The year 2000 may well go down in history as the pinnacle of merger-madness. Right before the turn of the century, the world’s largest entertainment company was formed with the US$167-billion Time-Warner/AOL deal, followed by Viacom’s merging with CBS. Meanwhile, over in Europe, U.K.-based Carlton Communications’ marriage to United News and Media consolidated overseas interests considerably. The chain of big fish devouring both big and little fish, arguably launched by Disney’s US$19-billion purchase of ABC in 1995, is still underway today.

The resulting widening of the gap between rich and poor has left a few vertically-integrated media machines at the top with the ability to spin their kid properties into virtually any media in-house. At the next level down, one finds a cluster of mid-tier property owners desperately trying to snap up smaller media companies and become integrated so they can orchestrate their own platforms, or form partnerships allowing them to compete with the in-house synergies of the giants.

Hans Vriens, member of the board of sales for Munich-based EM.TV & Merchandising, which has been on an acquisitions binge of late, is fairly blunt. ‘Do we have an advantage? Yes. We have an advantage because we had a thought, and the thought is called bridging media and industry.’ Vriens says EM has created an empire by giving property owners the chance to add value to their creations by branding under EM’s Junior umbrella, rather than signing individual properties that might not have as high a Q factor among kids and adults.

EM.TV owns worldwide rights to the majority of its properties, which include Rainbow Fish, Tabaluga, Twipsy, and Pippi Longstocking. EM doesn’t always get all worldwide rights to a property, but most often it retains the majority of TV and merchandising rights in German-speaking territories, Canada, the U.S. and Australia. In rare cases, such as Sesame Street, EM acts as a licensing agent only. Currently, the Junior umbrella represents hundreds of different properties, and its library houses a total of 30,000 episodes.

‘What we’re doing is taking a pure media property and leveraging it over a number of industries,’ says Vriens. ‘This is nothing new, of course, Disney has been doing it for 30 years. However, nobody did this before when you don’t own all property rights.’

EM.TV has made a number of acquisitions since January besides the property-rich Jim Henson Company. Along with Hamburg-based mail order company Otto Versand, EM acquired a 40% stake in myToys.de, which will be transformed into a new e-commerce toy platform called myJunior.de. Also, in January, it acquired half of Israli-based Talit Productions, in March, it purchased 50% of Formula One, and in May, EM entered into a 50/50 joint venture with Barcelona-based publishing company Grupo Planeta.

Some of the company’s upcoming plans include a game site produced by the Jim Henson Company called Muppetworld.com, launching this summer, and the development of JuniorWeb, a kid Web portal that only links to Junior-based property sites. Eventually, all of the JHC properties will fall under the Junior umbrella.

For companies with kid properties looking to launch significant licensing programs, the need to cover all these bases is illustrated by looking at the synergy strength in the vertically integrated competition.

Right now, Time Warner is using just about every kid-targeting division it has to build a solid platform for the relatively new Powerpuff Girls property. This year alone, The Powerpuff Girls will be stripped daily on Cartoon Network, a special Powerpuff area will appear on CartoonNetwork.com, two videos were just released by Time Warner Home Video, in-store displays showcasing a variety of Powerpuff wares will launch at Warner Bros. Studio Stores (as well as Target and Wal-Mart), and new titles will come out from Warner-owned DC Comics. And that’s not to mention a publishing program heating up with 15 recently published Golden Books and new titles planned by Scholastic.

The synergy doesn’t stop there. A Kid Rhino music album called Heroes and Villains will debut in July with support from a number of Time Warner levels, says Kid Rhino VP Carol Lee. Plans include teasers on the two Powerpuff videos, sampler CD giveaways through a Cartoon Cartoon off-channel tour across the U.S. this summer, a network giveaway promo called ‘Powerpuff Powerstuff,’ advertising on the TeenPeople, ChickClick and Gurl Web sites, a national TV campaign with spots on MTV, and a broad consumer print campaign including Teen People, Spin, Sports Illustrated for Kids, DC Comics and Warp magazine. A music video is also being developed.

In a similar manner, Time Warner will support the Halloween direct-to-video release of Scooby-Doo and the Alien Invaders across all relevant divisions (see ‘Scooby tightens his grip,’ May 2000, page 31). ‘It is one of our strengths,’ says Cartoon Network VP of promotions, sales and marketing Phyllis Ehrlich. ‘We really have a strong team of promotion professionals, and we all see the value of working together and bringing combined strength to the marketplace.’

Although the kid biz is more challenging than ever for licensors without the vertical integration of a Time Warner, don’t discount them yet, say execs at mid-sized companies. They say while the merger mentality is making it more difficult to get eyeballs on their properties, it is also causing smaller prodcos to be more clever in their approaches to licensing.

