Nelvana’s US$40-million deal to produce six animated series for PBS’s new Saturday morning kids block is part of the company’s strategic plan to increase shelf space for its proprietary projects, gain a hold over the U.S. preschool market, and increase merchandising opportunities. Another recent deal, the North American acquisition of Japanese series Cardcaptor, Nelvana’s first anime foray, also bodes well for the strengthening of the company’s merch plans, as the girl-centered series’ premise dovetails nicely with Pokémania.

Under the terms of the three-year PBS deal, Nelvana will produce six book-based series for the public network’s fall 2000 schedule, with PBS committed to commission a minimum two of the six series as daily strips (40 eps) for its weekday PBS Kids Ready To Learn service in subsequent seasons. PBS has a penetration rate of 99% of all U.S. TV households.

All of the new series for PBS are based on already successful literary properties: Maurice Sendak’s Seven Little Monsters, in which a group of 10-foot-tall monsters teaches social skills and problem solving; William Joyce’s George Shrinks, featuring a three-inch-tall character who celebrates the power of being small; Rosemary Wells’s Timothy Goes to School, chronicling the dilemmas of a bashful five-year-old learning the importance of self-confidence; Don Freeman’s Corduroy Bear, starring an urban child discovering the city; Michael and Betty Paraskevas’ Junior Kroll and Company, teaching young kids to solve problems and recognize their accomplishments; and Andrea Beck’s Elliot Moose, a combined live-action/puppetry/animation project featuring characters who sing songs, tell stories and play with toys that magically come to life.

‘Over the past few years, we identified a need to strengthen our shelf space, and this initiative was a result of that effort,’ explains Nelvana co-CEO Michael Hirsh. ‘The first building block was our Teletoon deal (20% ownership of Canada’s animation station)-by investing in Teletoon, that gave us a certain amount of output in Canada-then, our deal with CBS for the Saturday morning kids block and our output deal with Teletoon in France,’ he says. ‘Now, the PBS deal gives us a strong U.S. home for our programming and a large production block.’

With Nelvana serving as merchandise licensing agent on four of the six character brands, Hirsh adds that the PBS deal is part of a long-term plan to build strong character brands with sustainable merchandising and ancillary revenue potential. Nelvana has a percentage of rights in the remaining two properties-Corduroy Bear is being merchandised with Viacom and Timothy Goes to School with American company Simple. PBS is also participating in merchandising revenues.

Projections for Nelvana’s 1999 merchandising revenue are in the US$4-million range, as compared to the US$2.5 million generated last year. With second quarter results in, Nelvana’s year-to-date merchandising revenue increased 82% to about US$1.5 million, from US$870,000 in 1998, and `99 publishing revenue reached about US$4 million for the six months ending June 30. The benefits of the PBS deal are anticipated to start in 2000 and 2001.

The new series will be a mix of co-productions with Asian and European partners, says Hirsh. Financing will also come by way of U.S. corporate sponsors eager to reach the preschool market, as well as international sales. Nelvana holds worldwide distribution rights, outside of the U.S.

Nelvana’s two-year agreement with CBS to fill the network’s Saturday morning cartoon schedule is up for renewal next January. The deal called for the production of six animated series, worth more than US$18.5 million in budgets. ‘We are having conversations with them; we are exploring how to continue that relationship,’ says Hirsh regarding the potential of renewing the agreement.

Nelvana also acquired North American TV, home video distribution and merchandise licensing rights to Cardcaptor, a 70-ep Japanese animated series produced by Kodansha. Geared to girls ages six to 11, it now airs on NHK, Japan’s public television network. Nelvana will retain 100% of all broadcast license fees and merchandise licensing fees in the U.S. and Canada.

The company plans to deliver at least 215 proprietary production episodes in 1999, which is a 15% increase from last year.