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B.C. animators tap toy, video game revenue streams

Producers increasingly looking to IP that can be licensed for spinoff merchandise
Animators at work at Atomic Cartoons, the Vancouver-based studio behind an animated series coming to Netflix this fall, based on a popular children’s book series | Rob Kruyt

Marathon video game sessions, melees against monsters and candy-centric diets – it’s the dream life for an imaginative young teen who might find the world suddenly devoid of parents.

It’s also the premise of The Last Kids on Earth, a children’s book series that has sold 2.5 million copies worldwide, soon to be realized in animated form on Netflix Inc. (Nasdaq:NFLX) when it debuts in 190 territories this fall.

But Atomic Cartoons Inc., the Vancouver-based animation studio behind the series, won’t be relying solely on its deal with the streaming giant to generate revenue.

Long ahead of the fall premiere, the animation house announced last month it had struck a master toy agreement with Jakks Pacific Inc. to develop action figures, activity toys, role-play accessories, vehicles, plush items, novelty items, games and play electronics tied to the series.

“We can’t believe that toys will be out on shelves just a few months after this comes out,” said Matthew Berkowitz, chief creative officer at Atomic Cartoons and parent company Thunderbird Entertainment Group Inc. (TSX-V:TBRD).

“We’re beginning to have pretty extensive video game conversations as well.”

He said producers typically must wait to see if a series is a success before these types of merchandising deals begin to materialize.

From there, it’s often a lengthy period before toys show up in stores as merchandising partners develop the products that must go through an approval process.

But Berkowitz said the global push from Netflix combined with the The Last Kids on Earth fan base lends itself to getting a head start on delivering merchandise, expected to be available in January 2020.

Other B.C. producers have also tapped into the potential for non-traditional revenue streams when acquiring intellectual property (IP).

“The landscape is shifting and changing with the streaming services and so much opportunity online,” said Krista Kelloway, vice-president of production at Vancouver-based Wind Sun Sky Entertainment.

“People are watching and enjoying content in all-new ways, and I think it’s important for producers to be innovative and adapt and look at what other opportunities might be available.”

She described Wind Sun Sky as taking a “franchise-building approach” when acquiring intellectual property.

In 2017 the production company landed a deal with game developer Big Blue Bubble Inc. to turn the popular My Singing Monsters game into a TV series.

“While we’re also in active development of a traditional animated series for that property, we’ve chosen to go out and kick off a licensing program,” Kelloway said, adding the company is producing merchandise. “The fact that this is an existing mobile game with an existing fan base warrants the approach.”

Brian Hamilton, principal and executive producer at Vancouver-based Omnifilm Entertainment, said children’s properties lend themselves particularly well to creating additional revenue streams.

After optioning the Dino Knights book series, Omnifilm announced in October 2018 it would develop the property into a live-action show.

“We’ve partnered with The Jim Henson Company to create a vision for a content stream that includes a television series and toys, and one day we’ll hopefully have our own theme park ride,” said Hamilton, who sits on the Canadian Media Producers Association’s board.

“We in Vancouver can take plays out of the playbook of the big multinational entertainment powerhouses in terms of how we build our businesses.”

He said Omnifilm has been evolving over the years from a “broadcast shotgun model,” where it would put content out to a wide audience and hope for big numbers, and is now much more targeted when it comes to audiences.

“It’s centred around finding properties that we can build super-fan communities around,” he said.

The company is preparing for a summer relaunch of its Namaste Yoga brand, originally a fitness series that premiered on TV 12 years ago.

Omnifilm has merchandise such as hats, sweatshirts and tote bags tied to the brand, while the new iteration will be distributed on Omnifilm’s online content delivery system.

“The idea is we own the relationship with the customer and we build our own audience,” said Amanda Riches, Omnifilm’s director of marketing and distribution.

Vancouver-based entertainment lawyer Arthur Evrensel, founding partner of Michael, Evrensel & Pawar LLP, said these opportunities also present a double-edged sword of sorts.

“There is going to be even more demand for that IP because it’s not like it’s unlimited and so opportunities for B.C. producers – while they’re open – become really difficult to acquire,” he said.

“The real jackpot for most of these producers is to create their own IP and then to start licensing component elements, whether it’s, for example, something like a video game, a TV series, a spinoff, a theme park.”

Evrensel said B.C.-based gaming companies have been particularly adept at licensing existing IP to turn popular fictional characters into video games.

East Side Games, for one, has built a reputation developing mobile game titles based on shows like Trailer Park Boys and It’s Always Sunny in Philadelphia.

“It’s very difficult to perfect in the sense that if you take IP outside of its original intended use, there’s something lost in translation sometimes,” Evrensel said.

“Video games are the most successful because there is continuity in that it’s audiovisual.”

Vancouver’s Liquid Media Group Ltd. (Nasdaq:YVR) recently completed a licensing deal tied to Ancient Aliens, a TV series featured on the A&E channel, allowing it to become the operator of a mobile game based on the property.

Liquid Media Group chief financial officer Daniel Cruz told Business in Vancouver the fact the property was based on existing IP with a huge following made it easy for the company to bring it to additional platforms.

“Thunderbird Films is definitely another leader in this space. They’ve been around quite some time as a private corporation, but as a public corporation you’re seeing them balance their service revenue to their own projects and you’re seeing them now getting some licensing deals with merchandise, which is very new to the capital markets here in British Columbia,” he said.

He pointed to Halifax-based DHX Media Ltd. (TSX:DHX) as one of the other leaders in Canada for pursuing these licensing deals.

DHX, which has Vancouver studios that employ about 700 workers, might be best known for owning a 41% stake in the Peanuts franchise featuring Charlie Brown.

“The largest corporations that have succeeded over time had kind of a universe strategy,” said Cruz, referring to franchises such as Marvel and Star Wars that build concurrent stories across multiple platforms.

“And in that universe strategy, there has to be more than just a TV show or just a movie. I believe the physical touch-point with the consumer is very important to bring brand awareness to the next level.”

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