As the gamut of entertainment mediums for children grows ever wider, Andy Fry profiles how over-the-top programming services are adapting their offers to garner attention, and attract eyeballs, from kids of all ages.
In the last five years, kids’ media consumption has changed beyond recognition in advanced economies.
The advent of OTT and on-demand technology, coupled with widespread uptake of tablets and smartphones, means every kid from preschooler to teen can tailor their content choices to suit their interests.
New research from Viacom and Nielsen shows that this hasn’t harmed the TV business, with TV usage up 12% since 2005, but it has changed the way kids access and interact with content. Younger audiences have decoupled from linear TV, with mobile devices emerging as electronic babysitters. For older kids, it has created a media maelstrom, with teens becoming their own channel chiefs, as shortform content vies for attention with user-generated content, social media and gaming.
All of which is having a profound impact on the kids business, encouraging new players to challenge the dominance of Disney, Nickelodeon and Cartoon Network. From global platforms like Netflix and Amazon to niche players like Toon Googles, Kidobi, Kidoodle, Ameba and Hopster, there are more places to go for content.
This in turn has drawn a reaction from the Big Three, which have responded with their own online and VOD services such as Viacom’s My Nick App. New entrants have focused on the three-to-eight year-old market, where the consumer proposition is more easily defined.
At UK-based start-up Hopster, the aim is to offer safe, ad-free content for kids aged two-to-six, says company CEO Nick Walters, a former Viacom executive. “We have 1,000 episodes under licence from Entertainment One, DHX, Nelvana and Millimages, including 64 Zoo Lane, Ben and Holly’s Little Kingdom and Little Bear. There’s also a suite of games that are fun, but with a learning dimension.” Given the age group, Hopster’s pitch is to parents looking for a controlled content environment for their kids. “It’s available as an iPad App at £3.99 (US$6.63) per month,” says Walters. “For that price, parents know that there will be no commercial messaging and no chance of their child clicking on to inappropriate content, which is a risk with letting them loose on YouTube. Being on an iPad means it is also more stimulating and interactive than TV.”
In broad terms, Hopster’s approach resembles that of Canada’s Kidobi, whose director of research and content Eric Sorenson says: “We’ve carefully selected content that can have a positive effect on a child’s behaviour. It avoids the situation where kids watch content that is not aligned with their specific learning needs.”
Like Hopster, the service is available via mobile devices for a monthly fee but it differs in four main ways. Firstly, says Sorenson, there is a free tier, designed to encourage trialing. “Then there is a strong personalisation component, so as kids build up their profile, they get tailor-made video playlists that reflect their preferences,” he says. “Thirdly, there is content directly related to the educational curriculum. Finally, we source some of our content from non-traditional platforms.” YouTube is one such source with content from the Google-owned online platform sitting alongside shows from the likes of Foothill Entertainment [Eddy & the Bear] and Endemol [Bananas in Pyjamas], “We found a fantastic kids yoga channel that we embed on Kidobi,” says Sorenson.
This echoes the road taken by Toon Goggles, a US-based service that has built a registered user base of two million kids (primarily in the four-to-eight age range). “We started out as a VOD service,” says managing director Stephen Hodge, “but we see ourselves much more as an entertainment on demand platform these days. Our experience is that it’s very hard to keep the attention of users over an extended period of time, so in addition to high-quality shows like Bernard, we have a growing portfolio of games, music, educational and shortform content.”
Toon Goggles has established its user base by partnering with digital services ranging from Roku to Samsung’s smart TV platform. According to Hodge, the base could rise to five million by year-end. “We approach the market with the mindset of a software company,” he says. “Wherever the kids are, that’s where we want to be. It’s about growing like a virus.” Toon Goggles has a freemium model that allows kids to access ad-supported content for free, or pay US$5 for a premium ad-free service.
Some older kids use the service, which has prompted Hodge to think about whether there is a need for an older-skewing element. If that does happens, it won’t contain social media components. “I haven’t seen any successful examples of the Facebook for kids model,” says Hodge.
The commercial insight behind all of this is the new landscape opens up gaps that didn’t exist in the two-track world of free and pay TV. However, there are challenges turning this into a reality, notably pricing, marketing and content acquisition. Hopster, Kidobi and Toon Googles are asking families to divert discretionary spend that could be spent on pay TV, Netflix, Moshi Monsters, game apps, comics, partwork hobby publications or DVDs.
