Due to the impact – reach, volume, breadth and profitability – of children’s shows’ merchandise lines, it’s getting hard to find a kids’ show that doesn’t have character licensing, logo branding or some form of line extension attached to it.

In announcing the 55th anniversary February reissue of the restored and remastered classic Bambi, Buena Vista Home Video tagged the North American video industry at $15 billion and growing, and estimates that in the eight years since it last trotted Bambi out of the vault, the audience has regenerated 28 million ‘new kid viewers’ and 18 million additional vcr households. The Canadian home video market is 8.4 million households, and accounts for about 10% of the $15 billion figure.

While Bambi doesn’t need a piece of this market to balance its evergreen books (the Disney film released in 1942 has made over $268 million at the box office in North America), merchandising is increasingly a crucial component of the financial picture for new shows.

Paragon’s Creatures

Kratt’s Creatures, the wired new half-hour wildlife strip which airs on pbs and tvontario, introduces kids to exotic and obscure denizens of the animal world, such as the ant lion, a real Outer Limits kind of bug. However, it’s the show’s financing scenario which many producers would find scary. It’s the first show Paragon Entertainment has launched counting on merchandise licensing as a recoupment stream for a substantial deficit in the production financing equation.

With the broadcast licence fees from tvo, pbs and Tele-MŸnchen in Germany, Paragon had 35% to 40% of the budget covered. Paragon Entertainment president and coo Richard Borchiver says Canadian subsidies brought that up substantially, but that Paragon went into Kratt’s Creatures with 25% to 35% of the show unfinanced. ‘We put up the money against what we believed the merchandising program would render.’

They determined that if they got major players in at the start, Kratt’s would be a great campaign. Which they did. Scholastic Books (with an 18-title deal launched in October), PolyGram Video, Hasbro Interactive, Explora Toy, Unique Industries and Inkworks are among the key licensees for the hot show produced in association with Maryland Public Television and The Earth Creatures Company.

Wendy’s tie-in

Once you have key licensees in place and the right penetration for your show – Kratt’s is also distributed in Latin America, Singapore, the Middle East, South Africa, Hong Kong, Korea and Thailand – the trick is to maximize the momentum. To that end, Paragon just navigated the tricky fast-food/studio pact waters (wherein McDonald’s and Burger King are locked into exclusive studio deals) with a major Kratt’s Creatures promo tie-in signing with Wendy’s International Restaurants. Posters and giveaways will hit 4,500 Wendy’s across North America in the summer of 1997, and the national tv spot blitz is already being drafted.

‘When we launch a merchandising campaign there are several components to it,’ says Borchiver. ‘Some things we do because it brings revenue in directly, other things we do, like Wendy’s, because it will drive the rest of the program. It will raise awareness of the show and get more eyeballs on the screen.’

Susan Miller of Momentum Partners, the show’s worldwide licensing agent, brokered the deal with Wendy’s brand marketing manager Fay Kamer.

Discussing the tricky nature of picking winners – ratings don’t always translate into sales – Borchiver says that at the time they were assessing Kratt’s Creatures, they inked a $1 million diaper deal for Shari Lewis’ Lamb Chop’s Play-Along, which left everyone favorably disposed to the vagaries of licensing. ‘Things like that tend to help.’ Incidentally, don’t look for Hush Puppy and the gang in the diaper aisle; the diaper company went out of business, but not before Paragon cashed the cheque.

Hitting the mother lode

Borchiver says the importance of merchandising in financing a show has increased in tandem with the number of broadcasters; as the windows proliferate, ad revenue and licence fees dissipate.

‘At one point you dealt with pbs and cbs Saturday morning, and then Fox came along, then Nickelodeon came along, then Disney and Discovery.

‘Each new entrant to the market takes their proportionate piece of the pie. It’s changing all the time, you have to be so innovative in the way you finance these shows.

‘We’re certainly looking to create more shows that have as a component a strong merchandising arm. If you want the mother lode, especially in the family entertainment area, merchandising is where you’ll get the hit.

‘If we were able to do a show that had multi-windows and could come very close to break-even without merchandising, then merchandising would be gravy and we might have a different approach to how we do it.’

