Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

They Could Have Been Billionaires: Daisuke Inoue


The inventor of karaoke didn't think he had an invention worth patenting.

Daisuke Inoue is famous for two things. Most importantly, he's the man who invented karaoke. Until a few years ago, few realized that such a man existed -- it's a little like finding out that someone invented bad hair days. But after years of obscurity, a 1999 Time magazine story restored the Kobe-born Inoue to his rightful prominence as the creator of a multi-billion dollar business. There's been a movie about his life and a popular biography.

His second claim to fame is even more disturbing. It's summed up in the headline of a 2008 Japanese newspaper profile. The rough translation: "Laughing off a 10,000,000,000 yen loss."

That loss -- roughly $110 million in royalties, by that newspaper's estimation -- was the result of a simple oversight. Daisuke Inoue didn't patent his invention.

Imagine the life of Walt Disney if Mickey Mouse had somehow escaped his copyright clutches. What would he have become? Instead of managing an empire, would Walt have spent his days doing wistful media interviews about the one that got away, pausing to inquire discreetly if there will be any fee for the ensuing photo session?

In February 2008 I visited Inoue in his little Osaka office. He invited me up to the third-floor flat above where he made coffee and recounted once again the events that would bring him fame and… well, fame.

In 1967, Inoue was a struggling nightclub musician in Kobe. A drummer and percussionist, he taught himself a simple three-finger keyboard style to play tunes for nightclub patrons who felt the urge to belt out a tune. Inoue -- "Dai-chan" to his patrons -- was paid by the client. Every time a customer requested a melody, he made 2,000 yen, or about $20. In three hours Inoue could make more money than the top "hostesses," or escorts, in the club.

In 1969, one business leader asked Inoue to accompany him to a weekend retreat so he could sing. Inoue had another idea. He made an eight-track cassette tape of the CEO's favorite tune: a little ditty about a Tokyo airport from singer Frank Nagai, titled "Leaving Haneda 7:50." The CEO was thrilled. And Inoue glimpsed an opportunity. "I thought," he recalls, "maybe I can make some money off this."

What Inoue built in 1971 was a little wooden box he called "8-Juke." It combined an eight-track cassette player (the car-stereo format of the era), a guitar amplifier, and a coin box. Privately, Inoue called it karaoke (Japanese for "empty orchestra"), music industry jargon for backing tapes touring singers would employ instead of a live band.

Inoue began leasing 8-Juke to local bars. A tune cost 100 yen, or about a dollar -- more expensive than the average jukebox.

Flash forward to the late '90s. Japanese karaoke is a massive industry, dominated by three giant companies -- Shidax, Dai-Ichi Kosho, and B&V Corporation. Although there are no karaoke giants in the West -- no McDonald's, Burger King, and Wendy's of karaoke, battling for supremacy -- the leisure staple is a worldwide money-spinner. And that may be a consequence of Inoue's mistake. Witness this rueful statement from a 2007 Japanese Market News study:

"[A]lthough karaoke… originated in Japan, it does not contribute to Japan in terms of trade balance. This situation seems to be connected with the fact that the inventor's failure to apply for a patent contributed to the spread of karaoke."

In other words, the fact that no one needed to pay royalties helped spur the global spread of karaoke technology. Inoue's loss -- and Japan's -- was the global industry's gain. Leaving the aching, throbbing question: Why didn't he?

"My first karaoke machine was made from an eight-track tape player," Inoue explains, "a guitar amplifier, and a coin box. I did not invent any of those things. They already existed. I only put them together. So at the time my feeling was, I did not really invent anything."

Walt Disney did create an early character -- Oswald Rabbit -- to which he later lost the rights. No problem for Walt; he simply redrew the rabbit as a mouse and started fresh. For Daisuke Inoue, creating a second globe-girdling invention hasn't been so easy. For awhile he peddled a roach-and-rat repellent intended to protect karaoke machines from scavengers (something Inoue failed to do with the human variety). More recently he's been a dealer for a baking soda-based cleanser -- not his own invention.

Inoue received a 2004 Ig Nobel Award (a group of Ig Nobel laureates serenaded him at the ceremony with "Can't Take My Eyes Off of You"). He has received trophies and certificates from numerous musical organizations. But when he tells the story of his awards and repeats with a sense of wonder the global sales figures for the karaoke industry, it seems clear that Inoue craves something more. He is himself just coming to grips with how much he accomplished. And he would like the world to see it, too.

In Tokyo's Yurakacho district there's a statue of Godzilla. As creator of what's arguably a more famous entertainment export, shouldn't Inoue get the same? "I don't want a statue," he demurs. "Perhaps a certificate or something."

40 of the last 42 trades in our Grail ETF & Equity Investor newsletter have been profitable. Don't miss the next. Take a FREE 14 day trial to receive analysis and specific trades featuring ETFs and stocks poised for big moves. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos