Just a few years ago, if you told a retailer that you had a hit show on YouTube and were looking to take it into licensing, chances are you would have been met with more than a few blanks stares—maybe even a chuckle or two. But the most likely response would have been, “Come talk to me when you have a real TV deal.”

Fast forward to 2016. With the launch of YouTube Kids last year, the platform has become a major children’s entertainment player in this digital- and mobile-first era. Countless production companies the world over have capitalized on YouTube’s viral nature and its lightning-quick speed to market in terms of content distribution, which can also make for a faster track to retail. In fact, more and more retailers and licensees are coming to realize YouTube-driven licensing programs in the kids space are no longer child’s play.

“One of the things we know about kids is they like to watch things over and over again, and that repeatability online is obviously unlimited by any of the constraints of traditional TV,” says licensing industry analyst Ira Meyer. And unlike traditional TV, where programs come on at a certain time and programming directors control when and where the show is aired, YouTube lets kids become the programmers. Whether they’re watching in the car, at home or in the grocery store, all that extra screen time spent with their favorite characters opens up a whole new realm of possibilities, Meyer contends. “It helps build affinity for characters and all that good stuff (i.e. merch programs) that goes along with it.”

“[Kids] like to watch things over and over again, and that repeatability online is obviously unlimited by and of the constraints of traditional TV”

– Ira Meyer, licensing industry analyst

Stephanie Wissink, managing director and senior research analyst at Piper Jaffray in Minneapolis, says kids entertainment companies are building programs via YouTube in two ways—they’re either developing content for a digital audience, usually short-form or meme-oriented snippets, or they’re repackaging library and legacy content for the platform in an effort to revive a brand and re-engage consumers. (She notes that the latter is probably not the best way to ultimately develop a brand.)

According to Wissink, one of the benefits of YouTube is that all the material that gets left on the cutting room floor when creating a full TV series or movie can be repurposed to suit the site’s strength in showcasing short-form content. What once was a sunk cost can now be turned into something that can replace broadcast advertising in a lot of cases.

“That content for the superfan is even more entertaining than the content the mass market sees,” says Wissink. “Things like behind-the-scenes clips and director’s cuts that didn’t make the final product—that type of stuff can actually be more viral than an episode itself. You might be able to drive as big a digital following from something that goes viral, and the really savvy media companies are figuring this out.”

In addition, another benefit of building an IP through YouTube, as opposed to the traditional route, is that its open-ended nature allows for various entry points. Bloggers can be very influential in terms of their reach, and the platform lets consumers be a part of the content-creation process. “You can see this trilateral element in a brand like Shopkins in one single search,” Wissink says.

Shopkins is arguably the poster child for YouTube-driven programs, where the IP launched on the platform and became a strong licensed brand at retail in fairly short order. The collectibles line from Australia’s Moose Toys launched in July 2014 and its sales have surpassed more than 250 million units at global retail. The mini grocery-themed toy brand also now has 155 licensees worldwide, 20 major categories covered and 11 licensing agents globally.

So just how did Shopkins get to where it is today? Belinda Gruebner, marketing director at Moose Toys, explains.

“To have taken the traditional path would have meant that we’d have been working two years in advance on a TV series to support the Shopkins brand,” she says. “Because it’s a collectible, and sometimes it’s unknown how long collectibles can stay within the market, we decided that we really wanted to explore what was becoming a great trend of consuming short-form content on an on-demand basis.”

She admits it was a bit of gamble even just two years ago. However, it allowed Moose Toys to get Shopkins content to fans quickly, entertain them, and most importantly, incorporate fan feedback into the first animated web series.

“By the time we placed two to three webisodes on YouTube, we were able to make sure the next ones we launched took consumer feedback on-board, and we were able to evolve the web series very quickly. Our fans have played a huge part in how our web series came to be and the frequency of how often we have webisodes,” Gruebner says. “We were able to do that with a lot less cost and investment, and it also allowed us to be quicker to market than the normal traditional path, where you lead with a TV series.”

Moose Toys originally started by releasing a 1.5-minute webisode per month, then it moved to producing two new eps a month, and it is now looking at releasing new eps weekly.

The webisodes and the licensing program took off in tandem. As the toys were becoming more successful and the series more popular, Moose began pivoting Shopkins from being solely a toy brand to a lifestyle brand, working very closely with key partners to develop a blueprint for ancillary expansion. Additionally, the YouTube content helped Moose to determine which Shopkins characters were really striking a chord with kids and would be more likely to drive sales of licensed products. “You can’t really get that [kind of information] from the first one or two seasons of a toy range, especially when there are so many characters to collect,” Gruebner says.

