First Person
Lessons Learned
Larry Balaban
03/01/2008

Larry Balaban, a creator of Baby Genius and the president of Pacific Entertainment—one of the largest providers of children’s programming on CD and DVD—believed he had a new approach to teaching and entertaining youngsters when he helped launch the company in 1998. Balaban applied lessons that he had learned starting—and closing—a variety of businesses, in which he marketed everything from diets to specialty phone cards. The knowledge he garnered in such seemingly unrelated fields proved invaluable in building the new venture.

October 16, 2001, was possibly the best day of my life. It was the day I became both a father and a songwriter. As I rocked my daughter, Frankie, to sleep for the first time, I was inspired to write the song "1, 2, I Love You," scrawling on the back of an envelope with my left hand—even though I’m right-handed.

LARRY BALABAN struck gold with Baby Genius, a company inspired by his daughter, Frankie.

In that moment, new fatherhood, creativity and even entrepreneurship mixed together; Frankie’s song would eventually become a hallmark melody in my work as cocreator of the early-childhood education company Baby Genius and as the president of Pacific Entertainment. Today, more than 7 million Baby Genius CDs and DVDs have sold worldwide.

Three years before Frankie’s birth, I started Baby Genius with my brother, Howard, and Klaus Moeller and Michael Meader. We began modestly, using a small office above a gas station in San Diego. In 1998, Klaus had brought Mike, Howard and me into his business, International Trading & Manufacturing, which was selling jewelry on the Home Shopping Network. The sales were slipping in the costume-jewelry business, and Klaus was searching for a new venture. We wanted to start a business creating and marketing products for children, though none of us had worked in children’s programming before. And while it might seem like a stretch to switch from selling necklaces to creating musical and educational DVDs and CDs for children, we loved kids and believed in our idea. We also thought we could contribute different talents. I had extensive experience in negotiating licensing and promotional deals, and Howard was skilled at developing business opportunities. Mike had a strong musical and operational background, and Klaus was a great CEO. We thought that together we could create something new and meaningful in early-childhood education.

The first few years were tough, because we were building the company from the ground up without a lot of start-up capital. Minnesota Public Radio provided our first financial backing, with an initial $600,000 investment. Lacking a large marketing budget, we planned to build the Baby Genius brand by piggybacking on mature, well-regarded brands. We produced the first two DVDs on a shoestring budget. Then we partnered with Gerber to create a co-branded "bath-time" CD, and Kellogg’s placed 400,000 CDs in its cereal boxes. We also contributed 250,000 CDs to a Parents magazine subscription drive in schools.

Although I was new to children’s programming, I applied the lessons I had learned from my earlier businesses. I can thank my dad for helping me to become the entrepreneur I am today. I started in grade school as a Cub Scout, selling chocolate to raise funds. I was a natural; I sold all of my candy, as well as my brother’s, in one afternoon on the boardwalk in Atlantic City.

When I was 17, I helped my father start a company called the Diet System, which we sold within two years to Educom, a firm based in Philadelphia, for $1 million in Educom stock. Entrepreneurship was innate for me; I grew up in a family that encouraged it.

In my 20s, I moved to New York City and landed modeling and acting gigs. I continued working as a model for several years both in the United States and in Europe, appearing in commercials for Coca-Cola and Close-Up toothpaste. My interest in acting lessened as I became fascinated by business, but to this day, I still rely on skills that I began to develop on those shoots so many years ago.

Cutting Loss
Risk is a part of starting any business. I’ve certainly faced my own dark days, and I have seen some of the businesses I’ve tried to launch ultimately founder. In the late 1980s, companies began to buy phone time wholesale and resell it. My brother, father and I created BBB Communication, a distributor that sold phone time and prepaid phone calls.

Our business went belly-up and we lost $3 million, but I don’t regret the experience. From this loss, I developed a tougher skin to endure the hard times.

Successful at this venture, my brother and I dreamed up an even more exciting use for phone cards. We thought, wouldn’t it be great to speak to your favorite soap star? Or receive a wake-up call from Bart Simpson? Together we created the Telephone Entertainment Card. Partnering with Procter & Gamble Productions, we secured the licensing rights to soap operas such as As the World Turns, The Guiding Light and Another World. We also worked with Paramount to develop a Star Trek theme, with Klingon language lessons and phone calls with Captain Kirk. We succeeded in convincing William Shatner that we had a breakthrough idea, and he even joined us for our meetings at Paramount. Who wouldn’t be up for talking with their favorite celebrities?

Ultimately, the question turned out to be "Who would?" Sadly, fans were not willing to spend 50 cents a minute for the service. The Internet was also beginning to gain momentum, and it was a better platform for this type of content. Our business went belly-up and we lost $3 million, but I don’t regret the experience. From this loss, I developed a tougher skin to endure hard times. In addition to that, I got a crash course in licensing, negotiating and audio production, which in turn would contribute to the success of Baby Genius.

Licensing has become a central element in expanding Baby Genius. We have partnerships with Gerber, Taco Bell and Parents magazine. These partnerships deliver 5.8 million Web hits a year. Our programming is watched 1.3 million times a month on Comcast. And we recently expanded into a toy line. In the first four weeks the toys were available, the sales numbers doubled each week. My partners and I are finally seeing our vision come to fruition. Today, our DVDs and CDs are sold in more than 8,000 retail stores in the United States. Baby Genius also has gone international, and our DVDs can be seen everywhere from Australia to Malaysia. Beyond that, though, we are making kids and their parents happy. I look forward to working with the children on set, going to the studio and brainstorming new ideas with my business partners. I love to hear from viewers and customers, and see moms and their kids smile. I think I have the greatest job in the world.

Still, I don’t believe there is anything as wonderful as being a dad, and fatherhood still contributes to my work at Baby Genius. Before Frankie was born, there were no characters—the DVDs were simply music paired with images. Frankie was the inspiration for her namesake character, Frankie the elephant, as well as many of the other characters, like Vinko the dancing bear. I hope Frankie will help run the company someday. In many ways, she’s already helped a great deal: She serves as a one-person focus group for many of the songs, toys and DVDs.