Book bonanza

In the case of Kratt’s, videocassette was the largest advance with over $1 million from PolyGram. However, on the heels of the first book release being a hit, Borchiver feels that in the long run the Scholastic book deal could overtake video. ‘The real landslide for us could be books.’ Typically, Scholastic maxes at a two-book commitment, but has signed on for 18 with Kratt’s, and although the advance was significantly less, spent a lot on book development.

Limitations on the product line for the show airing on educasters come from within. The environmentally conscious Kratt brothers, Martin and Chris, are partners in the merchandising and self-police the product line; bug kits, which are tortuous to insects, were instantly vetoed.

As to longevity of the program, Borchiver says the product must be freshened up every year ‘to keep it alive and keep the licensees happy.’ Cross-promotion mileage is also boosted by an outreach campaign developed by Outreach Extensions, which also provides broadcasters room for local fundraising strategies. ‘All this stuff helps bring the children to the show.’

Borchiver’s prognosis on the counting-merchandising-revenue-before-it’s-hatched approach is positive: ‘With a national licence and a show which we believe allows for a mass merchandising machine, we would certainly do it again.’

Over at Cinar, where merchandising and licensing characters is identified as a significant growth area, Louis Fournier, vp distribution and marketing, would not project any merchandising licensing revenue as a recoupment stream in a show’s business plan, saying that outside of video or music, it’s too risky to predict given the hit or miss, fickle nature of merchandising.

However, in building a business plan on an established property, once the show is on the air, he would hope to build a licensing royalty stream anywhere from $1 million to $5 million in two to three years. To make that $5 million, the product would have to make $100 million at retail. Generally about 60% to 65% of the revenue comes from North America, with under 10% of that coming from Canada.

While those figures are describing a project with international appeal, Fournier says Canadian appeal only can be quite successful, citing the popularity of Passe Partout.

The strategy is to create original programming for which Cinar retains all rights, and to also exploit all the growing outlets for Cinar’s library. To this end, Fournier targets the best time slot, one that gives them the best reach and nails the target audience, as paramount to creating property awareness, followed up with promos and cross-promotions.

The current focus of Cinar licensing efforts are Wimzie’s House, Are You Afraid of the Dark? (video, cd-rom, board game), Space Cases, The Country Mouse and City Mouse Adventures and The Little Lulu Show. Lulu, incidentally, gained wider notoriety than her 1930s Saturday Evening Post comic strip when she became the Kleenex mascot in 1948.

Devine cause

There are as many ways to tackle merchandising as there are types of product.

Devine Entertainment has embarked on cause-related marketing with a Christmas three-video gift set deal for The Composers’ Specials. Over three million Visa/MasterCard customers of a major bank received the offer in September, which benefits Baltimore’s Kennedy Krieger Institute, and the same set was offered via pay-tv listing mags in Canada, with a portion of the proceeds headed to Big Brothers and Sisters of Canada.

YTV Wear launch

Following in the logo-branding footsteps of Canal Famille, ytv is eschewing the vagaries of which superhero is most desirable as an action figure, and trading in on the networks’ own inherent hip factor with a line of wearables. YTV Wear is launching Nov. 16 when an insert in TV Guide will offer viewers a direct-response 1-800 number to order ts, sweats, caps or a watch sporting the ytv logo.

Explaining that the branded merchandise program is a response mechanism to kids wanting stuff, ytv licensing department manager Christopher LaPrairie says it was ‘Pester Power’ rather than spotting a new profit center that motivated the launch. In fact, his projections call for ‘probably breaking even’ three years down the line although he agrees that on the marketing front, the equation is worthwhile.

ytv anticipates expanding its national retail presence and is looking at going beyond apparel via strategic partnerships with toy companies. ytv is ‘looking for ubiquity,’ like Sears and The Bay shelf space from its licensing deals with toy manufacturers.

The three licensing realms are ytv brands, ytv dayparts and ytv icons (chair, lizard logo). Currently in the negotiations stage, the plan calls for a national rollout of games and toys for Christmas ’97.

