavy hitter in this open innovation world would be Proctor & Gamble, P&G for short. They have a bunch of companies under them like Tide, Bounce, you name it and they have something in it. They’re huge. Ever since 2008, I believe more than 50% of their products have come from outside of their doors. 50% is a lot. P&G was a huge company. There are competitors like Unilever. If Proctor & Gamble gets caught and has a reputation of stealing ideas, I’m no longer going to go and submit my ideas over to P&G, I’m going to go over to Unilever, the competitor and help them out because they’re treating their product developers right. If P&G does not want to go down that route, so they’re like, “We’ll treat everybody with respect and be courteous and we don’t want to do anything funky because we want to have ideas continue to come in.”

You’re making a full-time living off the royalties, is that right? 

Your idea is not going to go anywhere if you don’t act upon it and send it to a company that would be interested in it.

It’s full-time on its way. It’s not a complete full-time yet. I’m living off of the freelance money that I saved up. There’s an unlimited amount of ideas. If you’re able to go find those ideas and submit your ideas to companies, you could have multiple strings and theoretically, unlimited amount of royalty checks coming in. Licensing, I focus specifically on the product aspects of licensing. It’s product licensing but licensing is a business model that hits different types of mediums. There’s music licensing, photo licensing, brand licensing, character licensing, video licensing. Let’s take music licensing for example. Let’s do like Rick James’ Superstitious, we’ll use that song. He’s still making royalties off of that even though he’s no longer here. Every single time someone plays his song on Spotify or Apple, iTunes music and all around the world, he gets like $0.0000015. It’s not a full penny but if you add those numbers up around the world from everybody listening to it over and over again, those royalty checks add up. Until this day, he’s still making money on it.

My question is, where do the virtual systems come in? What are you using them for? 

I have two things that I’m running at the same time. I’ve got my licensing business where I’m renting out my idea, coming up with ideas and I’m sending them out to companies. I’ve got the other side which is documenting my licensing process and sharing my licensing experiences with other people that are interested in this world. I have a VA. It’s a General VA, her name is Em. She has been helping me on that front especially with social media right now. I’ve got a little Facebook group where people are finding me that are interested in licensing. I have a little questionnaire that they fill out to give me a sense of where their head is at and what they’re looking for and what problems that they’re struggling with that I could help out with. Em would go and capture all that information, put it on a Google sheet for me and let me know we have this many people that showed up. That work alone has saved a lot of time for me to go and spend time either coming up with more ideas or working on content. She’s also helping me with writing. There are a lot of books that I’m highlighting and making notes of and instead of me writing it down, I like to highlight it old school like pen to paper. I take a picture with my phone and put it on Dropbox, message it over to her and she gets it done. She’s amazing.

You mentioned she’s a rockstar. What makes her so good compared to maybe some other VAs you hired that didn’t work out?

One, she’s a very nice person. Her personality, that’s a big thing. If you’re a good human being, we could chat and talk. Every time we chat once a week, I ask, “How are you doing?” She asks how I’m doing, “How is your weekend?” She tells me about what her weekend was. I was like, “That’s awesome.” She’s based out of the Philippines and it’s her attitude towards working on new projects and constantly wanting to learn and knowing that there are things that she won’t quite get right away. She acknowledges that in herself. Once I correct whatever the issue would be or to clarify something, she quickly applies it and says, “Thank you. I appreciate it.” I’m like, “That’s the right attitude to have.” Her attitude is one of the biggest things.

How did you onboard her? Talk about that first month of working with someone new? That’s where a lot of people struggle. How did you break that down?

Let’s take a step back before onboarding. First, I want to talk about how I found her. Using FreeeUp and the platform, I put a little job posting out, “Looking for a General VA.” I put in all the things that I’m hoping to have her do and the types of projects and tests that she’ll do. There were three. I interviewed every candidate. Depending on certain projects, if it’s a design project or copywriting project, I would do a little test. I’ll pay but I’ll have them do a little test work to see what their skills are like. For General VAs, I want to see what they can do right away. All the other candidates were great, but Em was one person that had the right attitude. As soon as we started, we would chat over Skype. I brought her onto Trello and using Loom, the screen recording software, I would go over the tasks that I would want her to do. I’ll show her, “This is how I do this. This task is capturing the information from the Facebook group. I’m putting it onto a Google spreadsheet. Here’s how I do it.” I do the exact same thing that I would do on a screen recording and I’ll put it on a card within a Trello and tag her in it. She’s been doing it ever since. For the next task, I’ll go and do that and she’ll go and do that. If there are any questions or anything like that, she’ll message me on Skype and we chat.

What communication channels do you use? You use Skype, you use email, anything outside of that?

Skype is pretty much it. The project management software would be Trello. Whenever she gets and does any specific tasks like doing data, capturing data or doing internet research, she’ll put it on Google docs. It’s quite lean tools that we use. It’s all free and they’re good. You could do a lot with it.