‘It certainly is more difficult today, I think, than it was five years ago,’ says Jeanne Olson, senior VP of sales and marketing at Texas-based Lyrick Studios. ‘Not impossible, but it requires people to sit and think hard. If they really believe in a property, how are they going to get it in front of the consumer, and what partners do they need to make it happen?’

Olson says one of Lyrick’s strategies is to be a technological leader, and launching its inaugural Barney DVD last year gave Lyrick a whole new platform on which to introduce Barney to kids. ‘I think we have to work harder at getting our properties in front of people since we don’t have a television network,’ she says. Combating that problem was the impetus for creating a Barney stage show, and Lyrick now has one portion of its entertainment division dedicated specifically to the touring costumed events.

So far, the approach appears to be working. This fall, Lyrick is introducing new fashions for its Barney for Baby line from Celebrity International and Haddad. Lyrick is also launching a new DVD called Come On Over to Barney’s House in August, and a party goods program will be launched with American Greetings this summer. Finally, Lyrick is expanding its publishing division with a new book series based on Humongous Entertainment characters (nine books) and a series based on Little Suzy’s Zoo (six books for 2001).

Although the amount of backing for a property like The Powerpuff Girls is enormous, mid-tier companies like Toronto’s Nelvana, The itsy bitsy Entertainment Company and HIT Entertainment say their approaches to vertical integration and synergy are similar, if on a smaller scale. The strategy here is to do what you can do well in-house, and when you can’t do it yourself, find a great partner who can help you achieve mutual goals for the property.

‘I think the thing about these companies that have merged is they really don’t focus a lot of their energies on young kids stuff. Certainly with EM.TV’s merger, I think people are starting to understand that the preschool market has great value and as a result, things are happening,’ says itsy bitsy president and CEO Kenn Viselman.

Itsy bitsy is helping gain visibility for its properties via programming blocks sponsored by Hasbro airing five days a week on the Fox Family Channel. Viselman says he sees this as the wave of the future for smaller property owners, but concedes it is risky.

‘Nobody really is a partner. Nobody’s taking on the financial risks, and nobody’s really giving pieces of the back-end to make it work out properly. What we’ve really tried to do is find a scenario where we could all participate and all profit if it became successful.’ Viselman says he looked at licensing the block differently than that he would individual shows. Products will be branded under the ‘It’s itsy bitsy time!’ label, similar to EM.TV’s Junior brand umbrella, which Viselman sees as less of a risk for the licensee who doesn’t want to work with individual, relatively unknown properties. As well, itsy bitsy is continuing to develop fresh properties. A slate of new programming is being produced for Webcast on itsybitsytv.com and broadcast on TV starting late this summer.

Another platform-building strategy, if you can pull it off, is launching a branded block on a pubcaster that reaches almost every U.S. household. Toronto-based Nelvana managed to do it by offering PBS ‘a terrific deal’ when it came to licensing fees, says John Wilson, PBS head of programming. Wilson adds that Nelvana’s book-based series were a perfect fit for PBS’s mandate to provide quality, educational programming for kids. The Saturday morning block, called Bookworm Bunch, debuts in fall 2000. ‘You just don’t get better real estate from a broadcaster,’ says Sid Kaufman, executive VP of worldwide merchandising, adding that Nelvana will move slowly into licensing and merchandising once the block has had some air time.

In March, Nelvana announced the creation of Nelvana New Media, a new division focused on developing new applications, products and delivery channels for Nelvana properties. In the publishing realm, Nelvana acquired California-based Klutz Publishing in March and plans to integrate it into Nelvana’s consumer products division.

‘We’re getting good feedback on how we’re positioned-you go to retail and you exhibit some flexibility, and they’re very, very happy to have another source for good properties,’ Kaufman says. ‘Obviously you get blocked out of some things. We’re not doing the US$100-million marketing programs that are out there for movies and for other people who are aggressively marketing their properties.’

He adds that for companies that are smaller than Nelvana, with virtually no vertical integration, it’s even harder to launch a property. ‘It’s tough today for anybody to consider making money on an animated series because of economic change, because license fees are down. It’s becoming more and more difficult to get product placed at retail as a licensor, and it’s extremely competitive for fewer slots-it’s constrictive on everybody.’

Another mid-sized company, Montreal’s Cinar, is still moving forward into the educational market to build platforms for preschool properties like Caillou, despite having its stock frozen last March because of fraud and financial mismanagement allegations. Cinar Education includes publishing division Carson Dellosa and recently acquired Twin Sisters, a music publishing company. Dan Tierney, VP of business development, says Cinar went in this direction because it was a natural fit with the company’s mission to produce high-quality, nonviolent children’s programs.

