TV Kids Brand Licensing Special Report 2014

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TVKIDS

WWW.TVKIDS.WS

OCTOBER 2014

BRAND LICENSING SPECIAL REPORT

Licensing & Merchandising Trends / HIT’s Edward Catchpole

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CONTENTS FEATURE

Down Memory Lane Nostalgic TV viewers are abuzz with news that several beloved childhood cartoon characters are returning.

Ricardo Seguin Guise Publisher Anna Carugati Editor Mansha Daswani Executive Editor Kristin Brzoznowski Managing Editor Joanna Padovano Associate Editor Joel Marino Assistant Editor Simon Weaver Online Director Victor L. Cuevas Production & Design Director Phyllis Q. Busell Art Director Cesar Suero Sales & Marketing Director Faustyna Hariasz Sales & Marketing Coordinator Terry Acunzo Business Affairs Manager

Ricardo Seguin Guise President Anna Carugati Executive VP & Group Editorial Director Mansha Daswani Associate Publisher & VP of Strategic Development TV Kids © 2014 WSN INC. 1123 Broadway, #1207 New York, NY 10010 Phone: (212) 924-7620 Fax: (212) 924-6940 Website: www.tvkids.ws

The ’60s hit Thunderbirds is back, with Thunderbirds Are Go making its world premiere at MIP Junior this year.

The iconic cartoon Danger Mouse is returning to screens in 2015. The Magic School Bus is being redone for 2016.

The Powerpuff Girls is being reinvigorated as well. From Clangers to Teletubbies, the list goes on.

These shows and characters come with a sense of comfort in their familiarity, notably for a generation that is now starting to have kids of their own. The sharing of nostalgic toys and TV shows between parent and child fosters a sense of togetherness. It’s no wonder, then, that Millennial women have been declared the most powerful segment in the U.S. toy industry, accounting for 26 percent of all American toy sales. In the first quarter of 2014, the NPD Group found that women aged 25 to 34 made up 75 percent of all Millennial toy buyers. Oftentimes, the toy-shopping process is a parent/child negotiation. While the parent has the purchasing clout, the child will ultimately decide what he or she wants to play with.

More and more, children are embracing their power of choice. With OTT, VOD and other digital platforms, this new generation is choosing when and where they watch their favorite shows. The industry has had to shift accordingly. Nowadays, apps, websites, games and immersive virtual worlds are top of mind when developing a property. While some will argue that digital has yet to really deliver substantial revenue returns, no one can deny that kids today expect to be able to engage with content outside of just watching the TV set.

In this edition of the TV Kids Brand Licensing Europe Special Report, we survey the latest trends in the children’s licensing and merchandising business, including a look at how digital is impacting the industry.

TV Kids also speaks with Edward Catchpole, the senior VP and general manager of HIT Entertainment, about the ways in which the company is responding to the changes in how kids are consuming media.

At the end of the day, Catchpole reminds us, all of the toys and digital bells and whistles mean nothing if there’s not a good story and beloved characters at the heart of the property.

—Kristin Brzoznowski

6 TOY STORIES At Brand Licensing Europe in London, brand owners will be busy pursuing toy, apparel and back to school, among the traditional categories, while also exploring apps, games and e-books to extend their properties.

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INTERVIEW

12 HIT Entertainment’s Edward Catchpole

The head of the Mattel-owned outfit talks digital deals, enduring characters and the importance of toys.

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TOY ITVS GE’s Thunderbirds Are Go.

Kristin Brzoznowski surveys f you’ve ever gone toy shopping with children, you know well how their eyes light up the minute they notice one of their favorite TV characters featured on the shelves. (This is usually followed quickly by an “I want!” and a “Can you buy this for me?”) Adults are not immune to this attraction either, as they often gravitate toward products associated with the latest blockbuster movies or their favorite television shows.

Indeed, the entertainment licensing industry saw a nice lift last year. Sales of licensed entertainment merchandise accounted for $2.66 billion in royalty revenues in the U.S. and Canada, and an estimated $51.44 billion in retail sales in 2013, according to the Licensing Industry Merchandisers’ Association. That’s an increase of 4.3 percent from the previous year. And, not surprisingly, merchandise from children’s TV programming was a big driver for the business.

