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4Kids positioning its Fox Saturday

Jan 28, 2002  •  Post A Comment

4Kids Entertainment, which paid $25.3 million a year to lease Fox’s Saturday morning kids block, is expected to use its clout as a licensor for companies such as video game giant Nintendo and toy giant Hasbro to tailor new kids’ series with built-in merchandising opportunities.
Two series already slated for the Saturday schedule, which 4Kids will start programming in September, are the boys-oriented imports “Ultraman Tiga,” a revival of the longtime live-action franchise (from Tsuburaya Co. of Japan), and “Kinnikuman,” an animated action series (from Toei Corp. of Japan).
One other provision of the deal with Fox calls for 4Kids to provide a half-hour of educational programming-to help meet the federally mandated Children’s Television Act of 1994-each Saturday. 4Kids Entertainment Chairman Al Kahn confirmed that 4Kids is negotiating a deal with Andy Heyward’s DIC Enterprises (which had also bid for the Saturday Fox block) to provide a so-called “FCC-friendly” educational series for next fall.
To fill the remaining 21/2 hours, Mr. Kahn said his company would mine other Asian production suppliers and potential outside U.S. program suppliers for product. Typically, 4Kids acquires worldwide licensing rights to a series from an Asian production company, while the producer retains the Asian rights. While the deal between Fox and 4Kids was for four years (and a total of $101.2 million), the licensing giant also has the option to extend the contract two additional years. If 4Kids options the final two years (extending through the 2007-08 season), it would be committing more than $150 million for the full term of the deal.
4Kids, which is traded on the New York Stock Exchange, has also been granted the option of paying $10 million of the annual license fee through shares of its stock. Another qualifier of the deal is local Fox affiliate carriage, where Fox is guaranteeing about 90 percent U.S. broadcast coverage; if it drops somewhat below that point, Mr. Kahn confirmed there would be an unspecified “pro rata deduction” to what 4Kids pays in its license fee.
In an attempt to get Fox affiliates on board, Fox got 4Kids to agree to offer 20 commercial units (at 30 seconds each) on a weekly basis, five more local units than affiliates got under the old split with Fox.
4Kids will retain eight minutes of national ad time per hour (compared with the affiliates’ 2.5 minutes of local ad time), which means the company will be placing 64 commercial units per week (or 3,328 national units for an entire season) in what has been a deflated kids ad market for the past four years. Taking into account 4Kids’ $25.3 million per year investment, one New York ad-buying source estimated that the company would need to garner at least $7,600 per commercial unit in order to potentially break even on its investment.
“It’s actually not that high of a bar for them to clear, but we’re really going to have to get an idea of what other original programming they’re bringing out before we even get close to haggling over pricing,” said a New York-based kids buyer who requested anonymity.
Mr. Kahn also said 4Kids will be seeking a “third-party,” outside sales organization to handle national sales because the company’s Summit Media Group (headed by Shelly Hirsch) is an established media placement company that handles ad buys for Nintendo and other major advertisers.
“There has to be a clear [separation] of church and state here, because any advertisers we get will have to feel they are getting a fair shake on competitive pricing” in the overall kids market, Mr. Kahn said.
Fox informed its affiliates of the 4Kids deal on Jan. 20, the day before the start of the National Association of Television Program Executives convention in Las Vegas. During the Fox affiliates meeting, some local station executives caught off-guard by the deal’s closing were questioning whether Fox’s charter affiliation agreement left it open for the network to cede the entire Saturday morning to an outside program supplier.
“Anytime that you subcontract out your time, it’s our responsibility as broadcasters-it’s one of the fundamental rights we have as broadcasters-to protect our airwaves,” said Mark Higgins, general manager of WOFL-TV in Orlando, Fla., who is also Fox’s new affiliate board chairman. “So until we know exactly what the deal is, we can’t respond.”
However, Mr. Higgins said an open-forum conversation with Fox Television President Tony Vinciquerra, who offered some more background on 4Kids’ credentials in the kids licensing and programming markets, made him and other affiliates “feel better at the end of the conversation than we did starting the conversation.”
“It’s looking somewhat positive,” Mr. Higgins added. “We did a lot of asking … and Tony graciously has said he would send us all of the deal points so we can get better familiar with this.”
In the last couple of years, some Fox affiliates have expressed the desire to get out of the kids business entirely, even more so when Fox dropped its weekday kids block this season. Looking to extend another carrot, Mr. Kahn said 4Kids plans to fully support with advertiser tie-in promotions and is “studying the prospect” of putting together a “co-op” promo fund for affiliates to tout 4Kids’ newly revamped block.
“We’ve met with Tony, Mark and the Fox affiliate board, and we’ve tried to reiterate that we have a clearly vested interest in making sure the block works and that we’re going to provide extensive marketing and promotional support,” Mr. Kahn said.
Karissa S. Wang contributed to this report.