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4Kids makes a bold move

Mar 18, 2002  •  Post A Comment

Al Kahn wanted to control his own destiny.
Like a number of independent producers and program suppliers, he liked the idea of having a piece of broadcast real estate to call his own. He wanted a place where he could break hits like “Pokemon,” the Japanime phenomenon that his company, 4Kids Entertainment, brought to the United States in the late ’90s.
With a recently inked deal with the Fox network, 4Kids Chairman and CEO Mr. Kahn now has that home. But at the whopping cost of $100 million for four years of leased Saturday morning time starting this fall, many in the kids television industry wonder how-save a “Pokemon”-size success, or several of them-Mr. Kahn can make his investment pay.
Consider this: Above and beyond the hefty price tag for the four-hour block, 4Kids still has to pay to populate it. The New York-based company will pick up the tab for creating or acquiring new programming; the full schedule hasn’t been announced, but so far 4Kids is producing three half-hours and buying one Federal Communications Commission-friendly series from DIC. If some or all of the shows don’t jump out of the gate, the company will have to pull them and try again.
In addition, Mr. Kahn said the company has committed to a multimillion dollar push to promote and market the shows to a highly splintered action-loving kid audience. His target-the elusive 6- to 11-year-old boy.
And the 4Kids deal was made against a backdrop that some in the industry said makes it even more daring-Fox affiliates have long wanted to divorce themselves from the kids business, and they successfully lobbied the network to drop its weekday afternoon kids programs.
The advertising market, in shambles across the television landscape for the past year, has been slow for the past four years in kids programming as supply boomed and demand waned. With the commercial time it will retain, 4Kids would need to garner at least a healthy $7,600 per commercial unit to potentially break even on its investment, a New York ad-buying source estimated.
If those weren’t enough hurdles, 4Kids will be launching the new block without its crown jewel, “Pokemon,” which remains committed to Kids’ WB.
None of this comes as news to Mr. Kahn. Instead of looking at the challenge as insurmountable, he sees it as an opportunity to set his own course.
“When this came up, it was almost like a divine thing,” Mr. Kahn said recently. “It was the answer we needed.”
There were other big-league bidders for the Fox daypart, including Nickelodeon, DIC and Warner Bros., who dropped out as the figure reached $25 million a year. 4Kids could extend the deal to six years, through the 2007-08 season, committing more than $150 million in all. In contrast, Discovery Communications recently agreed to pay NBC $8 million a year for its three-hour Saturday morning block, a sum that looks paltry in comparison.
What 4Kids gets for its buck is a consistent platform, available in 90 percent of the country, without relying on The WB, The Walt Disney Co. or other broadcast owners to buy their programs. That also means a leg up in selling the shows internationally (because those buyers value U.S. airtime) and a way to seed demand for home videos, toys, software and other licensed merchandise that comes from various 4Kids divisions.
“We’re looking at everything in a synergistic way,” Mr. Kahn said. “We’re asking ourselves, `How do we maximize the kids business we have?”’
4Kids is a multipronged company, with licensing, media buying, Web site design, movie and music production under one roof. It’s best-known for importing “Pokemon,” which started as a Nintendo game in Japan, and channeling it into one of the biggest successes in kid television and merchandising history. The pocket monsters and their licensed swag have pulled in $10 billion since their introduction. They once made up nearly 95 percent of 4Kids’ sales, according to the company’s annual reports.

Like all white-hot fads, “Pokemon” has cooled, and the company has looked to other properties to pick up the slack. 4Kids relaunched the Cabbage Patch Kids dolls last fall, with an exclusive deal for “adoption centers” at 1,500-plus Toys “R” Us stores. Mr. Kahn was part of the team at toy company Coleco in the ’80s that introduced the dolls, which went on to become a $2 billion franchise. On the programming front, 4Kids has launched two new series, the computer-generated “Cubix, Robots for Everyone!” and “Yu-Gi-Oh!” both airing on Kids’ WB. “Cubix” has been renewed for a second season, and “Yu-Gi-Oh!” goes to a six-day-a-week strip this spring, with trading cards and Mattel toys hitting shelves shortly.
Licensing deals with Hasbro and Nintendo mean that TV programming ideas, with built-in merchandising appeal, could spring from the deep bench of either company.
4Kids’ well-roundedness gives it a solid foundation, said many industry veterans.
“I think their toy background will work very much in their favor,” said Gary Caplan, who scouts entertainment licensing opportunities for companies such as Thermos and Buster Brown.
“They understand retail, and they understand what the kid consumer is looking for. They have their eyes and ears on kids worldwide.”
There are some logistics of broadcasting that will be foreign to 4Kids. Former Fox Kids executives had long complained about Saturday morning pre-emptions by sports programming and the difficulty in getting affiliates to help drive tune-in to the kid blocks.
“I know how difficult it was, even when we had a lot of resources in-house, to get attention and ratings,” said a former senior executive. “And 4Kids has no infrastructure as a broadcaster. It’ll be a tough road.”
4Kids is offering affiliates more local commercial time than Fox did, hoping that will help garner their support. If the block makes them money, Mr. Kahn said, affiliates will get behind it. The contract stipulates a limited number of pre-emptions as well. And for additional chest-pounding for its programs, they’re 4Kids is on the hunt for potential cross-promotional partners who could pair its shows with fast food, soda, snacks and grocery store goodies.
“They’re taking a formula that’s worked in syndication-staking out a block of programming-and applying it to broadcast,” said Ronni Pollack, a licensing veteran and president of The Licensing Department, Los Angeles. “They’ve proven that they have an eye for identifying properties and that they’re great marketers.”
For all his enthusiasm, Mr. Kahn is clear-eyed about the Saturday block.
“We have a media buying company, so we know what the CPM levels have been for kids,” he said. “In the current ad environment, will we sell enough advertising to pay for the time we bought? The answer: If we have a hit, definitely yes. If not, probably not.”