Jeff Dunn

October 2008

By Anna Carugati

Just about every preschooler knows Thomas, Bob and Barney. They’re not passing acquaintances at the playground or relatives they see on weekends. Thomas & Friends, Bob the Builder and Barney are among the top brands in the preschool market and have become the best friends of millions of little ones. This trio represents not only top-rated TV shows in dozens of territories, but they are the engines behind very healthy merchandising and consumer-products strategies. Jeff Dunn, the CEO of HIT Entertainment, is making sure the company takes these three superbrands, and others, to all the platforms where children have fun these days.

TV KIDS: What are your priorities for HIT?

DUNN: I’ve got five priorities for the company, and those are first and foremost to make the company more brand-focused. We have some phenomenal brands. We’ve been organized more by line of business, however, meaning we have people in our consumer-products business, our home-entertainment business, our TV-sales business. But I think what really makes this business grow are the brands themselves, so I want to be more brand-driven in our approach. My second priority is to add more properties, both through internal development and external acquisition. My third priority is to enhance our international footprint. It’s actually been the fastest-growing area for us, and I think the growth can be even bigger and better. I want to grow our network investments. We have an equity interest in PBS KIDS Sprout and in a network called JimJam, and both of those are in their formative years. As they grow we grow, and that is all good. And lastly, I want to leverage our expertise in the consumer-products business with other third parties. We have a very strong licensing group here and we can use that expertise for other people.

TV KIDS: In which business areas do you see the most growth?

DUNN: Our toy business has a lot of potential. It is coming off the Chinese recalls [more than 1.5 million Thomas-based wooden railway toys made in China were recalled last year along with other toys, because there was lead in the colors used to paint them] and we’re getting that back on track. In home entertainment, we have a brand-new relationship with Lions-gate, and they are a better fit for us in terms of being able to deal with a large catalogue business. Twentieth Century Fox is a wonderful company, but it’s also true that they are much more theatrical-release driven, and the kids’ business is as much a catalogue business as it is anything else. And Lionsgate is a great partner for us in that.

In our theme-park attractions, we have Little Big Club and Thomas Land, and they are beginning to look like pretty good businesses for us.

And then Thomas is the premiere preschool boys’ brand, even though it was impacted by the recall, and there is still much more we can do with it.

TV KIDS: Is the worst of the recall over?

DUNN: The worst of the recall is over, and we did have a downturn. But another measure of the strength of the Thomas brand, in a sort of a perverse way, was the fact that of all the companies who got caught up in the recall, and almost every brand did have products involved, we were the ones that became the poster child because it is such an iconic brand. And it was confirmation of that. It also meant that we did take a bit of a hit, but I think that people realize that we’ve fixed it and we’re moving on and business is coming back, and that is good news.

TV KIDS: What new programs do you have in development or production?

DUNN: The biggest one we are doing right now is Angelina Ballerina: The Next Steps. It’s a co-production with WNET and Nick Jr. U.K. That is the classic Angelina Ballerina series taken to a brand-new concept. It’s being reinvented in a number of ways. One, it’s gone to CGI. Two, it’s been broadened conceptually beyond ballet into all forms of dance. Three, it’s not just a completely girl-focused property, but it’s got boy-focused characters as well, and it’s a much broader-appealing property.

We have all our existing shows, Thomas and Bob and Barney, in production for new episodes, but the one we are really putting weight behind and trying to move on is Angelina Ballerina: The Next Steps. It’s a brand-new reinterpretation.

TV KIDS: What plans do you have for Rainbow Magic?

DUNN: Rainbow Magic is a phenomenally popular books series. It has about 15 million books in print. But we have to build awareness beyond the book series. We’re going to be doing a brand-new website aimed at girls of the age who are reading the books. We are in discussion about producing a television series. We’re looking to take this property to the next level, and once you have broad awareness [through a television series] and publishing, then you can begin to think about consumer products and other things like attractions and shows. But the next step for us, having just acquired it, is to broaden the appeal from just a publishing property into more of a mass [market] property.

TV KIDS: During an interview we had with a former HIT CEO, he said that licensing and merchandising made up nearly 90 percent of the company’s total revenues, and TV sales only about 10 percent. What is the ratio today?

DUNN: It’s not a policy to break out our financials, but here is what I will tell you. It’s no secret to anybody in the kids’ business that the shows are not the profitability drivers, the products are. The shows become the [vehicles that] generate awareness, and the monetization of that occurs off network. If you look at it just wearing your producer’s hat, you have to look beyond the network to make your money.