LaPrairie says the kinds of product the program might spark could be as literal as taking a ytv character and putting it into a game, or taking a theme from a daypart, like basing merchandise on an element of The Zone (fr’instance, a zany basketball product based on the ytv b-ball icon and the onset hoop).

Discussing kids’ inherent desire to extend their tv viewing into a more tactile and interactive experience, and how that aids in extending reach and promotion for a show, LaPrairie says he does not believe that whether or not shows have merchandising attached determines broadcasters’ programming decisions, although he adds, ‘it is certainly something they take into consideration.’

LaPrairie also says ytv is seriously considering expanding the scope of its licensing department to include handling merchandising for coproduced programs. Following the ytv brand, ‘there will be more stuff coming down the road.’

Some take their show on the road, which is a recurring theme for educaster series, such as the extensive meanderings of The Magic School Bus (which seems to be living out the Citytv motto) and Kratt’s Creatures, which recently undertook a u.s. zoo tour. And tvo’s Polkaroo and pals could be seen recently hoofing around the likes of Toronto’s Young People’s Theatre in the live stage show Polkaroo and The Imaginary Zoo.

In addition to Tanglewood Group live performances, cds and cassettes, The Polka Dots Shorts star has licensed his trademark to Irwin Toys for a plush likeness and to Morningstar Entertainment for videos. Now the Polkaroo is looking to eventually go global with his big green dotted mug.

Cindy Galbraith, head of tvo sales and licensing, says tvo has been strategically active in merchandising for two years now, and so far the video component has been most successful. Response to the Polkaroo toy has been warm and prototypes of Marigold, Humpty, Dumpty and Bear are waiting in the wings.

The key to building the merchandising program is to get more exposure with other broadcasters for the appealingly stackable eight-minute series. With three seasons of the new revamped Polkaroo vehicle and a core group of four licensees, the program was trotted out at mip and is now deemed ready for introduction to the u.s. at natpe.

‘Licensing is changing considerably, there are more players and more competition,’ says Galbraith. She says the trigger for a show is to sew up a number of markets, like pbs or cable, to demonstrate longevity to potential licensees. On how to achieve that, Galbraith says: ‘If you have a lot of money you do a pr blitz, if not, you rely on the integrity of the character.’

Nepotism and the deep pockets of some show suppliers have allowed them to elbow their way onto the airwaves, banking on toy sales rather broadcast licence fees. ‘It makes it a whole lot harder for us,’ says Galbraith. ‘We have copyright liabilities that don’t allow us to give our shows away. Broadcasters have the trump card.’

Cracking the U.S.

Networks and publicly traded companies don’t have a lock on the toy biz. The Adventures of Dudley the Dragon and The Big Comfy Couch typify the kind of show that not only mollify the newly required educational quotient of the kids’ skeds in the u.s., they are also prime examples of smaller Canadian companies making big inroads into the increasingly crucial merchandising game.

Breakthrough Films and Television’s Dudley (in its fourth season), which airs on 220 pbs stations in the u.s. and nine networks in Canada, was launched internationally this year and has licensing and distribution deals in about 15 countries. A $10 million feature, Dudley the Dragon Meets the Goblin King, is in development and is expected to boost the u.s. merchandise program, which has over 40 licensees.

In Canada, Malofilm is releasing Dudley videos, and Dudley mall tours are a hot booking into next August. January will see the cd-rom debut of 3D Dudley. This Christmas audio tapes – Dudley’s greatest hits – will roll out. The game software, a puzzle and interactive comic book, is from Multimedia Agency, the soundtrack is from mca/Tanglewood.

Radical Sheep’s Comfy Couch reaches over three-quarters of the pbs station viewers in the u.s., and where it airs as a strip, Comfy ranks consistently in the top two rated preschool series, vying with Barney.

On a nine-city, nine-week personal appearance tour, Comfy’s star Loonette attracted audiences of up to 7,000, and the personal appearances had to be stopped because of the unmanageable turn-out. Time Life is selling episodes via home video, plus eight books whose success they’re pleased with.

Toronto-based Comfy distributor Owl Communications works closely with l.a.-h.q.’ed licensing agent Hollywood Ventures, Comfy’s u.s. distributor. The merchandise campaign has over 30 licences and the master toy license belongs to PlayMate Toys.

