By Joanna Stephens
A look at how on-demand platforms for kids' content are helping—or hurting?—the children's programming business.
Friend or cannibal? This is the question at the center of the current debate on whether the new online and on-demand children’s platforms are complementary to the traditional linear TV services, opening up new sales prospects and revenue streams—or siphoning off audiences and income, diluting brands and setting a dangerous precedent in terms of unpaid content.
Where you stand in this conversation appears to depend on your place in the content ecosystem. Producers by and large are cautious, worried that, while the new platforms offer more children easier access to their brands, they are also making it increasingly difficult to fund, or be paid fairly for, premium content. Distributors, meanwhile, are more optimistic, seeing digital licensing opportunities as a way to ease the pain caused by the collapse of the physical DVD market.
And broadcasters are also upbeat, despite the recent Bernstein Research study in the U.S. that linked Nickelodeon’s ratings decline with the shift to online viewing in general and Netflix in particular. Andrew Beecham, the senior VP of programming for PBS KIDS Sprout—the first 24-hour preschool destination available on TV, on-demand and online—speaks for many broadcasters when he says, “Collectively, each platform is complementary in maximizing our programming exposure to consumers.”
Put like that, what’s not to like? “The problem of getting paid,” replies Pierre Sissmann succinctly. The chairman and CEO of the French producer and distributor Cyber Group Studios, whose catalogue of 368 half-hours includes such animation staples as Tales of Tatonka, Animalia and Manon, Sissmann believes the new platforms have much to say in terms of building audiences, extending brands and offering children the convenience of watching their favorite content anytime, anywhere, from the beach to the back to the car. For those reasons alone, he says, the online offer will inevitably grow in size and significance.
“But from a revenue point of view, I’m not optimistic about the way the market is developing,” Sissmann adds. “We used to finance our series through home video, but that market no longer exists. And while I’m very happy to see my shows online, somebody has to pay for my content. Right now, that’s not happening.”
Sissmann worries that the current model is also giving consumers “the habit of not paying for content at any early age.” And he makes the point that, while the A-list kids’ producers can afford to see online as an exercise in brand promotion, life is likely to get exceedingly tough for the smaller, poorer creative shops that form the backbone of the children’s programming industry.
AN APP A DAY
Cyber Group’s response to the changing market dynamics is to focus on new forms of content, specifically games and apps. “People are used to paying for apps,” Sissmann observes. “But apps aren’t episodes, so it’s almost like entering a new business.”
Sissmann’s concerns are echoed by his compatriot and competitor Pierre Belaïsch, the managing director of the producer and distributor Alphanim, whose 30-plus animation series are now on air in more than 130 territories. There’s a lot of “paranoia” about the new platforms and their potential for disruption, Belaïsch says, despite the fact that, in France at least, the nonlinear market is currently not that significant in pure business terms.
“But it will be,” Belaïsch adds. “And the one thing that’s certain is we producers must hold on to our rights. Today we may be fighting for peanuts, but the online market is about to explode and, when it does, those rights will have real value.”
The “confusing atmosphere” in which rights deals are currently being brokered is compounded by the lack of reliable measurement tools with which to calibrate value. “We can’t say that 153 kids aged between 4 and 6 were watching Galactik Football at such or such a time on Netflix or Hulu or wherever,” Belaïsch says. “That will eventually be possible, and that will help to give our rights a market value. But at the moment, it’s a tricky and complicated situation.”
Half a world away, in California, Richard Goldsmith, the executive VP of global distribution for The Jim Henson Company, has similarly trenchant views: “For us, the more people who consume our content, the happier we are. But everybody has to realize that content is costly and that top- quality content is very, very costly. So if the networks and digital platforms want to carry quality programming, they need to invest accordingly. Because if they don’t, they’re going to be stuck with B- and C-rate product.”
The funding issue aside, Goldsmith says the online platforms are opening up a range of opportunities for the company, which is currently in discussion with several on-demand services about producing original children’s content. He declines to name names, but points to Amazon’s recent announcement that it is to produce its own kids’ titles as illustrative of the trend.
“My feeling is that the single biggest opportunity regarding on-demand is to complement what the TV networks are doing,” Goldsmith adds. “I believe most on-demand viewing is occurring with shows that kids already know and love. The second opportunity is that on-demand allows children to watch shows that would otherwise not get on air—like library content that already has some profile in the market. And ultimately there’s the opportunity to develop new content specifically for these platforms.”