For Hodge, it’s a reasonable ask. “We fill a need for children amid all of the entertainment options, and there is great content out there, particularly among the indie studios with archives,” he says. Hopster’s Walters is equally upbeat. “Research suggests UK parents spend £10-15 a month on digital preschool content, over and above pay TV, so our job is to offer a great, keenly-priced service,” he says. “As for marketing, we need to avoid getting involved in an expenditure arms race and build out via user recommendation.”
One VOD platform that seems to have reached the critical mass required for survival is Splash Entertainment’s Kabillion, which is currently in 50 million US homes and is on course to hit 60 million by year-end.
Nicolas Atlan, co-CEO at Splash (fka Moonscoop US) and president of Kabillion, says several factors have contributed. “Strong brands are key, so we have mixed the best of our shows, like Hero 108 and Code Lyoko, with great third party shows like Power Rangers and Dragonball Z,” Atlan says.
In its current form, Kabillion is an ad-funded service that is available free as part of a cable subscription or via a dedicated YouTube channel. “For now, our approach is to offer individual episodes of shows rather than entire series,” says Atlan. “The next step for us would be to look at the viability of launching a subscriber-based application where we offer entire series.”
The new landscape has big implications for independent content studios, which now have to weigh up the benefits deals with established players against the opportunities from OTT and on-demand. For Hasbro’s senior VP, international distribution and development, Finn Arnesen, the priority is to maximise distribution revenues and generate mass awareness for the company’s toy-based franchises.
“If you can get one of the dedicated kids broadcasters to pay a reasonable amount for your rights and get international exposure for your show that’s still a very attractive proposition,” he says. “We will always talk to broadcasters about opening up windows for on-demand platforms like Netflix and Hulu, but we’re unlikely to give a pay TV platform complete exclusivity”.
A good illustration is the series of big brand on-demand deals the company has done with Netflix in the US. In 2012, it granted the VOD platform rights to series including Transformers Prime for its Just For Kids section. A year later, it expanded the deal to include Kaijudo: Rise of the Duel Masters and Littlest Pet Shop.
The Jim Henson Company’s executive VP distribution Richard Goldsmith also sees opportunity. “We did some significant library deals with Hulu, Amazon and Netflix,” he says, noting that hit show Dinosaur Train is present on all three. “We also launched Jim Henson Family TV as an ad-free SVOD channel on YouTube and as a branded channel within the Hulu Kids.” However, the market has changed, he adds. “Netflix, Amazon and Hulu are getting more selective and looking for original or exclusive content, so that means I tend to view them like a TV platform,” he says. “Now, when Henson is developing a series, we talk to them at the same time as the 15 free and pay TV players we’ve always dealt with.” This has had tangible benefits and Henson has previously piloted show called Teeny Tiny Dogs for Amazon Instant Prime.
DHX Media’s senior VP, distribution Josh Scherba says his company wants to work with the widest range of partners possible. “Netflix and Amazon can only tailor their services so much, so a dedicated kids app that manages to get a few hundred thousand subs at a few dollars a month looks potentially viable to me,” Scherba says. “From a content owner’s point of view I’m happy to work with services like this in return for a licence fee with a minimum guarantee.” Like his peers, Scherba has seen the shift towards cherry-picking, “but that hasn’t diminished the need for library content,” he says. “For us one of the big appeals of [DHX’s] Ragdoll Worldwide acquisition was the number of good-quality episodes of Teletubbies and In the Night Garden”.
Karen Vermeulen, senior VP, global sales and coproduction, Zodiak Kids, endorses this view, saying library title VOD deals have proved invaluable. Last year, Zodiak sold 270 episodes to on-demand service Ace Entertainment in France, including Totally Spies and Martin Mystery. There were also deals with Maxdome and Watchever in Germany and Hulu for titles including Rekkit Rabbit and Gormiti.
“A smart windowing strategy can be a win-win for everyone,” she says. “The real challenge going forward will be around catch-up rights. Broadcasters expect [these] to protect their position, but if that period extends too long it has a knock-on effect on the value of the secondary SVOD window”.
For Vermeulen, a vibrant VOD market has an additional benefit, which is that it makes dubbing affordable. “Lots of platforms taking non-exclusive rights can help amortise those kind of costs,” she says. While some VOD platforms are likely to fall by the wayside, the good news is that there are enough players to keep the market interesting for content owners. There’s also evidence that retailers are getting interested in VOD. In the US, both Walmart and Toys R Us have seen VOD as a way of extending their relationship with customers and brands, though the latter has shuttered its effort. New activity is all good news, according to DHX’s Scherba. “Ultimately, the more leverage you have in negotiations, the better the windowing arrangements you come out with,” he says. “Having great shows and a lot of platforms interested in them provides that leverage.”