But all is not necessarily on the rise within the kids’ licensing and merchandising (L&M) industry. While it may seem like most markets are on their way to having recovered from “the Great Recession” of years past, those in the L&M business are still dealing with some of the after-effects. Notably, retailers remain cautious of working with new, unproven brands.

“It’s tough to launch new properties into the market without a big marketing spend and confidence around the property,” acknowledges Trudi Hayward, the senior VP of global merchandising at ITV Studios Global Entertainment (ITVS GE).

Lucky for ITVS GE, its portfolio is led by the flagship property Thunderbirds Are Go, a reimagining of the iconic 1960s Thunderbirds series. Not only does this property come with brand recognition, there’s already quite a bit of buzz around the new iteration.

ITVS GE also has the Thunderbirds Classic property, which is celebrating its 50th anniversary. Hayward says that the veteran brand has seen renewed interest from licensees in the collectible niche categories.

“We tend to look at toys, publishing, DVD and digital as the launch categories, and then we extend into the peripheral categories of softlines [apparel, footwear, etc.], paper products, back to school, lunchware and homewares once we know the kids are engaged,” says Hayward of the company’s L&M approach. “We pretty

t

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Y STORIES the latest trends in the kids’ licensing and merchandising business. much have all of these categories covered across our portfolio. Construction is a segment we want to be dominant in with Thunderbirds Are Go, as the property lends itself perfectly to this category.”

Another classic brand returning to the marketplace is Danger Mouse, which makes a comeback more than two decades after the popular show originally went off the air.

FremantleMedia Kids & Family Entertainment (FMKFE) owns the global TV and licensing rights for Danger Mouse and is partnering with CBBC to produce the new series.

Rick Glankler, the executive VP and general manager of FMKFE, says that there has been “an overwhelmingly positive response” to the news that the show is coming back in an updated format. This buzz should bode well for the property’s impending retail launch.

FMKFE has already enjoyed L&M success with the Tree Fu Tom property, which has an established TV presence. There are around 30 British licensees on board, covering toys, apparel, publishing, lunchware, apps and bedding, according to Glankler, “and we are now working with a number of international agents across Europe and the Middle East.”

There are already more than 300 licensees for Maya the Bee covering all major categories, according to Marchand, including food, promotion and loyalty programs. For Vic the Viking, between the German and Benelux market, there are now approximately 60 partners, with Simba Dickie as the master toy licensee for

STRANGE TIMES For Strange Hill High, which has also had time to build up a TV following, the consumer-products line is just starting to roll out in the U.K. This includes products in the toys, books and DVD categories, with other lines to launch later this year.

The focus now for both Tree Fu Tom and Strange Hill High is to break out of the U.K. market and sign up more international agents. For its newer properties Ella the Elephant and Kate & Mim-Mim, FMKFE is focusing first on lining up master toy, publishing, digital and apparel licensees.

Similarly, Studio 100 International is betting on the built-in recognition and nostalgic values of its revamped classics Maya the Bee, Vic the Viking and Heidi to help drive retail success. “These are classic brands from the ’70s that parents know and like,” says Marie-Laure Marchand, the international licensing director at Studio 100 International. “They have grown up with these brands and have developed a special emotional bond with them, and can now see them rejuvenated in CGI with their children.”

FremantleMedia Kids & Family Entertainment has a host of toy partners on Tree Fu Tom.

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won over kids (and parents) around the globe. The property is celebrating its tenth anniversary in the U.K. this year, and internationally the brand continues to strengthen its foothold in key markets such as Australia, Italy, Spain, Latin America, the U.S., Russia and Benelux.

“Most categories are already in place for Peppa in the U.K., but we’re always looking for more,” says Hannah Mungo, the head of U.K. licensing at eOne Family. She notes that around 12 new licensees have been signed for Peppa in the last year, and that eOne is careful to ensure that new partners bring unique selling points and don’t dilute sales for existing licensees. eOne is also firmly focused on its L&M plans for Ben & Holly’s Little Kingdom, which has now achieved full retail distribution throughout the U.K. following Character Options’ relaunch of the master toy line this summer. The Character Options range will also be distributed globally throughout 2014 and 2015. Mungo says that toys, DVDs and publishing are the core licensing categories for Ben & Holly at present.