THE LINEAR EQUATION
Goldsmith is also impatient with the notion that online is killing linear, observing that the networks have been airing shows on catch-up for years without dire consequences. “Frankly, I’m more excited about on-demand than about anything else that’s happening in children’s TV,” he says. “It’s the fastest growing area of our business and it’s creating amazing opportunities for producers, distributors and audiences. But we have to take all this with a grain of salt. Yes, the new platforms are exciting, but traditional TV is alive and healthy and growing. It’s still the engine that powers this industry and will be for a long time to come.”
Claiming that 2011 was KiKA’s best year ever, driven by “record-breaking ratings,” Sebastian Debertin, the head of fiction, acquisition and co-production at the children’s channel, which is operated by the German public broadcasters ARD and ZDF, is certainly not concerned that kids are deserting traditional TV. Given that KiKA’s on-demand service, KiKA, reported “fantastic user figures” over the same period, Debertin is confident that both delivery platforms can exist in harmony.
“VOD is simply not a business yet in Germany,” he says of KiKA’s competition in the online/on-demand space. Germany’s rich free-TV offer means that viewers have little incentive to pay for content, especially when much of it is available free online via outlets like YouTube. “VOD only starts to work where adults have special interests that free and pay TV do not deliver, such as watching U.S. series in their original versions,” Debertin adds. “If the market situation remains the same in terms of free and pay TV, I see no real development potential for VOD services in the kids’ area.”
So how much online viewing do children actually do? Over in France, Gwenaëlle Le Cocguen, the digital director of Lagardère Active’s TV channels, which include the children’s services Gulli, Canal J, TiJi and the Santa Claus channel, reports that Gulli Replay generates around 6 million video views a month across all its platforms (IPTV, website and mobile apps). Sprout, meanwhile, claims 18 million views per month for on-demand, with an average of 5 million to 6 million video starts online.
THE AGE GAP
Differences are also beginning to emerge in what children are viewing across the various platforms. Le Cocguen says that shows aimed at 6- to 12-year-olds are the most viewed online, whereas preschool content is more popular on IPTV. “The screen has a real impact on the way shows are watched,” she adds. “Computers are used more by children on their own, while access to the TV screen remains a parental prerogative.”
Sprout’s Beecham adds, “For VOD, some of our most-viewed titles are programs that have been around a bit longer and are more well known. Online, some shows that are strong both on VOD and linear are also getting play on the site—Caillou and Thomas & Friends, for example—but other, newer titles like Justin Time and LazyTown are getting heavy sampling too.”
As to what age children start to consume media, a study by pediatrician Dr. Dimitri Christakis of the University of Washington found that, by three months, 40 percent of babies are regular viewers of DVDs, video or television; by the time they are two, almost 90 percent are spending two to three hours a day in front of a screen.
Another recent study, from the Kaiser Family Foundation, looking at the role of media in the lives of 8- to 18-year-olds, reveals that “over the past five years, young people have increased the amount of time they spend consuming media by 1:17 hours daily, from 6:21 to 7:38— almost the amount of time most adults spend at work each day.”
This comes as no surprise to Leo Henning, the founder and CEO of the Toronto-based start-up Kidobi, an online preschool destination that creates tailor-made video playlists for children based on their age, interests and skills. “The age children begin to consume screen content is coming way down,” he says. “There are some scary statistics about babies, but we put the minimum age at two.”
Kidobi was born of Henning’s own experience of attempting to find appropriate programming online for his daughter, who was having trouble with counting. What he imagined would be a 20-minute job took him over three hours of searching, previewing, evaluating and assembling. “I found it took me longer to program a half-hour playlist than it took for my daughter to watch it,” he says.
The result was Kidobi, a collective of software developers, designers, researchers and child-development experts whose mission is “to make screen time count.” Henning notes, “At first, people were resistant to the idea that a computer can make reasonable choices for something as important as a child’s viewing. Of course, a computer could never make as good a choice as a parent, but, for most parents, it’s simply not a scalable solution. The sheer volume of content out there makes it unfeasible.”