TV KIDS: Looking at your channel business, for the time being are you focusing mainly on PBS KIDS Sprout and JimJam, or would you consider any other channels down the road?

DUNN: I think we’re concentrating our efforts on those at the moment. They are both doing really well. Sprout has had a great start. In homes that have Sprout and other preschool offerings, Sprout has great awareness and earns great marks as being the favorite. It is very popular among the on-demand offerings. By any measure, it seems to be doing very well. It’s adding new distribution, so I feel very good about the job that has been accomplished there.

JimJam is even more recent, and outside the U.S. we’re in 11 territories now, and that’s moving well, too. I’ve seen how the strengths of our properties have really driven the success of the channel’s distribution. One of the reasons that those channels are getting distribution is that people really want to get Thomas and Barney and Bob and all our brands.

TV KIDS: You’ve been in the kids’ business for quite some time. What has kept you there, and what do you enjoy about it?

DUNN: I enjoy the opportunity to do good things that last a lifetime, and when we do the best of what we do, we brighten people’s lives. It’s like the old adage, you teach a man to fish and he’ll eat for a lifetime. [In] the kids’ business, you get an opportunity to work and influence people at a very early stage in their lives, and there are very few other businesses that can say that. It’s an enduring business, it’s an incredibly fun business, it’s a multigenerational business and it’s a business that if done the right way creates a lot of good in the world, and that’s what has always appealed to me about it.

WS: What has made Thomas and his friends such enduring characters for children all over the world?

DUNN: Thomas himself is a big kid at heart, and he is somebody that kids identify with. Thomas has all the emotions of a kid: He gets happy, he get sad, he gets jealous, so he’s dealing with universal emotions, and universal emotions are enduring. He has become a classic. If you think about Peter Pan, he has Neverland, which was a magical place—well, Thomas has the Island of Sodor and kids get that. There is a magical place where Thomas lives in these small morality plays. And as long as kids have emotions and need to grow up and be steered in the right direction, those values will never go out of style. We’re not trying to glamorize the brand, we’re not trying to be faddish, but what we are trying to do is create classic stories that are about real emotions that kids express and those will always endure. They’ve been around for almost 65 years and will be around as long as kids are around.

WS: How have you updated Thomas?

DUNN: We constantly add new characters; we are up to more than 100 characters. The next two will be a Japanese engine and a Spanish engine. We’ve done a lot of research into Spanish railroads and trains in Japan to make sure we are grounded in a certain amount of factual basis. We are trying to be culturally diverse. And CGI is a big step forward for the look of Thomas. It allows the facial expressions to be very real and it allows Thomas to talk, and that’s something we couldn’t do in stop-motion animation. We don’t give up the look, but we get all this great creative flexibility and give more depth to the characters. The key is that we try to keep it fresh but at the same time we try to keep the underlying lessons the same. We recognize that we have a classic, and we want to do it in a way that is enduring.

WS: The live stage shows and Thomas Land all work to reinforce the brand, too, don’t they?

DUNN: When kids [become attached to] their favorite characters on television, they like to interact with them off screen in a variety of ways. They like to be close to them and in some cases aspire to be them. And so you look for the opportunity to fulfill those desires. In some cases, products do that and in other cases, live shows and attractions do it. And a lot of kids get up close and personal and see their favorite characters in a completely different setting—in person and live, as opposed to watching passively on tele�vision. So [the attractions are] absolutely a key part of establishing a relationship with our audience, and they are as much a marketing vehicle as they are a business because you want to be able to provide your audience with that kind of interaction. It’s just a wonderful thing for your brand. Another part to it is that they can often be good businesses in their own right.

WS: Do you have to wait for a brand to reach a certain critical mass before you can think of setting up a theme park or a live show?

DUNN: This is true for everything we do. In our business, unless you have critical scale of audience awareness and fondness for the characters, then it’s really tough to be in any business off screen. The cost of making toys, the cost of making home videos, certainly the cost of creating theme-park attractions, requires that you have a big enough, loyal audience to make that pay off. The attractions business, however, has a different [component], which is, the people who own theme parks are spending millions and millions of dollars to build the structure and it’s going to last a long time. So you don’t want brands that are going to be a fad, here today, gone tomorrow, no matter how popular they are. If you think that it’s a one- or two-year fad and then it will move on, that doesn’t serve you as a theme-park owner because of your cost structure. Thomas has been around for almost 65 years. Barney is coming up on 25. Bob [the Builder] is ten years. These are brands that have stood the test of time on a worldwide basis, so as we talk to theme-park owners and people doing shows or attractions, it’s that kind of longevity coupled with popularity that is really appealing to them.