Having identified a universal play pattern—in which kids imitate their parents as they shop for groceries—Moose knew the Shopkins brand had big potential to be more than just a toy line. But as with any new brand entering the market, and especially given there was no major TV presence for the property, Gruebner says retailers were a bit more cautious at first. However, after two seasons of remarkably strong toy sales, and viewer growth on YouTube, the Shopkins brand was able to expand its retail presence, moving next into apparel after toys.

“We found after Shopkins’ second season in the market, we were seeing a huge demand from key retailers globally, driven very much by the US,” she says. “North American retailers are a lot savvier now in terms of recognizing the impact the digital space is having on children. They understand the amount of screen time children are spending on tablets, and dual-screening with YouTube means there’s a huge opportunity to tap into fan-based material.”

Another company that recognized the power of YouTube and its viral video potential was Bromelia Productions in Brazil. However, Juliana Prado, the co-creator of Galinha Pintadinha (Lottie Dottie Chicken in English-speaking territories), confesses it was a bit of a “happy mistake.”

“We were trying to produce a low-budget show in Brazil around 2003/2004—something with musical clips—and we tried showing it to some producers and broadcasters,” he says. “We uploaded it to my personal YouTube account for a meeting so a few people could see it. It was sort of a side project for us. We kept doing other things, and then six months later, we had more than 500,000 views of that single animated video clip, which was at the very beginning of YouTube.”

After doing some research and discovering Galinha had a significant audience, was approved by parents and had fans who were itching for more, Bromelia made a DVD with 13 video clips and starting selling it online. Shortly after that, home video partners came on-board and produced a second DVD in 2011. By then, Galinha had the number-one YouTube channel in Brazil, and Bromelia realized it no longer just had a loveable character, but rather a brand. At that point, the prodco’s Galinha licensing program really began to take shape in Brazil, with the help of Sao Paulo-based
licensing agent Redibra.

“We were producing content for the YouTube channel, as well as making DVDs and apps, so it was a paradigm that we broke here in Brazil with the licensees,” Prado says. “It was a Brazilian brand that was not on TV. It was something very different for them.”

Like most brands, Galinha got its merch start with toys, followed by categories like party goods and publishing. And now the YouTube-based IP has more than 60 licensees in Brazil across apparel, personal care, footwear, stationery and hard goods—not to mention real licensed chicken eggs.

At the moment, Bromelia is translating its digital content into English and Spanish and intends to also dub it into Italian, French, German, Japanese and Chinese. It also plans to launch four international Galinha YouTube channels by July and to have additional ones open by year’s end. And to help grow the brand’s licensing presence, Bromelia has signed agents in Mexico, Spain and Argentina. Furthermore, the production company is also working on a 52 x 11-minute Galinha series to launch in Q1 2017. Prado says the longer eps won’t be as musical as the current Galinha content and should be easier to translate into other languages. Bromelia will air the content on YouTube and also look to distribute it globally.

“We want to break outside Brazil,” Prado says. “Everything has gone very well. We’re working hard to become a classic character, and I think we’re getting there.”

Like Gruebner, Prado recognizes the value of fans watching on multiple screens for the brand. For example, while Galinha was born on YouTube, it’s also available on Netflix in Brazil, not to mention that its four DVDs (65 video clips combined) have now sold more than two million copies. “All these screens work to build awareness and the licensing program,” he adds.

While it’s possible to rattle off a list of other YouTube-backed licensing success stories, few stand out more than Talking Tom. The property created by London’s Outfit7 first launched as an app in 2010 and then headed to YouTube shortly thereafter. It now has more than 50 global licensees and a 52 x 11-minute TV series.

Outfit 7 went directly to YouTube to launch the full Talking Tom series

Iza Login, deputy CEO and co-founder of Outfit7, says the IP originated in the mobile world because that distribution model allowed the company to reach the largest number of fans worldwide. “As you can imagine, our fan base is extremely tech-savvy, so we want to be where they are and extend the brand as far as we possibly can,” says Login.

Thanks to the popularity of the app franchise, the licensing program had legs before the TV series launched on YouTube. However, like the aforementioned examples, Outfit7 ran into some retailer resistance.

“Most branded entertainment continues to originate from traditional distribution routes, but with the digital explosion via Netflix, Amazon and others, retailers are starting to slowly come around to emerging distribution platforms,” she contends. “It has become a bit of an educational process, and we still have a long way to go to further open retailers’ minds to YouTube entertainment distribution.”

