Podcast Summary: Making It with Jon Davids
Episode 191 - $60M a Year From One Book | Pantone
Release Date: May 20, 2025

Introduction

In Episode 191 of Making It with Jon Davids, host Jon Davids delves into the intriguing story of Pantone, a company renowned for its pivotal role in the color industry. Generating $60 million annually from a single book, Pantone has not only standardized color communication but has also ingrained itself into mainstream culture. Davids explores the company's history, business model, key milestones, and the lessons entrepreneurs can learn from Pantone’s journey.

The Genesis of Pantone ([00:00] - [04:30])

Jon Davids opens the episode by introducing Pantone’s foundational story in 1956. Lawrence Herbert, recognizing the inconsistency in color representation across different print shops, envisioned a standardized color language.

Notable Quote:

"Color should be a language, not a guessing game." ([00:45])

Herbert meticulously developed the Pantone Matching System (PMS), a book cataloging premixed ink formulas each assigned a unique code. This innovation ensured color uniformity, transforming Pantone into an indispensable tool for designers, printers, and brands.

Pantone’s Business Model and Dominance ([04:30] - [15:00])

Pantone’s primary revenue stream stems from selling the PMS books, priced between $200 to $1,000 depending on specifications and updates every few years. Additionally, licensing fees contribute significantly to their income. For instance, when Sephora incorporates Pantone’s Color of the Year into its makeup lines, Pantone benefits financially without manufacturing any products.

Davids emphasizes Pantone’s strategic positioning as a data company with a robust training and publishing framework. By standardizing the color industry, Pantone has established a winner-takes-all market within a niche, avoiding competition with larger, broader companies.

Notable Quote:

"When you're standardizing an industry, it really is a winner take all market." ([10:15])

The podcast highlights that Pantone’s niche focus—serving professionals who require precise color accuracy—has cemented its status as the industry standard over six decades.

Necessity Plus Niche: The Formula for Market Monopoly ([15:00] - [25:30])

Davids introduces the "Necessity plus niche" business formula, illustrating how Pantone exemplifies this model. He explains that Pantone addressed a critical need within a specific group, creating a market monopoly.

Using a vivid scenario from the 1960s, Davids describes the chaos faced by designers due to inconsistent color replication across different print shops. Pantone’s solution provided a must-have standard for color accuracy, effectively solving a pervasive industry problem.

He further breaks down the components of a good niche:

1. Homogeneous Within: Pantone serves graphic designers, printers, and brand managers—all sharing the need for color precision.
2. Heterogeneous Between: These professionals differ significantly from other industries, focusing intensely on color details.
3. Reachable: Pantone effectively markets through design schools, trade shows, and industry partnerships.
4. Profitable: High-margin sales of expensive books and recurring purchases ensure profitability.

Notable Quote:

"If you got those two things, you're onto something." ([16:45])

Davids also references other successful companies like Bloomberg and Intel that have leveraged similar necessity-plus-niche strategies to dominate their respective industries.

The Color of the Year Phenomenon ([25:30] - [35:45])

In the 1990s, Pantone expanded its influence beyond B2B by introducing the Color of the Year in 1999. Initially met with skepticism, the first color, cerulean blue, resonated with fashion editors and lifestyle magazines, embedding Pantone into mainstream culture.

Davids explains the evolution of this initiative:

• Selection Process: A committee of global color experts considers fashion shows, travel trends, political movements, and art exhibits.
• Cultural Impact: The Color of the Year influences various industries, from fashion and home decor to tech accessories and weddings.
• Revenue Model: Companies like Target and Sephora collaborate with Pantone, paying licensing fees to incorporate the chosen color into their product lines.

Notable Quote:

"They are actually setting the culture of color." ([30:10])

This strategic move transformed Pantone from a utility tool for professionals to a cultural trendsetter, significantly boosting its revenue streams with minimal operational changes.

Case Studies: Building Trust and Extending Influence ([35:45] - [45:00])

Davids draws parallels between Pantone and other brands that have successfully extended their niche expertise into broader cultural influence:

• Intel Inside: By leveraging trust in their processors, Intel expanded its brand recognition indirectly through computer manufacturers.
• Gore-Tex: Markets to consumers by emphasizing trust in their fabric technology, enhancing the appeal of partnered apparel brands.
• Dolby: Enhances consumer experiences in theaters and concerts by being synonymous with high-quality sound.

Notable Quote:

"If your brand has earned the trust of a niche, then ask yourself, what do we stand for?" ([40:20])

These examples underscore the importance of leveraging established trust within a niche to penetrate mainstream markets without significant product diversification.

Challenges and Controversies: The 2022 Adobe Incident ([45:00] - [55:30])

Despite its successes, Pantone faced significant challenges in 2022 when it altered its licensing agreement with Adobe. Historically, Adobe Creative Cloud included Pantone’s full color library, allowing seamless access for designers. In October 2022, Pantone abruptly discontinued this bundled license, requiring designers to subscribe separately to Pantone Connect at $15/month.

Impact:

• Immediate Disruption: Designers opening legacy files saw Pantone colors vanish, replaced by solid black squares.
• Community Backlash: The sudden change sparked frustration across social media platforms, with many labeling the move as a "cash grab" or feeling betrayed by a trusted vendor.
• Pantone’s Response: The company maintained its stance without public apologies or adjustments, reinforcing the dominance of its standard despite reputational damage.

Notable Quotes:

"It's like it just kind of happened overnight." ([50:10])
"You have a business like this. There's really not much people can do." ([54:00])

Davids uses this incident to highlight the risks of platform dominance. While owning the standard provides durability and defensiveness, it also leads to ownership perception issues among users, who feel entitled to the standard as if it were theirs.

Business Lessons and Conclusions ([55:30] - End)

Jon Davids wraps up the episode by extracting key business lessons from Pantone’s journey:

1. Necessity Plus Niche: Identifying and addressing a critical need within a specific, homogeneous group can create a market monopoly.
2. Leveraging Trust: Extending niche expertise into broader cultural influence requires leveraging established trust without overextending operational capabilities.
3. Platform Dominance Risks: While owning a standard can ensure long-term success, it necessitates careful handling of user relationships and expectations to avoid backlash.
4. Adaptability: Pantone’s evolution from a color standard to a cultural trendsetter exemplifies the importance of adapting business models to seize new opportunities.

Final Quote:

"They didn't take a U-turn or say, oh, we're so sorry, we'll go backwards, we'll come back to this later. They said, no, you want to use our color library, you got to pay for the privilege." ([54:30])

Davids concludes that Pantone’s story is a testament to the power of niche dominance combined with strategic innovation, offering valuable insights for entrepreneurs aiming to build enduring, defensible businesses.

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Key Takeaways

• Standardization as a Strategy: Pantone's creation of a standardized color language addressed a fundamental industry need, establishing them as indispensable.
• Monopoly Through Niche Focus: By targeting a specific professional group with a critical need, Pantone secured a monopolistic position within its niche.
• Cultural Integration: Expanding influence through initiatives like Color of the Year enabled Pantone to penetrate mainstream culture effortlessly.
• Handling Platform Dominance: Owning an industry standard provides significant advantages but requires careful management to maintain user trust and avoid backlash.

This episode offers a comprehensive exploration of how Pantone built a $60 million-a-year business from a seemingly simple concept, providing entrepreneurs with actionable insights on creating and sustaining market-leading positions.