‘We’re trying to put the show first,’ says Hollywood’s vp licensing and product development Stephen Hill, discussing how the positive qualities embodied in the show also inform the decisions made in merchandising it; ‘the Molly doll to me is something kids would love to have anyways.’

‘We were asking companies to give us something that was inherently cute and structure the product based on quality,’ says Hill. ‘We’re looking to structure a 10-year program and get the word out that there are people out there making quality children’s programming.’

Hill says the cornerstones of the program were released a year after it was on the air in the u.s., and that the plush, video, audio and book sold through even in markets where the show wasn’t on the air.

Since Comfy demonstrated success in the u.s., Owl International launched the program in the international market at mipcom.

One of Owl Communications’ new shows, Hello Mrs. Cherrywinkle, stars a toddler-friendly Martha Stewart who transforms pink kitchen sponges into pig puppets, so unsurprisingly, its merchandising potential includes craft kit spin-offs designed for little fingers.

The series about creativity from producer/concept creator Bernice Vanderlaan, was inspired by the I Can Make book series published by Owl Books. Owl is doing 13 episodes for Family Channel (in the u.s., Nickelodeon has an option on the series).

The show is being tied in with a new Owl preschool magazine, Chirp, and Family Channel is being hooked up with a corporate sponsor via Next Media which is handling the launches.

Owl president Annabel Slaight says the marketing strategy is to build success in Canada, then look out to the rest of the world, with the u.s. being the next stop.

‘The revenue that will be made from Mrs. Cherrywinkle will come primarily from home video and merchandising,’ says Slaight.

‘It’s always difficult to tell how much it will be, a very successful show that becomes a classic earns approximately $50 million wholesale in the United States in a year. Whoever is putting money into a preschool property or boys action show will expect that the show will earn about 10 times as much as it costs to make from its merchandising – but it could make nothing.’

‘Through our new company Combined Media, our strategy is to develop the property in more than one medium at the same time, so that we can pretty well guarantee a recoupment from media-related ideas, publishing, sponsorship, home video, cd-rom, Internet.’

Not counting on plush, because the toy market is so risky, Slaight divides the potential into three levels: ‘a show that will make most of its money through sales of the show itself – primarily not a preschool show, it’s almost impossible for that to happen; the next level is a show that can recoup based on the show itself plus ancillary media products; the next level is the one that’s going to go all the way. And it’s looking very positive for Big Comfy Couch becoming a classic,’ says Slaight, citing the fact that the Molly doll sold 700 units in one store in New York last week. Apparently the PBS Store of Knowledge responsible looks like a Molly doll factory.

Recently purchased by Disney, Groundling Marsh added the u.s. and u.k. to its tally of over 45 countries. In Canada, the Portfolio Film & Television/J.A. Delmage Production is airing as a strip on ytv and the Disney Channel and in the major markets.

Disney is now a coproducer on the current 26, along with ytv, and both nets will take a cut of the merchandising revenue. The Disney purchase had the ripple effect of doubling the show’s internationl sales. Not surprisingly, the reach presents a springboard for home video and merchandising, which the Beanstalk Group is handling in the u.s. (product is launching within the year).

Skewing slightly older, Vancouver’s Forefront Productions is making merchandising progress with The Adventures of Shirley Holmes series (in which the great sleuth’s female descendent has inherited the deductive-reasoning gene).

Shirley packs tools of the criminology trade and neat gadgetry, according to Forefront principal Helena Cynamon, executive producer of the series. Credo Entertainment’s Kim Todd is the coproducer of the 13-episode series. Toys run along the lines of a sleuthing knapsack with secret compartments and pens that take pictures. Licensing agents and deals with toy companies are afoot post very enthusiastic sales interest in the show at mipcom.

u.k.-based Winklemania (which had the books rights) is on board furthering the merchandising agenda, Winchester (which optioned the books rights) is the European distributor and ytv is the Canadian broadcaster. The show is slated to air in primetime next February, with super-sleuth merchandise hot on the heels of the launch.