Long reads

All for the kids

Kids channel providers are increasingly looking beyond TV to maximise the value of their assets. Andy Fry reports.

These days, it makes no sense to consider kids channels in isolation. Increasingly, they are best thought of as one of the many mechanisms by which kids content owners reach out to their target audiences. Others include programme distribution to third parties, online, on-demand, theatrical release, home entertainment, publishing, games, stage shows and licensing.
Thinking about the kids market in this way helps unlock the key strategic issues more easily. For example, all these touch points are not just conceived as business units in their own right. They also have a job to do in boosting revenues across other parts of company.

Widest exposure

A classic case in point is the way Viacom-owned MTV Networks International (MTVNI) has reinvented how it thinks about Nickelodeon, so that programme distribution and channel management sit within the same business unit. The rationale for this is to ensure that the group is achieving the widest possible exposure and greatest possible revenues for programme brands like SpongeBob SquarePants and Dora The Explorer. This in turn helps when building out licensing and merchandising through retail. All well and good. But does this holistic approach to content brands represent a downgrading of the importance of channels? Not according to Steve Grieder, executive vice-president of Nickelodeon and programme sales for MTVNI, who says the sale of shows to third party broadcasters doesn’t conflict with channel management: “I used to be a channel general manager and would argue that programme exclusivity was critical. But all the evidence I’ve seen contradicts that. What I’ve learned is that a limited number of runs on free TV helps create a hit for a kids’ channels. I say this with the fervour of the converted.”

“We knew Cbeebies was a strong channel because of its appeal to UK audiences, but it has also been performing extremely well in the markets where we have launched.”
Dean Possenniskie, BBC Worldwide

For Grieder, there is plenty of proof that Nick still regards its TV channels as highly important assets within the overall corporate structure. “The big drive for us right now is to super-serve key segments of our audience,” he says. “In the last year, the emphasis has been on rolling out our preschool brand Nick Jr, which is now too big to be boxed in as a block on the main Nick channel. That’s why we’ve rolled it out into markets like Belgium, Italy and Switzerland. We are also looking at ways to develop our offering for teens and families. In the US, we’ve had success with evening block Nick At Nite, so we are thinking about developing that.” This strategy of super-serving narrow demographics will continue through 2010 and has not been particularly affected by the downturn. “Platforms are being more careful. But when you see the kind of content we have coming down the pipeline at Nick, you can understand why so many platforms are happy to carry our channels,” says Grieder. “You also have to keep in mind that children’s channels provide platforms with a disproportionately high amount of their total audience.”
Paul Robinson, general manager of KidsCo, a joint venture between NBC Universal, Cookie Jar Group and Corus Entertainment, gives a similar assessment: “People are taking longer to make decisions. But if you have the right proposition you can still do business. We’ve launched on 20 new platforms since January in markets ranging from western Europe to Asia Pacific. For us, it’s the combination of high quality shows – Paddington, The Wiggles, Dinosquad and The Future Is Wild – and a cost-efficient model that appeals to platforms.”

360° exploitation

The emergence of KidsCo is itself a direct result of the 360° exploitation model. Because the big US studios (Viacom/MTV, Time Warner/Turner and Disney) are vertically-integrating around wholly owned content, the only way for third parties to find a place in the kids market is to build their own businesses from the ground up. “The good news for us is that we have a strong channel distribution partner in the shape of NBC Universal,” says Robinson. “At the same time, we have access to great content from our shareholders and from third-party producers that see us as a viable alternative to the big US channels.”

“What I’ve learned is that a limited number of runs on free TV helps create a hit for a kids’ channels. I say this with the fervour of the converted.”
Steve Grieder, Nickelodeon

KidsCo is not the only international kids channel that has emerged as a producer-led counterweight to the might of the big three US studios. With digital distribution having blown the market wide open, others in this camp include the likes of JimJam and BBC-owned preschool channel Cbeebies.
Like KidsCo, preschool channel JimJam is a joint venture between a strong content company (Hit) and a proven distributor (Chello). Also like KidsCo, it has an industry veteran leading the charge in the shape of general manager Wayne Dunsford. “I’ve noticed a slowing down in distribution,” says Dunsford. “But with recession come opportunities to offer subscribers the best in terms of programming and choice as they spend more time at home with the family. For JimJam, which has shows like Thomas & Friends, Bob The Builder and Angelina Ballerina, there is always room for negotiations with platforms.”
During the downturn, Dunsford says he has been pursuing a dual strategy: consolidation in existing markets and expansion into new niches. “Our most recent launches have been in markets where we already have a presence but are actively seeking to develop further, such as Portugal and Russia. In terms of new areas, we did our first in-flight channel deal with Air New Zealand – which means we are able to entertain young children on its flights globally,” he says. “We also did a VOD deal with Ziggo in the Netherlands, under which four hours of content a month will be available and refreshed monthly for subscribers of the Delight package. Looking ahead, our focus is very much on expanding in Asia and in to Africa. We hope to be announcing some major new distribution deals in these markets in the next few months.”

