The New Kids

April 2008

It may not yet be time to tell Disney Channel, Nickelodeon and Cartoon Network to move over. But there is a smattering of new faces on the global kids’-channel block looking to lure young viewers with an alternative offering. And most are being launched by companies that have already made a name for themselves on the supply side of the kids’ business.

“Well-established brands open the door straight away to the discussions with the cable operators,” explains Wayne Dunsford, the general manager of JimJam, a new global venture co-owned by HIT Entertainment and Chellomedia.

And there are other distributors involved in the channels business—DIC Entertainment, Entertainment Rights, Scholastic Media and Taffy Entertainment, among others, all own stakes in kids’ outlets. The channels benefit from a built-in content supply, while the distributors score another platform with which to reach viewers.

JimJam, which was launched in Central and Eastern Europe last year, targets kids aged 1 to 4 and takes the bulk of its grid from the HIT catalogue. “We have to accentuate what sets us apart from the competitors in this crowded market, and that’s our content,” says Dunsford. “It would be very shortsighted if we weren’t building on the recognition of Bob the Builder or Barney or Thomas.”

KidsCo, which began its global rollout in Europe last September, takes about two thirds of its programming from two of its three co-owners, DIC Entertainment and Nelvana (the third partner is Sparrowhawk Media, now owned by NBC Universal). It is positioning itself as the “fourth network” in the global kids’ space, according to its managing director, Paul Robinson.

Kabillion, too, is tapping into the resources of its majority owner, Taffy Entertainment, the distribution arm of France’s Moonscoop. Kabillion launched a little over a year ago and is offered up in the U.S. as a free video-on-demand service and online broadband channel, featuring shows including Bobby’s World, I Got a Rocket! and Pet Alien.

But tapping into the resources of a parent company’s library can be a complicated task, especially for a global service that has to take into account broadcast deals that may already be in place with free-TV or other pay-TV channels in a given market. “You have to do what’s right for the property,” says Bill Schultz, the CEO of Kabillion, who wears a second hat as an executive producer, co-CEO and partner at its parent company, Taffy Entertainment. “Taffy is first and foremost a producer, and we have partners on a lot of our shows. There’s no way that anybody would turn down the opportunity to put a $10-million, 26-half-hour series on Nickelodeon, Cartoon Network or Disney. Getting the show out to the [largest] number of people, that’s goal number one.”

TREASURE TROVES

JimJam has a similar mutually beneficial relationship with its parent company’s slate. “HIT will be granting JimJam exclusive pay-TV rights whilst maintaining relationships with both pay-TV and free-TV [broadcasters],” Dunsford says.

Dunsford joined JimJam after a spell at HIT, where he had been tapped to devise a strategy for exploiting that library on a proprietary global network. “It’s going to be a case of managing the rights and expectations of all our partners. With the size of the library that HIT has, the variety of programs, there’s plenty of high-quality programming to go around.”

The question of reach is an important one for any rights-holder looking to derive licensing and merchandising revenues from a TV show, says Kabillion’s Schultz. “The question that’s on everybody’s mind is, If I put my show on a platform, will I be able to get licensees, will I be able to get product into retail, will I be able to drive sales? If you watch the independent shows that get acquired by Nickelodeon, Cartoon Network or even The CW, you see [that those shows] can start to find some licensees—a toy company, a video-game company. Properties that may not be on enough platforms [find it harder] to get that critical mass, they can’t get a Spin Master—never mind a Hasbro.”

Scoring a slot on one of those mass-reach platforms, however, is no easy feat. “Disney, Jetix, Nick and Cartoon are vertically integrated—they are using their own content, creating their own brands, and developing them through from character to production to broadcasting to merchandising and licensing,” says KidsCo’s Robinson. “For independent-content creators, it’s becoming increasingly hard to get their characters and products to air.”

Robinson stresses that one of the strengths of the KidsCo schedule is the variety of the content that is available. In addition to DIC and Nelvana, other suppliers to the channel include TV-Loonland, Entertainment Rights and DECODE Entertainment. “We’ve got not just the best of the U.S., but also Canadian, Asian and European content,” Robinson says. “There is a range of different voices, content made by different people in different continents, and there is also a range of creative executions: cel animation, CGI stop frame, claymation, plus movies and live action.”

KidsCo’s niche, Robinson says, is gender-neutral content for kids aged 6 to 10, to set it apart from the female-skewing live action on Disney and Nick and the boy-targeted action fare on Cartoon Network and Jetix. The channel will also feature preschool fare during the day, “And that is relatively undersupplied in all the markets internationally,” he says.

With strong faith in the appeal of its programming mix, KidsCo has set ambitious distribution targets. Carriage was recently secured in six markets: Poland, Hungary, Romania, Turkey, Russia and Ukraine. Further expansion for KidsCo into Eastern Europe will continue and the channel is now available in Asia. “The next phase will be Western Europe,” Robinson continues. “It is a more mature market, and negotiations are more complex, but by the end of 2008 I’d expect us to be in the U.K., France, Spain, Germany and Scandinavia. And toward the end of 2008 also in Latin America.”

