If a broadcaster doesn’t pick up your kids show pitch, no problem, right? I mean, you can always go direct-to-video.

Not so fast! The sight of overstuffed shelves bowing under the weight of DVDs at U.S. mass retailers makes it apparent that the home entertainment market is far from untapped. (According to industry association Digital Entertainment Group, there are more than 43,000 DVD titles available right now.) Moreover, convincing strong home entertainment distributors to pick up an original IP can be just as difficult as reeling in a broadcaster.

Last year, U.S. consumers spent upwards of US$24.5 billion on DVD and VHS titles, and with 95% of households with kids ages 13 and under owning a DVD player (compared to 65% of U.S. households overall), parental spending likely contributes significantly to that number. But only 8% of all the DVDs sold last year were kids non-theatricals, and that’s something that weighs on the mind of Lions Gate Entertainment Family Productions VP Ken Katsumoto whenever he takes a pitch. ‘It’s not just any old IP that’s going to make it to DVD,’ he warns.

Time for a reality check

Herein lies the rub. To make serious headway in an already crowded market, it’s imperative that you line your IP up with a top home entertainment distributor that has some clout at retail. The likes of Warner, Buena Vista, Lions Gate and Universal command more shelf space than the smaller indies. A look at the top 20 home entertainment titles in the U.S. right now reads like a who’s who of evergreen children’s properties – and they’re distributed primarily by the larger players (see chart on next page).

A good rule of thumb is that properties without any pre-existing awareness in the marketplace – books or toys, for example – are not likely to be picked up by many of the top distributors. And even licensing or book support isn’t guarantee enough for a distributor, unless it’s a superstar brand that resonates with both kids and parents.

It’s a mistake to think DVD alone can drive awareness for a property, especially since there are roughly 800 new non-theatrical kids titles hitting the shelf every year, says Dorinda Marticorena, Warner Home Video’s VP of kid and sports. She likes to piggyback releases on brands with existing consumer pull – they propel video sales and, more importantly, bear higher prices at retail.

Mass merchants such as Wal-Mart and Target allot a certain amount of space to each distributor, and although the bigwigs have more SKUs on shelf than the smaller guys, they must abide by the same rules. If a given title fails to achieve 50% sell-through within the first 10 days of its release, it’s a dead DVD walking. And with big-budget films such as A Shark’s Tale and Shrek vying for the same shelf space and consumer dollars as non-theatricals, unknown brands tend to get the boot first.

Katsumoto also cautions that if a property launches on DVD and fails, there’s little chance retailers will want to reconsider the brand in other consumer products categories. ‘Even if you sold 20%, [retailers] would deem it a failure and say your IP didn’t work as a brand,’ he says.

Getting a toehold in the market

Despite the fact that they are fielding upwards of 200 pitches for branded and non-branded ideas in any given month, distributors haven’t completely closed the door to producers who want to pitch original IPs. While it’s rare that an original project cracks the top-50 sales chart, there are some lucrative exceptions. Take Baby Einstein, for example. It began life as a home video and is now on the licensing and broadcast fast track, thanks to a brand-wide acquisition by Buena Vista’s parent company Disney.

Other than picking projects with a strong narrative, there’s no checklist a distributor refers to when determining an IP’s viability. But a property cannot pass muster on great storytelling alone, and the key to standing out from the slush pile is having a multi-platform brand development plan already in hand. For example, Katsumoto says it’s much more attractive to align with a partner who can hit the ground running, as opposed to one he has to babysit throughout the entire process.

Glenn Ross, executive VP and GM of Universal Studios Home Entertainment Family Productions, adds that these umbrella-type media companies can also offer a leg up to original IPs that are looking to garner broadcasting or licensing interest outside of his company’s remit. ‘It’s really about us knowing what the television and consumer product outlets are and what they’re looking for,’ he says.

And sometimes it pays to go to a home entertainment distributor before making a pilot, even if your heart is set on launching a show on-air first. DVDs are cheaper to get off the ground, and home entertainment distributors will often pony up more cash up front.

