KidsCo Targets Gap In Children’s Genre

Distributed in several million homes in Asia and growing quickly, NBC Universal-affiliated children's channel KidsCo says it has to thank its low-cost business model, as well as the support of well-established stakeholders, for its progress.

“In markets where there is data, we’re always a top-five channel or top-three channel,” said managing director Paul Robinson. “Given what we charge platforms, if you look at the viewing per cent paid for a channel, we’re probably the highest value for money, because we’re so much cheaper. If we have half the audience Disney has, we’re probably one-fifth of the price of them – so I’d argue that we’re 2.5 times as good value,” he added.

KidsCo is not yet making money, although it has hopes of going into black in the medium term. It now broadcasts to 59 countries worldwide, with the latest being its November launch this year in Australia on Foxtel.

Asia currently makes up around 20% to the company’s global revenue, with Hong Kong and the Philippines contributing the most. In the past year, KidsCo has launched in Vietnam, Hong Kong, Indonesia, Sri Lanka, Maldives, Thailand, South Korea and Taiwan.

The channel was formed in April 2007 by Canadian children’s broadcaster Corus Entertainment, American producer DIC Entertainment and European broadcaster Sparrowhawk Media Group. NBC Universal bought into the brand when it acquired Sparrowhawk later that year, while DIC was bought out by around notable Canadian producer Cookiejar Entertainment.

Now CookieJar Entertainment and Corus Entertainment each hold a 33% stake, while NBC Universal holds 27%, and two individuals make up the remainder.

Growing Asia distribution
Of the three ‘big’ markets in Asia – China, India and Japan – KidsCo took the view that India was the easiest to get into. It has a joint venture with NDTV, and is in discussions with all the major DTH operators, ready for a possible launch in 1H 2010, pending approval of landing rights.

One rapidly growing market is Vietnam, where the channel is distributed in 0.5 mil. households on metro cable players VSTV, Ho Chi Minh and Hanoi Cable. Thailand is also strong in subscriber numbers, but underreporting and piracy continue to weaken revenue across Southeast Asia.

Two-thirds of the schedule is the same irrespective of feed, and the rest is customized to the region. More emphasis will be placed on local Asian content, with co-production deals already in place in Malaysia and Korea. The channel currently generates no meaningful revenue through the syndication of content or by selling advertising, however, non-linear services such as VOD and SVOD are viewed as a potentially strong growth area.

One deal with Malaysia Airlines to screen content on its flights is an important tool to grow eyeballs and extend the brand. But so far, non-linear accounts for less than 10% of revenue, and its key to have the linear channel to help prop up its non-linear offering.

The channel is sold by a combination of KidsCo, agents in specific territories and NBCU. In certain markets, NBCU is a useful partner to take advantage of, to be part of its bouquet of channels. In others however, the non-portfolio sale is better – where a platform is either strengthening its kids or family line up, or using KidsCo to replace a channel whose contract is expiring.

KidsCo tends to be packaged in extended basic tier or family package, used by platforms as an upsell, to boost ARPU. “If you’re going into the basic tier operators are thinking, ‘Why should I do that, because you’re not going to grow my distribution?' All you’re going to do is hit my margin and there’s no advertising either.”

A different business model
KidsCo aims to target what it perceives as a gap in the market, children aged 6-10 years old; while Disney and Nickolodeon tend to go with older children with the likes of High School Musical, Jonas Brothers and programming targeting 'tween' girls, Cartoon Network and Jetix are heavily geared towards action-orientated programming for boys, says Robinson. In addition, the sheer amount of children’s content available on the market means KidsCo will never be short of supply.

“Third-party budgets have been falling, so they’re not acquiring much stuff outside their own – they want to own it right through the value chain. There’s now a lot of content creators unable to find a route to market, and in the children’s business, there is no lack of supply,” Robinson said.

The channel may not command strong carriage fees from platforms but it’s also committed to keeping costs to their absolute minimum; one way is by ingesting all tapes digitally and sending out digital files electronically, saving on play-out costs and couriers.

In addition, instead of paying a commercial license fee, it offers content providers a revenue sharing arrangement. The deal remains an attractive prospect, with the channel currently having around 15 content partners, including big names such as BBC Worldwide, and Sesame Worldwide (producers of The Sesame Street).

A significant part of the value chain for kids’ entertainment is in the back-end such as merchandising, toys and DVDs, so the channel is keen to get a slice of that pie, Robinson explained. “If you haven’t got eyeballs, you can’t sell your merchandising. So we thought we have a play here: bring all the content creators in to give them a platform and then we can make money on the back end.”