In a market that is inevitably moving from physical media to digital, Toronto, Canada-based home entertainment distributor Phase 4 Films has beefed up its kids and family DVD sales by taking on non-theatrical feature films to sell into its established North American mass-market retail accounts.

The company’s been on something of a roll over the past year. In fact, in a sales climate that’s in overall decline, Phase 4 increased its Canadian DVD sales by 33% in the first half of 2010.

VP of acquisitions Jessica Labi explains that recent moves to leverage its key retail relationships – forged through its feature film/adult TV DVD business – into growing its share of the kids market started to pay off after experiencing sales success with 2008 animated feature Dragon Hunters.

Phase 4 acquired the CGI film from French prodco Futurikon that’s based on the TV series of the same name and dubbed it into English, using the voice talent of Oscar winner Forrest Whittaker. The company then placed 300,000 reversioned DVD/Dragon Hunter comic book combo packs (US$9.98 each) as a limited-time exclusive offer into Walmart stores in the US in 2009. And since widening distribution to all the big-name North American mass retailers in 2010, Phase 4’s sold 700,000 packs to date.

The company is now actively looking to pick up enough kid-friendly features to release one newly acquired title per month.

So in February, the company will launch Luke and Lucy and the Texas Rangers on DVD, a Belgian film that was a theatrical success in the Netherlands. In this case, Phase 4 dubbed the CGI feature into English, employing the vocal talents of Billy Ray Cyrus – a.k.a. Hannah Montana’s dad. Labi says the extra cost of casting and dubbing is well worth it. ‘Films that are cast-driven do very well,’ says Labi, adding that she expects Luke and Lucy to be one of the company’s biggest animated features in 2011.

‘A lot of animated feature films, which are expensive CGI properties, are from foreign countries,’ says Labi. ‘And we’re looking for high quality, so we often look internationally for really great product.’ To that end, she’s attending KidScreen Summit, MIPTV, MIPCOM and a handful of children’s film festivals to feed the planned monthly release schedule. And Labi is open to receiving submissions in the form of screeners, sell sheets and marketing material, which can be sent to jlabi@phase4films.com. (She says all deals are negotiated differently, but many include royalty-based agreements.)

Phase 4 also actively distributes children’s properties through its North American mass-market retail accounts and has a multi-year DVD deal with Corus Entertainment’s Nelvana Enterprises for existing and upcoming Nelvana IP, including Franklin and Max & Ruby, and an agreement for DHX Media/RDF’s Waybuloo. In the case of Nelvana, the DVD license that originally covered just Canada has generated more than 6.5 million unit sales in that country alone. It’s since been expanded to include US distribution for the first time. And to keep that pipeline full, Labi says she’s on the hunt to pick up US and Canadian DVD rights to more episodic series, especially preschool, as long as they have proven success on air.

Labi says the company is also looking to further expand its North American reach, especially State-side, by placing wholesome, inspirational movies and episodic series in the Christian retail channel. In November, Phase 4 put DVDs of the classic version of Where the Red Fern Grows into Walmart, and the title’s now selling 10,000 units a month, bringing total sales so far to just shy of 100,000 copies.