“Israel is a perfect incubator because it has a dynamic television and technology environment. This helps us to develop content that can travel well internationally.”
Galya Halaui, Zebra

The emergence of Cbeebies as a global channel brand is part of this same process – though built on a different model. While KidsCo and JimJam are spin-offs from commercial content creators, Cbeebies is a by-product of UK pubcaster the BBC’s ever-expanding portfolio of licence fee-funded content. Ultimately, any revenues derived from the channel are destined to feed back into the running of the corporation. Whatever the basis of the business, it seems to be doing well. “We knew Cbeebies was a strong channel because of its appeal to UK audiences,” says Dean Possenniskie, general manager and senior vice-president, EMEA, BBC Worldwide Channels. “But it has also been performing extremely well in the markets where we have launched. In Poland, a localised version is doing very well against rivals like Disney and Cartoon Network while growth in South Africa over the last year has been excellent. We’ve also had good reports from our Cbeebies launches in markets such as Australia and India.”
In the face of so much competition, why does he think the channel is holding its own? “I think it represents all that is good about the BBC’s values,” he say. “It’s safe, non-violent and educational, while also being entertaining. We were also careful not to replicate rivals. Less than 15% of our content is animation, with the emphasis being on puppetry, dancing, cooking – all areas where children and parents can interact.”
As an overtly British brand, Cbeebies might be expected to run into difficulties when it tries to enter markets like France, Germany and Italy, all of which have their own strong public service broadcasters. However, Dunsford believes the channel will be able to find a place. “I’d really expect us to be announcing some deals in western Europe fairly soon,” he says.

Commercial dynamics

If any companies are capable of holding their own against the big three US kids studios then it’s the likes of NBC Universal, Corus, the BBC, Hit and Chello. But they’re not the only big groups seeking a foothold in the global kids market. Another of the major players ramping up is News Corp-owned Fox International whose preschool channel BabyTV has made great strides in the last year. After transferring from the US to Portugal as its opening gambit, it has now pitched up in Ukraine, Russia and various parts of eastern Europe. Leading platform operators which have signed up the BabyTV service include Romtelecom in Romania, ITI Neovision in Poland, SBB in Serbia, T2 and Planet 9 in Slovenia, Teo in Lithuania and T-Hrvatski Telekom in Croatia.
Perhaps even more significant is the news that Discovery and toy maker Hasbro are joining forces to launch a kids channel in the US. It’s too early to know what the partners plan in terms of international rollout since the domestic version is not due until late 2010. But it’s clear once again that the decision to shake-up the channel market is driven by the commercial dynamics outlined at the outset.

For Discovery, the question was how to produce a competitive answer to the big three in the kids genre – something its wholly-owned channel Discovery Kids wasn’t able to do. For Hasbro, owner of brands GI Joe, Transformers and My Little Pony, the big strategic question was how to use TV as a way of driving toy revenues and developing new revenue. The answer is this alliance, which combines established brands and mass distribution.
Unveiling plans for the joint venture channel, this point was summed up by Hasbro CEO Brian Goldner: “Today, consumers are embracing our brands through entertainment and educational experiences in a number of areas, including movies and digital platforms. We believe the time is right for Hasbro to take the next step into TV through our partnership with Discovery. Discovery has the experience, track record and ambition to make this joint venture a long-term success. We look forward to creating fun, stimulating and educational content that will allow us to deliver all-new brand experiences to the young and young  at heart – anywhere and anytime they want it.”
In the face of new competition, the existing big US kids players have not been idle, however. For Disney, the challenge this year has been the rebranding of boy-skewed channel Jetix as Disney XD (see sidebar). The issue of branding and positioning is also a live one for Turner, whose Cartoon Network brand looks slightly out of step with the times thanks to the resurgence of live action (both as a comedy and an action-adventure format). Disney has responded to this trend by dropping its Toon Disney brand in the US and placing it with XD (an animation and live action mix). The fact that Cartoon Network now airs live action as part of its line-up suggests it is also aware of the issue – though whether Turner would go as far as rebranding is doubtful. In the US, the channel has introduced a live action block called CN Real.
This kind of branding question does throw up one of the big issues for kids channels – how far it makes sense to self-limit the appeal of networks. It is noticeable, for example, that kids channels around the world are extending their appeal to encompass older audiences, either to win over advertisers, increase subscribers or drive interest in ancillary products.