For Robinson, KidsCo is set to benefit from a digital-delivery infrastructure, as opposed to relying on tapes. “That may not sound so revolutionary,” he says, “but it does mean you’ve got many, many efficiencies in terms of operational costs, which means we can be highly competitive for satellite and cable operators, and that gives us a real position in the market, given that we’ve come relatively late.”

Dunsford says that JimJam is looking to tap into the pay-TV expertise of its co-owner, Chellomedia, as it progresses on its global rollout. “We think we’ve got a sufficiently different proposition to make our efforts worthwhile. You’ve got Chellomedia and all of their experience in terms of scheduling, developing and launching channels globally. Their association with Liberty Global brings with it great distribution opportunities through the UPC cable networks throughout Europe. Obviously we hope to benefit from those relationships.”

The channel is currently available to about 6 million subscribers in Italy and in markets across Eastern Europe. The rest of Europe is the next target, notably Benelux, Austria, Switzerland, Portugal and Iberia, as well as the Middle East and Africa, while an Asian expansion is on the planner for later this year.

CBeebies, operated by BBC Worldwide’s Global Channels division, began its expansion outside the U.K. in India, followed up by launches in Hong Kong, Singapore and Poland. For the BBC, a portfolio approach is at the heart of its rollout strategy, with CBeebies, targeted at preschoolers, being offered to platforms together with BBC Entertainment, BBC Lifestyle, BBC Knowledge and BBC World. The bouquet targets everyone from a “2-year-old on CBeebies through a 60-year-old on BBC Knowledge and BBC World,” notes Dean Possenniskie, the general manager and senior VP for Europe, the Middle East and Africa at BBC Global Channels. In Poland, the first European market outside the U.K. to carry CBeebies, the service has become the number one channel in its genre on the Cyfrowy Polsat platform.

While opportunities are aplenty across the less developed pay-TV markets internationally, it’s the mature territories that promise the greatest rewards, and are the most competitive. This is particularly true in the U.S., where Disney, Nickelodeon and Cartoon Network exert their greatest influence. “We refer to the three as the triopoly,” quips Schultz at Kabillion. “If you take what’s left after the triopoly, it would be interesting to look at what that market share is. I would imagine that on any given weekday or Saturday or Sunday, the triopoly has got to account for 80 percent of the audience.”

MAKING ROOM

Nonetheless, some independent channels have made room for themselves in the market, including PBS KIDS Sprout, which has made tremendous strides since its launch two years ago. Sprout, too, has exploited the benefits of its parent companies, utilizing the libraries of HIT Entertainment, Sesame Workshop and PBS, and the distribution prowess of the cable giant Comcast Corporation. “It’s a tough distribution environment,” says Sandy Wax, the president of Sprout. “Sprout has been such a happy success. We’ve been able to come in, and in two years, kids and families and distributors really get what [we are]. We’re one of the fastest-growing cable networks that’s launched in recent history.”

A more recent entrant is qubo, which launched last January. Owned by ION Media Networks, NBC Universal, Scholastic Media, Entertainment Rights and Nelvana, qubo operates as a block on three networks—ION, NBC and the Spanish-language Telemundo—and as a linear channel via digital multicast.

“The qubo mission is to promote positive values and literacy,” says Rick Rodriguez, the president and general manager of the service, which targets kids aged 4 to 8. Given that it airs on free-TV broadcasters, qubo—programmed from the Scholastic, Entertainment Rights and Nelvana libraries—has to “meet the educational and instructional criteria set forth by the FCC,” Rodriguez adds. “We’re really trying to differentiate ourselves from the content that’s found on other programming services by emphasizing community values, positive learning.”

Rodriguez says that qubo’s distribution prospects are looking up, with further deals recently clinched with pay-TV platforms, and the upcoming February 2009 digital transition that will widen the multicast channel’s reach even further. “We think we have found a unique space: pro-social content has tended to be preschool, and the live-action programming on Disney tends to skew older. There is an opening in this content aimed squarely at the 4- to 8-year-olds. We’re attempting to provide a safe environment.”

As a VOD service, Kabillion currently reaches about 13 million U.S. homes. Schultz is looking to expand the service’s reach via further cable agreements, and is eyeing opportunities on broadband platforms. “We’re getting traction by not competing with Nickelodeon or Disney or Cartoon Network,” Schultz says. “We are an alternative. The audience is so plastic, they can stretch and change and move; viewing habits are changing constantly. So with Kabillion we’re seeing growth every day. Every month is a little better than the previous month, both in terms of VOD and online. The numbers are still small, but at the same time, the fact that we’re achieving that type of growth in a very saturated, competitive market” is a sign that there is still room for competition, he says.