U.S. networks will typically front a licensing fee amounting to about one-third of the production budget. And if the show costs US$225,000 per half hour, producers would still need to line up about US$5 million in additional financing to pay for 26 episodes. Meanwhile, a typical 66-minute DVD can cost anywhere between US$1.5 million and US$5 million to produce, and a distributor may invest US$1.3 million to US$2.7 million.

Beyond funding, Katsumoto says a distributor can draw on a cache of writers and international animators to make the kind of pilot that might interest TV buyers. ‘We’re having conversations with broadcasters about what they’re looking for,’ he says. ‘If you have a hot property, together we can create a great pilot and bring it to them to show it has some legs at retail.’

If the distributor invests in an IP to help turn it into a franchise, expect to hand over most of the rights and share a portion of the revenue, which varies with each deal. ‘The more we put in, the more we have to justify, and thus the greater the expectation in the first couple of weeks at retail,’ Katsumoto says. He adds that producers shouldn’t get too greedy, and it’s in their interest to structure deals whereby a certain amount of money is given when a property reaches a set sales target. ‘I know it sounds self-serving, but thinking in terms of moderation ensures we don’t have to overexpose our SKUs to make our money back.’ Also, keep in mind that selling 500,000 units over a three-year period is considered a success, but you need to sell 50% of these within the first year.

Using home entertainment companies to help build a franchise does take time, but not as long as developing a program with a broadcast partner. Ross says he won’t commit to an IP if he doesn’t believe it will generate revenue in less than two years.

Building a brand means taking a strategic approach to marketing, and for Universal, this includes using its video-on-demand portal run by U.S. cable operators. ‘VOD is a great promotional tool for us. If a kid watches something on VOD and loves it, the next logical step is buying it,’ says Ross. But the VOD market is so small, he says, that it’s impossible to talk about its successes until the technology is more readily available.

Similarly, Katsumoto sees VOD taking on a bigger role, especially for original IPs. He thinks of VOD as a means to expose a property that might not otherwise land in front of viewers, and perhaps more importantly, as a way to break the industry’s dependence on mass retail. A chain can pass on a title for simple reasons such as the animation style is too prevalent, or a similar product didn’t sell well in the past. Katsumoto foresees VOD creating a user-friendly and relatively inexpensive opportunity for a consumer to buy titles on impulse and sidestep these types of retail barriers.

Year-to-Date kids Non-Theatrical Video Sales

1. Mulan II; Disney/Buena Vista Home Video

2. Barbie – Fairytopia; Lions Gate Films

3. Tarzan II; Disney/Buena Vista Home Video

4. Aladdin II & III Collection; Disney/Buena Vista Home Video

5. Dora the Explorer – Catch the Stars; Paramount Home Video

6. Land Before Time XI: The Invasion Of The Tinysauruses; Universal Home Entertainment

7. Sandlot 2; Twentieth Century Fox Home Entertainment

8. Dora the Explorer – Big Sister Dora; Paramount Home Video

9. Barbie as the Princess and the Pauper; Lions Gate Films

10. Scooby-Doo: Aloha Scooby-Doo!; Warner Home Video

11. Lion King 2: Simba’s Pride – Special Edition; Disney/Buena Vista Home Video

12. Baby Einstein: Baby Monet – Discovering The Seasons; Disney/Buena Vista Home Video

13. Disney Princess Stories Volume 2: Tales Of Friendship; Disney/Buena Vista Home Video

14. Dora the Explorer – Dora’s Fairytale Adventure; Paramount Home Video

15. SpongeBob SquarePants – Home Sweet Pineapple; Paramount Home Video

16. Strawberry Shortcake – Seaberry Beach Party; Twentieth Century Fox Home Entertainment

17. LeapFrog: Letter Factory; Warner Home Video

18. Star Wars Ewok Adventures: Caravan of Courage/The Battle for Endor; Twentieth Century Fox Home Entertainment

19. Pokémon: Destiny Deoxys; Disney/Buena Vista Home Video

20. Disney Princess Stories Volume 1: A Gift From the Heart; Disney/Buena Vista Home Video