Q&A: Jeffrey Dunn plots HIT’s course for the next five years

Heading into MIPCOM with a stronger development team and the goal of hatching new IP, HIT Entertainment CEO and president Jeffrey Dunn brought KidScreen editor Jocelyn Christie up to speed on his plans for the indie preschool specialist. Just six months into the job, Dunn is putting his 13-plus years of experience at Nickelodeon, where he launched its international consumer products business and co-created Noggin, to bear on planning the company's next phase of growth.
October 1, 2008

Heading into MIPCOM with a stronger development team and the goal of hatching new IP, HIT Entertainment CEO and president Jeffrey Dunn brought KidScreen editor Jocelyn Christie up to speed on his plans for the indie preschool specialist. Just six months into the job, Dunn is putting his 13-plus years of experience at Nickelodeon, where he launched its international consumer products business and co-created Noggin, to bear on planning the company’s next phase of growth.

How would you describe HIT’s current market position?

I think we are the largest and the best of the independent kids producers.

What would you say the company’s current strengths are?

We have great global heritage properties. We have a terrific licensing group, and we have a pretty cool network investment in PBS Kids Sprout.

Looking back at the past five or six years, what would you say has been the biggest area of growth for HIT?

Factually, it’s the growth of Thomas and Friends into a mega-business. Thomas has become the number-one preschool boys brand. In 2003, he was the third-largest brand in the company – today, he’s the largest.

Where would you like to take HIT in the next five years?

We want to be more brand-driven. We have great properties, but we haven’t thought about them as brands so much as TV shows. I’d also like to see us have more properties, and I suspect we will be even bigger internationally than we are today.

Also, our channel investments will be in very different places, so Sprout and JimJam will be real networks. And in five years, I think we’ll be leveraging our CP expertise to be a licensing player beyond our own business.

How do you plan on getting there?

1.We’re going to reorganize and add a brand management function. So we’ll see actual brand managers who have responsibility for a property across all lines of business. We’ll create P&Ls and measure the profitability of brands going forward. We’ve got a lot of big anniversaries coming up (in 2010, there’s Thomas’s 65th, Bob’s 10th and Barney’s 25th), so there’s a lot of good stuff to be planned.

2.In terms of adding more properties, we’re significantly increasing the size of our development team. HIT has been more of an acquisitor than a developer of IPs. While we’re still open to acquisitions, we’re going to put energy and effort behind building our development capabilities. That involves a bigger development budget and more people in London and the US. We haven’t been doing much in the way of US development. Karen Barnes, the producer of Barney, is responsible for US development, but it hasn’t been a big priority for her. We’re going to make it one and build an incremental team around her.

3.To enhance our international footprint, it’s about potentially opening up some offices beyond London. We’re focused on countries that make sense for us. For example, France is taking on Thomas for the first time, so that country makes sense. We’re also looking at putting some more energy and resources behind Spain, and we’re going to be doing a bunch of things in Eastern Europe.

4.Sprout and JimJam are both relatively new networks, but all the news is good on both of them. Sprout is doing well and is ahead of plan, gaining a reputation in the preschool marketplace. We’re going to be working with management of both networks to see how we can grow them as quickly as possible into more widely distributed businesses.

5.Lastly, to leverage our consumer products expertise to third parties, we’re looking at opening offices in countries that make sense for that business, but we will also probably acquire some licensing companies.

What do you think are the biggest challenges you’ll face when it comes to meeting these goals?

The biggest challenge facing everyone right now is that we don’t know where the economy is going. I’m sure we’ll learn a lot this quarter and holiday season. The preschool business is strongly underpinned by licensing and merchandising and we suspect that we’ll be fine in the fourth quarter because it’s also a business driven heavily by big-box stores, which tend to do reasonably well in tough economies. And in a tough economy, people tend to spend on their kids first, themselves second. Kid spending is the last spending they give up.

How do you future-proof your business?

You look at the adjustments that you can make, and the timing of your investments, if your economy turns difficult in the short term. We are looking at all the things we can do that will allow us to delay or not invest as much if the economy does head into a downturn.

Where do you see the most potential in the existing HIT portfolio?

There are three big pieces of potential. One is Thomas, which we can take to a whole new level if we start treating the property as a brand. It can grow, particularly if we look at what we can do across platforms for the 65th anniversary.

The second is Barney. I think there are ways to reinvent and refresh Barney to make it more contemporary – almost reinterpreting it for a new generation.

And the last one is Angelina Ballerina. We have now totally reinvented Angelina. It’s got a whole new CGI look, and it’s really fantastic.

What constitutes ‘making sense’ when it comes to assessing acquisitions opportunities?

It’s all about bringing value. We believe we know how to take character-based properties and do well with them. We’re looking for properties that we think we can do a better job on than the companies that own them. Sometimes it’s not just a property, but a whole company that is for sale. And we’d go after it if the opportunity was a good fit for our company.

Are there any plans to expand your preschool target up or down the age scale?

Today, we are richly represented by boys, but our girls properties are less developed. We would like to have a broader demographic portfolio, and we’re starting by going after girls in a more active way. We’re also thinking about whether to age up or down.

Will HIT continue with its third-party distribution business?

It’s been very successful, and I think we’ve done a good job. We’re looking to do more. It’s tough to be able to afford a lot of infrastructure in this business, and we’re lucky that we have such large-scale properties because it allows us to maintain that infrastructure, so we’re delighted to work with other producers and help them realize the potential for their properties.

You recently changed your home entertainment partner in the US. What approach is Lionsgate taking, and how are these plans projected to grow the business?

Lionsgate understands the catalogue business well, and it’s been a big change for us going from a big event-based partner to a more catalogue-based one. Having said that, we’re planning to do a lot more in the way of original home videos. The plan that we’ve developed with the company calls for us to be doing more than one new original home video a year for all our brands, which is a whole new thing for us. I also think Lionsgate gets the whole branding thing, so we’re working together to make sure that we’re coordinating our brand play across all our different businesses, and I think that’s something we didn’t do as well with our previous relationship.

With HIT taking on third-party IPs for L&M representation, how do the US and European consumer products markets differ?

Europe isn’t as dominated by big-box players. The US is a more consolidated industry. That’s the biggest difference. The economics are going to be very interesting as we go into this. Historically, the UK’s been very strong, but it’s now starting to face the same economic issues that the US has felt. In general, it’s a much more localized market in Europe, whereas in the US, it’s a national distribution play. So the response to economic tightening is very different country by country – it’s a market you have to address very locally.

What experiences that you’ve brought with you from MTV/Nick do you think will be most valuable to your plans at HIT?

At Nick, I was in all the same businesses – and even more – than I am here. So I have a good perspective on consumer products, which is so key here, and on network investments. None of this is new to me. I also set up Nick International, so that global experience is really valuable here as we move to become more internationally driven. Our business is very heavily concentrated in the US and UK, with Germany and France up there too. I know from my Nick experience that there’s a lot more to the world than that, and we can be much more diversified than we currently are.

Tell me three things most people don’t know about you.

I have more than three million frequent flyer miles. I was named after the inventor of baseball, Abner Doubleday – Doubleday is my middle name. And my secret ambition at some point in my life is to own a gourmet hotdog stand.

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