How much could SawStop get in royalty payments? The answer here.

[Handplanesandmore]

"...interesting that workers comp insurance carriers are big fans of SS technology in production environments, and CGL insurance carriers in school environments, it makes sense from a liability perspective."
Standard insurance practice, I guess.

 I receive deductions annually as long as:

1) I keep my security alarm service active, and
2) My sprinkler system is checked and certified by a licensed entity.

It is all about risk management. My SawStop does not reduce any premiums for me as a hobbyist, but it serves its purpose of reducing or preventing serious finger injuries for me. I am as attentive and careful as before when I do any cuts on the sawstop. It is stupid not to be so, as all other machines in my shop have no AMI feature to protect me. Never let your guard down regardless of whether you own a SawStop or not. 

Simon

[Tapper]

Interesting. So Gass is basically a mafia kingpin getting the govt to force companys to use his product and pay him for it.  Is not legal for him to force them so he has the courts do the dirty work for him to make it legal. Its unfortunate that oir courts get used for mafia tactics.

Haters gonna hate! 


Doug

[Handplanesandmore]

Haters gonna hate! 


Doug

Yup...and it will go on even when ALL new saws are equipped with the finger-saving technology. Gass what? Gass will be remembered forever -- for better or for worse. (And if he thought he would no longer be the punchbag after selling his SS business, he was wrong. Haha!)

Simon

[vernonator]

My bro-in-law is in the LED business (he got rich because he entered the market before everyone else). His mark-up in early days (7 years ago?) -- for illustrations, not the exact figures:

Imported $2 a bulb, wholesale $3 to retailers who sold them for $8

Later, everybody joined the bandwagon:

Imported $1 a bulb, wholesale $1.5 to retailers who sell them at $4 - $5. Some sell them now at $2 a bulb during promotion events.

He says when you see a LED bulb selling $2 a pc at Lowe's or Home Depot, the LED business for people like him is dead. He is sourcing a different "first-wave" product for imports (can't tell you what it is here, of course). He got rich like Dr. Gass for being insightful about the market.

8% royalty payments are a lot?!!!


No wonder most woodworkers are not entrepreneurs, like Dr. Gass, or my bil.

Simon

 
Your BIL was not getting a royalty - he was marking up a product HE imported, there is a big difference. A royalty is a % of EVERY product sold, even if you never touched it.

[Handplanesandmore]

 
Your BIL was not getting a royalty - he was marking up a product HE imported, there is a big difference. A royalty is a % of EVERY product sold, even if you never touched it.

I am afraid you missed my (or my bil's) point. When you see an opportunity (and want to get the most out of it), you set the max. return possible for it, one that the market conditions allow you to. SS is the only technology of its kind available at this time and to ask for 8% (still within the "normal" range of royalty payments) is to maximize the returns to the innovation investment that Gass has put in. (Just found this on the wiki: In 2002, the Licensing Economics Review found in a review of 458 licence agreements over a 16-year period an average royalty rate of 7% with a range from 0% to 50%.)

Remember he and his investors have taken the risk of using their money to turn an idea into a profitable product. If I invested my money in a risky equity, 8% would be a very poor return for me - 50% to 500% would be the norm. All royalty payments work the same way: They are applied to every unit sold, not a one-time lump sum payment. Look at payments made to authors, for instance. They are based on no. sold, after the initial lump sum.

The two situations (LED vs SS) were of course different, but the business logic is the same: a business created for profit making is to seek the highest return possible within the legal and market framework. We may not like Gass for any reasons, but he has his rights (and is right from an investment point of view) to extract a good return for his work. This is capitalism.

We must also not forget that when Gass invented the technology and approached the PTI members (between 1999 and 2003), he could be asking for a much lower % as his idea wasn't proven in the field yet. No one knows what that % was, other than those involved, but the lower % assumption is reasonable. Gass would be dumb business wise if he didn't ask for a higher % today. In fact, the new owner of SS could be revisiting that figure, if it was lower than the European norm or practice!

Oh. One more thing: When we buy something, do we ever ask the seller if any or how much the royalty payment is involved in the product? We never do. I suspect that many people asked questions about it in the case of SS is that they don't like the fact that Gass could be getting rich from his invention. Get over it. Gass has sold his business for a return that he deemed reasonable for him and his investors. My guess? It was more than 8% in the return.

Simon

[Downwindtracker2]

Years ago, now many, I worked for an importer . He would pay 10cents for something in Hong Kong and wholesale it for 1dollar. The retailer would then sell it for 2dollars. He did well , but he wasn't wealthy. His expenses were shipping. paper work , warehousing, packaging and reshipping. Nor were the retailers wealthy. I would even question if they were well off.

[Guest]

If I was a saw mfg. 
Lets say I was selling a cabinet saw now for $1500.  I would offer a bare bones saw for $650, (+$52 royalty)
Then sell the fence for $400. 
Miter gauge for $150.
2 wings for $200.
Motor cover for $100

I think a sharp blade, and common sense are the main safety items.
Anyone can get a blade sharpened. Unfortunately, common sense, doesn't grow in everyone's garden!

Time to go out and hug my old Unisaur!  And the other man eaters.

[EricU]

the early days of led bulbs vs. a mature product like a tablesaw are completely different.  It's likely that a tablesaw manufacturer is going to have to eat the royalty and go with thinner margins.  I don't know if anyone has noticed, but it's not exactly a business that people are rushing to get into.

And people live off those margins, that's what it takes to stay in business.  I have seen that 5x fixed cost is assumed for a manufacturer just to keep the lights on.  1.5 x a distributor's cost, and then 2 x the wholesale cost for a retailer.  Anyone scrimping on those margins is asking for it.  I think you'll find that the "discounters" have the same margins, they just play tricks to make it look like they don't

[tomsteve]

i havent followed the whole sawstop thing much but one thing im greatful for:
all of the demonstations ive seen done have been with hotdogs and not bacon.

[Tapper]

Interesting. So Gass is basically a mafia kingpin getting the govt to force companys to use his product and pay him for it.  Is not legal for him to force them so he has the courts do the dirty work for him to make it legal. Its unfortunate that oir courts get used for mafia tactics.

No "Mafia Kingpin", just a brilliant businessman with a great idea that has attracted a ton of buyers. No dummy either with both a PhD in physics and a law degree. Buy his product, never have another injury from a tablesaw. Seems to make a lot of sense to a lot of people. That's why the powers that be are taking a look at it now.

Ever wonder why seat belts are mandated? Want to take your family for a drive and not have your wife and kids buckle up? Or try parachuting without a reserve chute. How about trapezing without a safety net? Get it yet?

Doug