Unlike the U.S.-only services Sprout and qubo, Kabillion does have international aspirations. “We’ve started to have some conversations,” Schultz says. “We are putting together a platform for IPTV and broadband in France. The model is to take the brand and expand it opportunistically on as many platforms as we can. We had an opportunity to launch a block in Spain, but we de-cided to go with the Taffy brand. We are in negotiations with a company in Europe to do a Kabillion-branded, Netherlands-based version on cable, VOD, IPTV mobile and broadband.”

Schultz notes that outside of the U.S., “the triopoly is not anywhere near as powerful.” But the global majors are not the only competitors that need contending with. Strong local services are also daunting to take on, especially ones that have been in the market for some time.

According to a recent survey in Germany, KI.KA, owned by public broadcasters ARD and ZDF, had a brand awareness of 90 percent among parents and children, a position enhanced over the years by its host of local productions. With upcoming highlights that include the quiz format Die beste klasse Deutschlands and new episodes of the popular soap Schloss Einstein (Einstein’s Castle)—which scored market shares of up to 48 percent last year—original productions will remain key to the KI.KA schedule. “The stories in our live-action programs are taken from the young viewers’ everyday life,” says Frank Beckmann, KI.KA’s programming and managing director. “They approach subjects of social relevance and offer ways of identification with positive role models.”

The German kids’ market, however, is fiercely competitive, especially following Nickelodeon’s successful return to the market. A challenge for KI.KA, Beckmann says, is holding onto young viewers who are starting to migrate elsewhere. “A high percentage of kids in Germany watch programs made for adults, like prime-time series and movies,” he says. “But these programs do not cater to the special needs of this age group. Our recent successful performance with live-action shows for older kids, like Krimi.de (Crime.de), a highly acclaimed and award-winning detective series for teenagers, [establishes us as] a trend-setter in the field of programs especially made for older kids and youth. We will enlarge our activities in this respect.”

In France, another intensely competitive market, Lagardére Active, is expanding its kids’ viewing share by attempting to corner the market with four networks, each tapping into a different demographic. In the cable landscape, there is the flagship Canal J, a humor-oriented network for boys and girls aged 4 to 12; Tiji, targeting preschoolers; and Filles TV, which currently targets 11- to 18-year-old girls but is aging up its demo to young women 15 and older. According to Pierre Belaïsch, the deputy general manager at Lagardére Active’s Pole Jeunesse division, with those three channels performing well, the next step was free to air. “We had to compete against the big networks in France to get the [digital terrestrial television] frequency to create a national kids’ service,” he says. Going into partnership with France Télévisions as a minority owner of the new channel, Lagardére launched Gulli in 2005.

The free-to-air service has a broad target audience, Belaïsch notes, with shows for kids aged 4 to 12 during the day and more family-friendly fare in the evenings. Gulli completes a portfolio that Belaïsch believes is strong enough to weather the “serious” competition posed by the global majors. Indeed, the Canal J name in particular has become so synonymous with kids’ entertainment in France, Belaíïsch says that the company has mulled over taking it to other markets. “We are thinking about it, but we wouldn’t do it alone. A lot of markets are saturated. There may be some opportunities in [Central and Eastern] Europe or the Middle East. But the U.K., U.S., Germany, are all pretty saturated.”

PLETHORA OF PLATFORMS

New entrants and established players are eyeing new-media and off-screen initiatives to help build their brands in these challenging environments. “It’s unrealistic for a channel today to launch without offering more than just the linear service,” says JimJam’s Dunsford, citing plans for a complementary VOD offering. “You want to be able to offer [platforms] something that justifies your fees and offers the greatest possible choice for the viewer in terms of accessing your programming.”

KidsCo, too, is looking at VOD rollouts and possibly mobile in the future. “We want the brand to be out there, wherever kids are,” Robinson says. “Whether it’s mobiles or iPods or Internet or on-demand, we want to be in that space.”

Sprout in the U.S. launched with the idea of being multiplatform as one of its founding principles; it initially became available to the market as a VOD service before adding on the linear service and website a few months later. “This allowed us to program each platform in a way that worked best for the audience,” Wax says. “It’s a big advantage for us to be able to think about how you have a Sprout experience in each of the three different ways. In a linear service, you have to figure out how do you do the others without cannibalizing the first. For us, we’re platform agnostic, so we want to see all three experiences grow.”

KI.KA recently began testing a mobile-TV service in the German state of Saxony, and is gearing up to launch KI.KAplus, an online platform with live streaming of the channel as well as catch-up on-demand content. Citing the success of the annual KI.KA Summer Tour, Beckmann stresses the importance of extending the KI.KA brand on as many platforms as possible. Indeed, as the market gets more and more competitive by the day, the key is to “be where the kids are. In their rooms, on their book- and toy-shelves, outside on their most beloved playground or at the school yard.”