What other hiring tips do you have? If someone’s looking to hire a virtual assistant, they’ve never done it before, they’re looking to hire a freelancer or maybe they have done it, but they want to do it at a better level. What else can you share?

Always have an open mind and look at things as a progression. You’re not going to find the rock star right away. You might but you’ve got to try and experiment with different people and have an open mind on like, “What are their capabilities?” You know exactly how you would want things but see how they do it. If they have a better way of doing something that you didn’t think of, great. There are things that Em called out. I was like, “I did not think of that before. Let’s go and start doing that now.” It’s the progression of it because they’re not going to know everything that you know right away. In time with patients and education, they’ll be able to get on the same alignment and on the same page with you. Ideally, you want to set a system up where they could go and relay or transfer that same information onto other people when more people come onto the team.

I have one more question that I thought of. Can you give us some type of ideas that you come up with? Give us an example or two if you can. 

I’ll go over my first product idea that I licensed. This was right after I graduated, it was a few months of me not doing anything, not finding any jobs. I was like, “I’m going to create my own job.” There’s one company called Kikkerland that makes whimsical, novelty products. On their website, they have a little “Submit an idea” button. I was like, “I’m going to submit a bunch of ideas to them.” One idea that I randomly thought of was the retractable back scratchers. They collapse and you could scratch your back. They sold one. I was like, “That’d be funny if you made a smaller version of it.”

If you want to be successful, then grow and become something meaningful and significant. You’re going to have to put your chips all in.

I took a screenshot of their product page on their website, removed the white background, made it smaller and put it next to a key chain on Photoshop. I wrote, “Mini backscratcher, have something that always has your back on the go.” To give a little context, the thing that I send to these companies is called a cell sheet. A cell sheet is pretty much a print ad. I’m making a printout of the mini backscratcher and I put my little business logo, contact info, a website. I emailed it to them and they loved it. They’re like, “Let’s start making this right away.” They’re selling it all around the world now, which is cool. I believe, I know for sure it’s over 150,000 units that they have made and sold for me. I didn’t lift a finger other than putting that little cell sheet together.

Talk to us about the YouTube channel. You’ve taken off a little bit on YouTube. If someone wants to be a YouTube star or if someone wants to grow their own channel bigger than what it is now, what advice do you have for them?

If you’re interested in making video content, YouTube is a great platform to do it. It is the number two largest search engine in the world. Number one being Google, number two is YouTube and number three is Amazon. YouTube functions like Google. If you’re able to get yourself to the front page, that’s amazing. YouTube is a fascinating space where you’re able to talk about anything and do anything. For me, I talk about licensing and document my licensing process because there are not that many people talking about it. They always talk about startups and getting investments and getting seed capital and all that stuff. That means you’re borrowing money and it’s all trendy and stuff. I’m like, “I don’t want to deal with that. I’d rather have another company make it for me.” There aren’t that many people talking about, I thought I might as well pitch in on the conversation. My goal and hope is that more people get a bug like I did for licensing and they would want to start contributing and creating YouTube videos.

Videos in general is a great content to be able to dissect and use in different parts of social media. For this podcast video, for example, this video could let end up on YouTube but then the audio ends up on a podcast and then you could clip everything up. You can have a transcription version and you can have a summary version. There are a lot of things that you can pull off from a video. That definitely helps a lot with creating content for the stuff that you create. Going on to my YouTube channel, if you’re interested about learning licensing and how to make your ideas happen by another company, doing all the heavy lifting and they pay you in royalties even while you sleep, I encourage you to check out my YouTube channel called House of Royalties. There’s also a website that people could find more free resources. There’s a lot of stuff that I give out for free. I have one for your members and audiences. The website is FreeUp.LicensingStarterKit.com. It’s a little toolkit of free resources to get people started on the licensing path on the right foot.

Sef, thanks so much for coming on. This has been awesome. I learned a lot. I didn’t know that much about royalties going into it. I appreciate it and I look forward to continuing to work with you. Have a great rest of the week. 

Thank you for having me on, Nathan. This is fun. It would be great to chat with you again sometime down the line. Thank you for everything that you’re doing with FreeUp.

I appreciate it.

Important Links:

• Sef Chang
• House of Royalties on YouTube
• FreeeUp
• Trello
• Loom
• Kikkerland
• FreeUp.LicensingStarterKit.com

About Sef Chang

Sef chang is part product developer, all daydreamer – innovating straight out of from Los Angeles, CA.
He has successfully licensed ideas to companies and gets paid for them in royalties.

Sef is also a youtube creator that runs a youtube channel called “House of Royalties” where his goal is to document and demystify the world of product licensing, one licensing deal at a time.

Special promo you’d like to share with the community: Free Licensing Starter Kit — freeeup.licensingstarterkit.com
Super stoked for our chat tomorrow!