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This is evident at the start of the day – where preschool channels are attempting to bond with parents. “Whilst JimJam’s content is dedicated to entertaining young children, our approach is to convey the benefits of the channel to parents and carers, as they are often the gatekeepers for their preschoolers’ TV viewing habits,” says Dunsford. “So our focus now is to make JimJam the ideal companion to parenting and ensure that our programming, scheduling and on- and off-air activity positively reinforce this positioning.”
It’s also evident at the end of the day, where Nick and Corus-owned YTV in Canada are using sitcoms and spicy animation to encourage co-viewing between different age groups within the family unit. The rationale, says YTV vice-president of marketing Laura Baehr, is partly to encourage greater loyalty, but it is also to encourage a co-viewing dynamic: “We know from our research that time spent together watching TV is valued by families. We also know that advertising recall is higher among family audiences because they are more likely to talk to each other about ads.”

Audience base

Kids channels are not the only ones trying to broaden their audience base (SciFi has become Syfy has Biography has morphed into Bio). But there are two risks.
The first is that the brand proposition becomes less clear-cut – allowing new players to enter the market by squeezing into neglected niches. Perhaps this explains why channels like Nick Jr and Playhouse Disney have been pushed so hard by their parents, since they are now competing with the likes of JimJam, BabyTV and Cbeebies (not to mention domestic broadcasters such as the Canal J in France and ZDF/ARD’s KiKa in Germany).
The second is that it starts conflicting with other channels within the same portfolio. What happens, for example, when Nick starts to cut across MTV audiences? It’s not an issue Grieder is too worried about, however. “It’s inevitable you get some aging up in the Nickelodeon audience because the channel is now 30 years old and viewers like the brand,” he says. “But the decision to watch MTV or Nick is really about your mood and the kind of content you want to watch at a given time.”

One might think that all this competition would be troubling dedicated kids channels. However KidsCo’s Robinson says there are still platforms willing to bring networks on board, and he takes the view that newcomers take share from free-to-air broadcasters rather than their immediate international commercial rivals in the sector. And the kids market continues to attract entrants. The  UK’s CSC Media Group, for example, continues to develop its kids channel portfolio. With a portfolio that includes Kix, Pop, Tiny Pop and Pop Girl it has demonstrated that it is still possible to launch low-cost services into the competitive kids channel arena. Likewise, Cbeebies may be the best example of a domestic model that has been retooled for the international market, but it’s not the only one. Another strong example is Israeli company Zebra Communications, which runs Hop! and Luli.

Hop! (targeted at under-sevens) launched in 2000 and is in 90% of Israeli cable and satellite homes. Luli (for babies and parents) followed soon after in 2004. Domestic success with both channels encouraged Zebra to roll its business out internationally, starting with central, eastern and southern Europe. Hop! is now available in Romania (as Boom Hop!) while Luli (which is available as a linear channel, a VOD option and internet games) has launched on The D-Smart platform in Turkey and the Mio TV platform in Singapore.

Galya Halaui, vice-president of acquisitions and international strategy, echoes her peers when she says carriage is tough to get these days. But she says Zebra has had success with its latest proposition – a Parents Channel that is now up in Turkey. “Our existing channels are also doing very well – partly because we produce our own shows. We have entered the Portuguese market and are also more active in DVDs,” she says. A big trend, says Halaui, is that many platforms have converted to triple-play providers: “So we benefit because our offering covers a linear channel, VOD and the internet. Israel is a perfect incubator because it has a dynamic television and technology environment. This helps us to develop content that can travel well internationally.”

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Reference to VOD, broadband and gaming is a reminder that channels operate in a very different environment from a decade ago. Consider the recent news from the US, for example, that ad-supported free-to-view VOD platform Kabillion (a joint venture between Moonscoop, Remix Entertainment Ventures and Studio 100 Entertainment) had over three million orders in May and June 2009, making it one of the top performing services on cable platforms including Comcast. By the end of 2008, Kabillion had seen year-to-year growth of 300% in VOD views and a 250% increase in VOD users. The rise of VOD, combined with the rapid growth of kid online usage, has not been overlooked by the major players – which have developed a range of online worlds to make sure they are also playing in this space (Nicktropolis, Club Penguin and Fusion Fall to cite a few examples).

But what does this mean for the linear channel world? Do channels have any relevance other than packaging for hit shows? Grieder thinks they do, though he agrees that expectations have shifted: “People aren’t loyal to brands like they are to religions. It’s more like the relationship they have with retailers,” he says. “You want to be one of those places they always come back to but you can’t expect them to stay in your shop the whole time. You have to be in that consideration set.”


Tags: Kids