‘One way we can market Cinar Education is by delivering learning content across different media. We call it a cross-media approach, and we think that might be our leading approach in international markets. This is integration. I don’t know about vertical or horizontal, but we’re not just doing videos, and we’re not just throwing them out to the public,’ says Tierney. He adds that it also helps to look to a different retail market to grow a property, such as the Christian bookstore market.

Plans for the near future include the creation of a series on both broadband and TV with U.S.-based Lightspan.com, in which Cinar is an investor. Tierney wants to see the educational portal for grades kindergarten through 12 become ‘the Yahoo of education.’ Another initiative is to create a pre-kindergarten portal for caregivers featuring day care curriculum store High Reach Learning.

HIT Entertainment CEO Peter Orton says his company promotes properties like Bob the Builder and Kipper through its own tenacity. Unlike some other companies, he says, HIT deals directly with licensees and has the ability to exploit its properties through its own video, publishing, licensing and merchandising divisions.

Speaking of the U.S. market, Orton says there’s been an explosion in the number of hit kid programs from the U.K., making it easier for others to follow. But he stresses that a company must control at least some of the publishing, licensing and merchandising and if possible, the distribution-otherwise, it is looking at certain failure, especially if it’s leaving the property in the hands of licensing agents. Orton says HIT’s plan of attack is to vertically integrate up-from programming through to licensing and merchandising. HIT started the process by launching a U.K. licensing division in 1998, followed by an L.A. office in 1999.

One company that has been more or less forced to go the route of forging platform alliances and leveraging its properties to keep afloat, mainly through licensing and merchandising, is Children’s Television Workshop. ‘The not-for-profit status in our mind does not make a difference. We are facing the same challenges our for-profit brethren are facing,’ says Gary Knell, executive VP of operations at CTW. Knell says the solution for CTW is really two-fold.

In order to continue getting eyeballs on its programming, CTW must build stronger partnerships with companies that are integrated, as it did by hooking up with Viacom-owned Nickelodeon for the Noggin educational kid channel joint venture launched last year. The second thing that Knell says must be done is to continue working with major licensing partners such as Sony, Bertelsmann and Mattel.

‘We’ve been able to build a cadre of closely aligned companies that share our values and want to help us grow our properties as long-term brands-which is key to managing your way through the competitive world of mega-merged companies,’ he says.

Knell uses Dragon Tales, a co-production with Columbia TriStar, as an example of the direction in which he would like to see the company continue to move. He says the partner relationship works much like a company that is vertically integrated: Where CTW may be better at merchandising, Columbia TriStar may be better at home video distribution.

For 2000, a licensing campaign is underway with Hasbro and Toys `R’ Us, and CTW recently announced that Random House Children’s Books will publish a 14-book Dragon Tales series. CTW is also moving into food licensing, recently announcing a partnership with cookie manufacturer Keebler to produce healthy snack food products for children. As well, CTW is looking to find another platform for its properties in Sony PlayStation games.

The securing of platforms and their effective use is becoming mega-important to licensees themselves, the ones who are taking the ultimate risk with new properties.

According to Kirk Bloomgarden, chief executive of U.K.-based Copyright Promotions Licensing Group, property owners must have an integrated platform that includes media, merchandise and promotions-given the competition. CPLG was recently granted U.K. rights to Viacom Consumer Products properties and represents other entertainment majors such as Lucasfilm, Twentieth Century Fox, MGM, Sony and Sega.

‘Particularly in the preschool area, there are so many properties that are coming out of small operations. As the properties get to an explosive or bigger range, they do need to secure partnerships or third-party relationships with bigger players who can help them take it to the next level,’ says Bloomgarden.

Landoll Books director of licensing Rick Mallow, on the other hand, maintains that integrated platforms come second to the integral quality of a property. ‘It really isn’t the size of the company for us,’ he says, ‘it’s the strength of the property.’

Mallow says for a licensee, although strength of support for a property via promotions and cross-divisional synergy is important, there are other considerations such as timing, whether the merch will make it to the rack at retail, and what other licensees are working with the property. For example, since Hallmark is doing a program for Arthur, it makes working with the property more attractive. Currently, Landoll is considering working with Nelvana down the road on some of its newer properties.

Of course, the best way to kick off a high-profile merch program is to land a high-profile master toy, says Mallow. Once you have Hasbro or Mattel in your stable, signing other licensees, such as Landoll, is a bit of a walk in the park. But like a lot of advice in the field, it’s easy to say and hard to do-and typically comes back to real estate considerations…. Platform, platform, platform.