Consumer Products

Production/distribution year in review

Creativity and flexibility were unquestionably the essential ingredients for success in the production/distribution sector this past year. With the global advertising slowdown shrinking many kids programming budgets and putting downward pressure on already-low license fees, traditionally pivotal markets like the U.S., the U.K. and Germany offered far fewer commission and presale opportunities this year, making it difficult to get shows off the ground. Investment capital raised on the stock market used to be the answer to production shortfall, but that well also dried up this year.
November 22, 2002

Going with the flow: The new recessionary modus operandi

Creativity and flexibility were unquestionably the essential ingredients for success in the production/distribution sector this past year. With the global advertising slowdown shrinking many kids programming budgets and putting downward pressure on already-low license fees, traditionally pivotal markets like the U.S., the U.K. and Germany offered far fewer commission and presale opportunities this year, making it difficult to get shows off the ground. Investment capital raised on the stock market used to be the answer to production shortfall, but that well also dried up this year.

As a result, mid-sized producers had to rely more heavily than ever on co-production, and many players also looked beyond the usual financing models to embrace different strategies like gap-financing, the use of low-cost Asian service companies, and bringing in master toy partners earlier in the production process to top up series budget deficits.

In addition to the need for financial resourcefulness, a lingering glut of animation in the kids market and the heightened competition for fewer broadcast berths has also raised the bar on creative quality. The pressure to come up with mold-breaking animation styles and rich story lines that will stand out in the clutter has pushed larger production companies to look outside of their own creative teams for fresh concepts brewing at smaller creative hotshops like The Dan Clark Company (Decode picked up its preschool CGI concept The Save-Ums! and is producing the 26 x 30-minute show for a February 2003 launch on Discovery Kids) and The Story Hat (which has signed a co-development deal with AAC Kids for its Dragon Boosters property).

There’s also been a recent influx of new independent studios whose business plans don’t rest on television as the be-all and end-all medium for launching a property. Led by such kids industry veterans as former TV-Loonland director of programs John Bullivant (Kickback Media) and ex-Pepper’s Ghost creative director Richard Morss (Banjax), this new contingent is focused on introducing ideas and concepts in whatever medium makes the most sense for the target demographic and the project’s core elements.

Outside-of-the-box approaches to financing and creative development should continue to characterize the supply side of the kids production/distibution business as broadcasters continue to tighten budgetary belts. Also watch for India and Korea, whose governments are pushing hard to build domestic animation industries, to break out of service work and start playing a larger role in co-development partnerships.

HIT punches above its weight in 2002

With turnover up 131% to US$188 million, 2002 has undoubtedly been a fantastic year for HIT Entertainment. And the fact that these results were posted during the toughest financial climate in recent memory should sweeten that success.

A linchpin to HIT’s boffo fiscal year was the integration of Barney studio Lyrick following its US$275-million acquisition in March 2001. ‘Apart from ownership of a property with the strength of Barney [whose worldwide revenues jumped by 233% and should continue climbing with TV rollouts in key territories such as Germany on Super RTL], it gave us a wonderful video infrastructure, as well as relationships with PBS and all the major retailers,’ says HIT COO Charlie Caminada. ‘It has obviously transformed the amount of business we do in America, which went from 30% to between 78% and 80% today.’

Establishing a U.S. stronghold has also allowed HIT to secure premium State-side broadcast homes for its shows. Angelina Ballerina is ensconced on PBS, and new stop-frame series Rubbadubbers is locked in to debut on Nick Jr. in March. And it seems likely that HIT will secure an equally strong U.S. platform for 26 new episodes of Pingu, which the company acquired for US$23 million last year.

HIT Home Entertainment saw a US$63.8-million revenue spike this year, and the division accounted for 51% of the year’s total turnover. Driven primarily by Bob the Builder, Barney and Angelina Ballerina, HHE controlled 13% of the children’s video market in the U.S. and 25% of Britain’s mid-tier kidvid market.

And while Thomas the Tank Engine was undoubtedly the crux of HIT’s US$208-million Gullane acquisition, it’s also hanging onto the tween-skewing Guinness Book of World Records. ‘We have a very strong lineup in the under-seven age group,’ says Caminada. ‘But we often blue-sky on what we will do in the future, and there are interesting opportunities in the eight to 12 age group.’

Six new concepts are now in the piloting stage to replenish HIT’s under-seven development slate, and Caminada says the management team will likely select one or two of these to produce for 2005.

Hot on the Trail

Decode

Despite the tough climate, Decode charged ahead with a gap-financing strategy that tops up budget shortfall by mortgaging against future revenues. Four gap-financed series were among Decode’s hottest sellers this year: Blobheads, King, Girlstuff/Boystuff and The Save-Ums! Reinforcing the strength of its development slate, three Decode series ranked in the top 10 programs screened by MIPCOM Jr. buyers: B-Bot vs. the Alien Posse (a co-pro with Sunwoo USA), Franny’s Feet and Girlstuff/Boystuff.

DIC Entertainment

DIC has enjoyed a strong sales year following the April opening of its European headquarters. This move, coupled with an international broadcast trend towards movie blocks and prime-time family film viewing, has translated to strong sales for DIC’s 39-film ‘Incredible Movie Toons’ package: Walt Disney International (Europe, Latin America, Southeast Asia and Australia), Nickelodeon (U.S.), Super RTL (Germany), YTV (Canada), Cartoon Network (Japan), Televisa (Mexico) and RCTV (Venezuela).

Disney

2002 was the year of the toon debut for Walt Disney Television Animation and Walt Disney Television International. Launched on ABC in January, Teamo Supremo has maintained a respectible 1.6 rating with the two to 11 set, with Kim Possible and Fillmore garnering respective 2.5 and 3.4 ratings with kids six to 11 since their September launch. Internationally, the three series have enjoyed terrestrial sales success in South Africa and the U.K., with Kim Possible netting additional sales in Belgium and France.

Millimages

Building on the marketing foundation it laid with the October 2001 launch of Millimages USA, the French prodco strengthened its distribution network in 2002 with the setup of Millimages UK. The company also picked up new assets in different media – notably German toon studio Toons ‘n Tales (Jasper the Penguin) and documentary producer Gedeon Programmes – and its slate grew with six projects in production this year: Corneil and Bernie, The Way Things Work, Fire Quest, Pigeon Boy, Jasper the Penguin and Planet Grabo.

TV-Loonland

Despite the international broadcast and production downturn, the German-headquartered prodco had a record number of projects in production this year with Pongwiffy, Dragon’s Rock, Something Else, Metalheads, The Cramp Twins (series two) and feature film Heidi. TV-L sewed up many broadcast deals for its existing library in Asia, Europe and Latin America, as well as securing a stronger foothold in the lucrative British home entertainment market by upping its 29.9% stake in DVD/video distributor Metrodome Group to 54.18%.

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