Login adds that thanks to Outfit7 fully funding the production of Talking Tom, and therefore having full creative control, the company is able to cross-promote the TV series via its apps and have ongoing dialog with its fans worldwide. “Feedback from our fans is in real-time and constant. We take feedback seriously and act on it,” Login explains.

It’s important to note, she continues, that just because a property comes from YouTube, it does not mean its production values won’t measure up to traditional linear broadcast shows. “It’s this quality that ultimately supports consumer products,” she says.

And as the franchise continues to grow, Outfit7 is constantly on the lookout to expand the licensing program with global retail partners. “Currently, we are keen to add to core categories such as publishing, toys, apparel, back to school, as well as one of our favorites—food and beverages,”
she says.

Then there is the otherworldly tween girl-targeted music and fashion brand SpacePOP, from L.A.-based Genius Brands International (GBI). It is one of the latest IPs set to launch on YouTube and already has 15 licensees on-board, (GBI expects to announce a master toy partner soon.)

When asked why GBI decided to launch the brand on YouTube, Stone Newman, the company’s president of global consumer products, answers with an example from his personal life.

While recently at his home with a colleague in the kids business, Newman asked the individual if he wanted to see something crazy. He obliged. So Newman then asked his six-year-old son, who was sitting on a beanbag chair with his head buried in an iPad, to rank his top three places for finding TV shows. The answer invariably came back as: YouTube, Netflix and Disney.

As a company that prides itself on being at the forefront of the digital evolution, and armed with the knowledge that YouTube is the number-one place girls eight to 12 go to look for music and is also the most popular content platform for kids that age, Newman asks, “Why would we not go where our consumer audience is?” He adds, “My team recognized there was a significant white space for tween girls and there hadn’t been anything for them since Monster High.”

With that in mind, GBI devised a strategy for the brand that included closely integrating content and consumer products launches.

“Everything we’ve done is focused around YouTube. We have aligned very closely with them here in L.A. All our packaging will have the YouTube logo and call out the SpacePOP YouTube channel,” he says. “We feel this is no different than, say, 1984, when kids were watching their favorite show on NBC, CBS or ABC at 10 a.m. on a Saturday morning. Except it’s 2016, and now they are getting their content on tablets, smartphones and smart TVs, and they’re living in the YouTube landscape. We’re embracing the market.”

In fact, GBI’s strategy for SpacePOP, which features music from artists like Fergie and launches June 20 with the first of 108 four-minute eps, is very deliberate. The first product hitting retailers on July 26 is a 224-page middle-grade novel from MacMillan. On October 1, the larger consumer products program launches at mid-tier US department stores and tween specialty retailers before heading to mass-market retail in December and into Q1 of 2017.

With two eps being released per week, there’s enough SpacePOP content to last through the 2017 back-to-school season, and Newman says GBI has already committed to producing additional content.

One of the reasons SpacePOP has been so successful in drumming up licensee and retail support pre-launch, Newman contends, is because the property is coming from a position of strength. It knows where its consumers are (YouTube) and GBI is confident it will be able to market the brand and successfully build an audience.

“That’s the most important thing, because anybody can put up videos on YouTube. The challenge is to break free,” he says. “It’s not easy. But we have a sound marketing and brand-building strategy, and we’ve been able to paint a picture of what it will look like.”

GBI has already lined up 15 licensees in advance of SpacePOP’s YouTube debut

Despite the success some brands have had breaking into licensing with their YouTube-backed properties, the burning question remains—is this business model here to stay, or is it just another flash in the pan?

Wissink believes it is definitely here to stay, in part because platforms like YouTube and Netflix are developing original content. And then there’s the whole digital community component of evolving a brand, which she feels isn’t going anywhere.

“Very few people are sitting down at a computer and watching YouTube videos. The bulk of viewership is done via mobile,” she says. “The other thing content developers need to realize is the screen is very different when you’re putting kids in front of a 96-inch flat screen to watch Paw Patrol versus a short three-minute YouTube video you watch on your smartphone. It’s a very different visual experience.”

On the other hand, Meyer argues that the YouTube-backed licensing model will only be around until “the next big media thing happens,” which will force content producers to adapt in terms of how they distribute their wares and get compensated.

“Content producers aren’t limited to 22 minutes anymore. Ultimately it will come down to those who really understand those media and develop programming that’s not going to resemble what it is today all that much,” reasons Meyer. “That said, the story will continue to be the cornerstone of content—no matter what. And you need likable characters kids can relate to, and all of the classic play patterns still have to be there—whether it’s dress-up, construction stuff, adding exercises or positive social values. The core of what it is will remain very consistent. It’s the format and delivery mechanisms that are going to change.”