TODDLERS UNITE

Studio 100 is pursuing toy and gaming deals on its refreshed classic Heidi.

Germany, Austria and Switzerland. Studio 100 has also developed more than 50 board games, puzzles, books and arts and crafts tied to the brand. For Heidi, the company secured a number of publishing deals and is now in discussions for toys and games.

“Retailers are looking for sure-fire hits with their customers and are also expecting heavy and creative marketing campaigns to help drive brand awareness,” says Marchand. “It is increasingly difficult for new brands to get through nowadays unless children have developed relationships with the characters.”

Many in the L&M industry share Marchand’s view about the difficulty of launching a new brand. This is especially true for independent companies that are competing in a market dominated by powerhouses such as Marvel and Disney.

Entertainment One (eOne) Family was able to buck this trend with its smash hit Peppa Pig. The series and its companion consumer products have

Both Peppa and Ben & Holly tap into the lucrative preschool market. Also angling for a piece of that pie is the brand-management firm m4e with its new property Tip the Mouse. Based on a set of successful children’s books, Tip the Mouse launched as a TV series this fall. Despite the show being new to television, the company is already looking at ways of extending the brand at retail, according to Bernd Conrad, the head of licensing at m4e. The first categories, with product launches in 2015, are toys, magazine publishing and home entertainment.

The German outfit already has an L&M hit on its hands with Mia and me. The TV show airs on broadcasters in more than 80 territories, with this exposure helping to push a successful consumer-products program that continues to gain momentum.

“Two years after the initial launch of licensed products in the German market, Mia and me is one of the best-performing girls’ properties on an international level,” says Conrad. “There are more than 120 licensees on board worldwide at the moment.”

While the focus has primarily been on physical product segments, Conrad acknowledges that digital must also be part of the plan for any property launching nowadays. This is particularly true, he says, when it comes to home entertainment. Conrad believes that a multiplatform strategy is best in order to serve those markets where physical DVDs are still strong and also those where SVOD and OTT are picking up steam.

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“We see the same in publishing,” he says. “The e-book market is growing for kids’ titles, but not really as a substitute for printed books. The smart way is to offer different forms of entertainment. An e-book with some animated content can be nice to read and watch in the afternoon, while a printed book is still first choice for nighttime.”

Cyber Group Studios is also making use of the new opportunities popping up in the digital space. For its TV series Zou, which has sold in more than 150 territories, there are e-books and apps in multiple languages.

The Zou app has been particularly successful, according to Pierre Sissmann, the chairman and CEO of Cyber Group Studios. However, even with this strong performance, the revenue it delivers just can’t compare with what a successful toy line can bring in, he says.

“I have not seen any independent producers bringing in big revenues from digital,” asserts Sissmann, “even though a lot of people seem to be bragging about it.”

He views apps and other digital extensions not as moneymaking ventures, but as tools to give youngsters deeper engagement with a brand. “People have looked too much at doing apps just as a way to increase revenues [to counter] having fewer sales for toys or apparel,” says Sissmann. “But apps are not just another line of revenue; they have their own specific entertainment content. Instead of [looking at it simply as a] source of revenue, I’m looking at digital as a way to involve our viewers in a different kind of entertainment and to complement the experience they have watching a show.”

For Cyber Group’s latest launch, Mirette Investigates, the company is developing a set of apps right alongside the development of the series itself. Sissmann promises that the Mirette apps will deliver a fully immersive, 360-degree experience. Cyber Group is working with a major tablet manufacturer on this effort, to allow children to interact in real time with the stories they’re seeing on the TV screen.

DIGITAL PLAYGROUND Studio 100’s Marchand has a similar view about how digital is impacting the children’s L&M industry. “This is a growing side of the Studio 100 business model, although it is currently quite low in terms of revenue,” she says. “We have created a new dedicated digital department at Studio 100. We are developing our own apps and websites and will be launching an extensive social-gaming platform—which will include e-books, episodes and games showcasing our main properties—in Belgium and the Netherlands very soon.”