Henning’s first challenge was to get the technology right; the next was to find programming. “That’s been a huge hurdle,” he admits, explaining that, without deep enough pockets to acquire product, Kidobi has been forging revenue-sharing deals, trawling the MIPTV and MIPCOM content bazaars for quality back catalogues “that haven’t made it over to North America.” He adds, “Now, 18 months later, we feel we’ve gotten to the point where we have enough content to be engaging, grafted on to a system that really works.”
Kidobi, Henning believes, is ahead of the curve—“but I hope not too far ahead”—in terms of the way children’s viewing is going. He believes that, ultimately, traditional TV will inevitably be challenged by platforms such as Kidobi. “Linear works for now, but when the online market matures, it may not,” he says.
In the meantime, he is excited about the reintegration of parents into their children’s viewing experience. With the traditional model, he says, the only parental involvement is the on or off button. Whether the content is good, bad or indifferent is not the central focus: it’s getting “bums on seats.” Online, on the other hand, is a two-way medium, enabling parents to make active choices about what their children can watch and when.
“In the future, it’ll be about what kids and parents want, not what broadcasters want them to want,” Henning concludes. “I think that will change the children’s business in a big way.”
Occupying the same space as Kidobi is another fast-developing start-up, the Los Angeles-based Toon Goggles, which launched in October 2011 to offer prescreened, safe and age-appropriate entertainment programming to children under the age of 13.
“We exited beta in January of this year,” says Stephen L. Hodge, the managing director of the free online channel. “Since then, we’ve been busy acquiring content, securing deals and further developing our apps for mobile devices.” Recent moves include partnering with Techno Source to preload the Toon Goggles app on the kid-friendly Kurio7 Android tablet; teaming up with Toon Boom Animation to develop apps that will allow children to create and netcast their own animations; and adding France’s Millimages and Spain’s BRB to its growing list of content providers. In June, Toon Goggles also announced that more than 1,200 hours of cartoons would make their IPTV debut in the U.S. and Canada on Panasonic’s VIERA Connect-enabled HDTVs.
Hodge believes that Toon Goggles plugs a gap: “Platforms like Netflix and Hulu and Crackle speak to adults, but there isn’t an IPTV platform that speaks to kids. We’re hoping to fill that void.”
He is also hoping to fill it before too many others have the same bright idea. “Statistics are beginning to show that TV viewing among kids has gone down but that online viewing is up,” he says. “Every network will have to adjust to that. I think, in the long run, on-demand is going to prove to be the dominant way of distributing content.”
Hodge observes that the consumer-electronics industry is increasingly driving and shaping content creation and consumption, and points to the tablet as a genuine game-changer. But he also doubts whether children differentiate between linear and other devices: “They are growing up in times where they just expect everything to be available on everything. In their innocence, they don’t understand why their favorite TV show isn’t also available on their tablet or cell phone or PC.”
A COMPLEMENTARY APPROACH
On balance, most children’s players are choosing to see the new platforms as an opportunity and are working hard to harness the synergies between on-air and on-demand to bolster viewing across platforms. Beecham, for example, says that Sprout’s new “strategic scheduling” provides children with a compelling reason to visit all its destinations, from linear through Sprout On Demand to SproutOnline.com.
“As mobile devices, tablets and technology continue to develop, I believe that, for preschoolers, linear TV will remain dominant, with online and on-demand playing a complementary role, deepening the experience for our audience,” he adds.
In the end, it all comes back to content, maintains Philippe Soutter, the president of the Paris-based distributor PGS Entertainment. “For me, this is more about new ways to consume product rather than a different product. It’s still about the same thing—quality content with strong values and a great track record.”
In other words, the sort of gold-standard content in which PGS specializes. The company has built an impressive portfolio in just four years, representing such animation power players as Method, Marvel, Samka and Studio Hari. Its top titles include The Little Prince, now launching into its third season; The Jungle Bunch, set to debut as a long-form series; and Marsupilami Hoobah Hoobah Hop!
Soutter is refreshingly unruffled by the new digital order. “I don’t know what’s going to happen,” he says, “and for us, it’s not that much of an issue. We will continue to invest in the best possible content and supply it to the partners that suit it best, whether that’s linear, DVD or online.”
His take-away point is equally robust: “I think it’s important not to have too high hopes or too low hopes. The new platforms are not the end of the world as we know it, and they’re not something magical, either. Good content will always make good money regardless of screen or platform—and bad content won’t.”