The TeleBrands CEO Is Courting Inventors.
Should You Trust Him?
By Mike Drummond
Seems Khubani also was in the process of filming a pilot for a television series along the lines of Pitchmen – this in addition to Khubani’s aggressive move to get more new products from inventors in his infomercials. Every other month, he promotes “Inventor’s Day” events, where inventors pitch him in hopes of becoming Snuggiaires.
Khubani is the infomercial king behind PedEgg, Windshield Wonder, Go Duster and scores of other inexpensive, mass-market products sold in ubiquitous As Seen On TV ads. For any product developer, the allure of such national exposure is a powerful pheromone.
Yet Khubani also possesses another imperial reputation: knock-off king.
So, if Khubani was willing to let me ask him probing questions about his business conduct in a crowded restaurant (I ordered the ice water with a sprig of lemon), I was game to participate in his TV pilot. Mic me up and let’s get started.
A little background:
Khubani and his two brothers, Andy and Chuck, run related businesses. Since 1996, the three have fended off at least a dozen lawsuits, most dealing with patent or trademark infringement, including one brought by the National Audubon Society in 2000.
Additionally, TeleBrands in December 2008 agreed to pay $7 million to settle a lawsuit brought by the Federal Trade Commission. The FTC claimed TeleBrands engaged in deceptive advertising for its Ab Force product.
Late night is not the best time to hawk stuff on infomercials. Daytime TV is best.
During a five-month period in 2002, TeleBrands marketed and sold the Ab Force, an “electronic muscle stimulation belt.” The infomercials, complete with models blessed with six-pack abs, claimed the belt would cause consumers to lose weight by applying electronic stimulation to their abdominal muscles.
The FTC found the claims to be fantastical, or in the agency’s words “unsubstantiated.” But the ads were effective. TeleBrands sold 700,000 units.
At the outset of our conversation, Khubani’s media rep started placing TeleBrands products on the table. There’s Bottle Top, Heel Tastic, and the Jupiter Jack, among others in their tight clamshell packaging.
Khubani, in his dark-blue suit, sky-blue shirt and red power tie, eyes the products that have helped make him a millionaire many times over.
As per custom, I eased into the interview with some simple questions. I asked about his dedicated push into the inventor community.
I would like inventors to feel comfortable coming to us. They shouldn’t think we’re going to rip them off.
About 100 inventors a month typically submit their product ideas to TeleBrands, Khubani says. His operation initially didn’t have the wherewithal to handle the submissions, which arrive via e-mail.
So in 2008, he beefed up the invention-submission part of his business and began hosting Inventor’s Day events. Every other month, either from his home base in New Jersey or in other cities, he’ll engage local print and broadcast media to help spread the friendly word.
About 300 inventors usually sign up for the events. From those, he and his staff whittle that number to 35. Each inventor is given 5 minutes to pitch him and his team of reviewers.
Of every 100 ideas, TeleBrands may select 10 products for test marketing. Of those, maybe one product makes it on air.
Ron Popeil and his Ronco Spray Gun launched the infomercial industry some four decades ago. Among the products Popeil popularized was the Pocket Fisherman. A young Khubani persuaded his mother to buy him one, a purchase that “probably had a lasting impression” on him, he says.
Today, the infomercial industry has an insatiable hunger for new household products. That’s why Khubani desires inventors.
“We’re in the business of finding novel products. It’s hard to sift through and find diamonds in the rough,” he says. “But the best diamonds come from inventors.”
That said, he notes the “majority of inventions are not commercially viable. It’s a numbers game and the problem with most inventors is they come up with only one idea and get stuck on it.”
He picks up the Jupiter Jack, a mobile phone gizmo that converts your radio into a hands-free speaker system. It’s a hot seller, but with only so-so consumer reviews. During our conversation, a commercial for the Jupiter Jack happens to run on one of the restaurant’s jumbo TV screens. Khubani notes that the inventor who sold TeleBrands on the Jupiter Jack actually was infringing on a patent.
TeleBrands, he says, had to license the technology from Sony Ericsson.
Well, since he brought up infringement, I decided to run some names by him.
Peticure. Dioptics. Ymax. Quatron. Milestone Scientific. Edmark Industries. Khubani sort of cuts me off before I finish the list of those who have brought infringement suits against him and/or his brothers.
“You’re known as the knock-off king in certain circles and that some say for you, litigation is just a cost of doing business,” I continue. “Don’t shoot the messenger, but what’s your reaction to that?”
“I hear that a lot and it gets me upset,” he says.
If he’s irked, he masks it well. His voice remains calm. No perspiration emerges from the layer of camera makeup applied to his face and pate.
“It’s unfortunate we have that reputation,” he adds. “I have no intention to rip off inventors. People confuse my aggressive competing with ripping off inventors. The bottom line is, I have nothing to gain from ripping off” inventors’ ideas.
He says the lawsuits are from companies that are envious, irate competitors.
“Why are they pissed off? Because,” he says, “I beat them out there in the marketplace.”
And the $7 million FTC settlement for alleged deceptive advertising?
He disavows his infomercials ever made any claims that the Ab Force made you ripped.
“I didn’t say any of that stuff,” he says. Other, off-shore entities made those claims with similar products and when the U.S. government couldn’t go after them, they went after him instead, he adds.
Khubani says the Ab Force made $1.8 million on sales of $16 million, rebutting any notion that he and TeleBrands see litigation merely as a cost of doing business.
I asked him what he learned from the experience.
“Don’t fight the U.S. government,” he says. “They don’t fight fair.”
With that out of the way, we continue talking about his courtship of inventors.
Khubani will consider all manner of product ideas, from patented, fully developed products already in the market, to ideas scrawled on cocktail napkins. Heel Tastic, a product that alleviates dry, cracked heels, didn’t have a patent.
Of course, more fully developed products with intellectual property and sales histories enjoy better terms. TeleBrands typically offers a 1 percent to 5 percent royalty rate.
“We negotiate the best deal for TeleBrands,” Khubani says. “Most inventors make a million dollars in royalties” in the first year.
What’s he looking for?
“Items that solve an everyday problem. We don’t want niche products. TV is a mass medium.”
Products also have to demonstrate well and typically retail for $10 to $20.
He favors the 2-minute infomercial format. It’s long enough to persuade people to make a purchase, and short enough that it (theoretically) won’t annoy would-be consumers.
Khubani seems to have a Midas touch when it comes to selecting mass-market, TV-friendly stuff you want to buy for the house. Does he have any regrets? Any hit products he passed on?
He lists three: Book Sox book covers, the Razor scooter and Snuggies.
AJ Khubani took a pass on Snuggies?
“We don’t like seasonal products,” he says with a shrug. “If you look at it, it’s a blanket with sleeves.”
What’s his next hit? Look for the Perfect Fit Button, a product that adds an inch to the waistline of your pants.
And finally, I ask him if there’s anything he’d like to amplify or address something I haven’t asked.
“I would like inventors to feel comfortable coming to us,” he says. “They shouldn’t think we’re going to rip them off.
“That would be being a pig,” he adds. “And we all know what people think of pigs.”