Marchand adds that Studio 100 is exploring opportunities to extend this platform internationally, with the

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intent that these activities in the digital sector will not hinder sales of products that involve physical play.

Children’s play patterns are changing, though. Kids today are constantly plugged in, using smartphones and tablets with ease. It’s not uncommon to see even the youngest of toddlers clutching an iPad nowadays.

This has led many in the children’s L&M business to ramp up their digital strategies, making them a key part of the overall consumer-products package, regardless of the size of the revenue return.

At FMKFE, for example, there are already three apps for Tree Fu Tom and more to be announced. The brand has a presence on CBeebies Playtime, currently the U.K.’s number one preschool app. FMKFE also developed, with Crane Media, Tree Fu Tom 3D Adventures,

m4e is already developing the licensing plans for Tip the Mouse, which is new to TV but has strong brand heritage from a series of books.

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which was the U.K.’s second most popular paid app at launch, as well as Tree Fu Tom Squizzle Quest, developed with Cupcake Digital. “The apps are each distinctive and offer alternative ways to further engage with the brand,” says Glankler.

He adds that many of FMKFE’s publishing partners have also come out with e-books, which have extended their businesses rather than cannibalized the sales of physical books.

BALANCED APPROACH

eOne is currently focusing on the consumer-products campaign for Ben & Holly’s Little Kingdom.

Even with this increased focus on digital, FMKFE has not forgotten that traditional forms of entertainment are still relevant in the kids’ market. “Live events and attractions targeted at preschoolers are continuing to grow, as many theme parks are realizing the benefits that can come from getting families in when kids are at an earlier age,” says Glankler. “We have seen this with the recent inclusion of Tree Fu Tom in CBeebies Land at Alton Towers [Resort].” eOne is also carefully balancing its emphasis on the digital and physical product segments, and has not seen one take anything away from the other. “We have launched apps, e-books and digital magazines, and sales have been purely incremental,” says Mungo.

“Consumers are still buying physical products, but are also engaging with digital content. This is a huge opportunity for us, and this area will continue to adapt and grow.”

Another development within the L&M arena that Mungo has taken notice of is the changing nature of relationships between retailers and brand owners.

Cyber Group’s Zou has done well across a host of L&M categories.

“Retailers are much more keen to build relationships with licensors directly, which has a hugely positive impact on all parties: retailers, licensors and licensees,” she says. “Retail teams are starting to see licensors as key sales drivers for [product ranges]. We are all after the same thing at the end of the day, so working together to make that happen seems like the obvious plan.”

In today’s competitive marketplace, more and more alliances are being formed early on between retailers and independent producers—in some cases, at the inception of the IP. This is a route that Cyber Group is pursuing, Sissmann says.

The company is working with a major toy company on a new animation project that the two are creating together from scratch. “We are jointly thinking about the characters and the story lines at the same time as we’re planning the toy lines and interactive development,” says Sissmann. “It’s not like we create a story and then go after licensing on our own. I think those days have passed because of the way the market has evolved.”

Cyber Group is also in advanced discussions about a new IP with a leading video-game company, with plans for the simultaneous release of a multiplatform game and media exploitation through traditional and digital channels.

Sissmann sees this as one of the major developments for the future of the business, and many others in the children’s L&M industry agree. Retailers and producers starting strategic partnerships at the earliest possible stages of projects could certainly be one way to overcome the challenges of the still-risk-averse market.

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HIT Entertainment’s

Edward Catchpole

By Mansha Daswani

Early this summer, HIT Entertainment entered into a partnership with Amazon that many are calling a revolutionary new distribution model for the kids’ programming business.

The online retailer is now offering its U.S. customers streaming access to the preschool hit Fireman Sam alongside a host of related merchandise, from e-books to lunchboxes. For Edward Catchpole, who moved over from Mattel to take up leadership of HIT following its sale to the toy giant, the Amazon deal speaks to the ways in which the company is responding to the dramatic changes in how kids are consuming media today.

TV KIDS: What were some of the key strategies you implemented at HIT following the sale to Mattel?

CATCHPOLE: As a division of Fisher-Price/Mattel, HIT is the content engine for our preschool brands. HIT brings new capabilities to Mattel, with expertise in storytelling, content development, production, distribution, live events and attractions on a worldwide scale.

We [set out] to build a phenomenal organization, with very talented individuals creating stories that engage, inspire and captivate children. If you don’t do that, you have nothing. We want children to care about our characters. We want them to laugh with them and be invested in them. That is very different from, “Here’s a toy, how do we sell it?”

Furthermore, establishing a centralized creative structure in the U.K. helps us rally as one organization with clear priorities and the flexibility to support our global activities as needed. This approach reinforces our position as a true creative hub, while helping us strengthen our relationship with our partners worldwide and improve the quality of our output.

TV KIDS: What benefits does HIT derive from being part of Mattel?

CATCHPOLE: We have access to resources to invest in redeveloping our brands. In August, we premiered Thomas & Friends: Tale of the Brave. I believe it is the best movie we’ve produced to date. I had challenged the [creative] team to produce an epic for 3- and 4-year-olds.

It had to justify parents getting out of bed on a Saturday morning and taking the children to the cinema.

Mattel is a global company, so there’s an ability to invest in and scale the brands around the world. For the first time, Thomas is taking off in Latin America.

It’s in Russia. It’s in China. As we approach the 70th [anniversary of Thomas the Tank Engine] next year, we’re expanding the brand not just to new generations, but to new continents as well.

TV KIDS: Why do you think Thomas has been able to endure for so long?

CATCHPOLE: In the U.K. it’s almost a rite of passage for a little boy to get a Thomas book. Thomas is like a cheeky little boy; it’s very easy for a young child to connect with the experiences he has and the challenges he faces through the stories we tell. That’s the first reason. The second reason is that trains themselves, and especially steam engines, are incredibly interesting for 2-, 3-, 4-year-olds. Combine the physicality of the trains with the emotional connections to the characters—that’s why those Thomas stories that the Reverend Wilbert Awdry wrote so many years ago are still absolutely relevant for today’s children.

TV KIDS: What led to the deal with Amazon for Fireman Sam?

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HIT has inked a deal with Amazon in the U.S. that includes streaming rights to Fireman Sam.

CATCHPOLE: If we look at the last 50 years, content consumption for preschoolers has been dictated by the schedule. If the program a child is watching on television isn’t engaging, they won’t switch the TV off; they will just start playing with a toy or go to mum and dad. Content producers like us had been protected by the schedule.

Once smart TVs, tablets, etc. hit the tipping point of penetration within families, content consumption will no longer be dictated by that schedule. If content on my tablet has not engaged my 4-year-old son within the first two minutes, he’s looking for something else. We need to make sure that our content is engaging.

There is also massive change on the distribution side.

The linear process—developing a series, 26x11 or 52x11, built around schedules—is going to shift. However, terrestrial is still very important and it will continue to be. The partners we have around the world are not going to disappear, but they will shift more towards digital. As you move to digital, there are new partners playing in that space. It’s important for our brands to be available to our audiences wherever they are. We do not have a broadcast channel, and that gives us huge opportunity to partner with the best [platforms] around the world.

We had conversations with Amazon about how they approach content. Together, we developed a unique way to launch preschool content in the U.S. We’re taking a longer-term view. We’re saying, let it slowly build, and we think it will [endure] over a longer period of time. We also looked at the whole ecosystem of how our consumers now engage with content and how to activate brands within that ecosystem. Partnering with Amazon enables us to explore a new way of brand activation.

TV KIDS: What are HIT’s greatest opportunities in this shifting landscape?

CATCHPOLE: This year, we’re seeing our new content— based on ideas and strategies put in place when [Mattel] acquired the company—released into markets. Our approach is [to produce] exceptional content in a wide, wonderful world that is totally fragmented, where the rulebook has been thrown out the window, where we’re playing with short form, long form, linear TV—with the world’s largest toy company behind us. Toys are really important. Brands that truly become global and powerful are the ones that a child wants to engage with in multifaceted interactions. The toy is the physical embodiment of the brand. When you’re 3 years old and you love Thomas, the first thing you want is Thomas, and Thomas is the die-cast or wooden toy train. Kids will engage with the content in a book, in a movie or in a TV series or app, but with the toy, they are controlling the story. There’s a symbiotic relationship between content and toy.

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