Nice article on Al Kahn in today's Wall Street Journal - page 1 Marketplace section
interactive.wsj.com
Creating the Craze for Pokemon:
Licensing Agent Bet on U.S. Kids
By JOHN LIPPMAN
Staff Reporter of THE WALL STREET JOURNAL
Would Americans buy a video game with oddly animated creatures playing a variant of rock, paper, scissors? Back in 1995, Nintendo Co. had its doubts. Its role-playing game was a hit in Japan, but Nintendo executives weren't convinced it was exportable to the U.S.
Nintendo went ahead with a U.S. launch, thanks in large part to the perseverance of a couple of executives at a little-known company called 4 Kids Entertainment Inc. How the tiny New York company helped change the Japanese giant's mind is a story of one of the great marketing bonanzas of our time.
The game, Pokemon, has sold four million Nintendo Game Boy games in the U.S. And 4 Kids has negotiated 90 U.S. license deals for Pokemon toys, trading cards, comic books, a TV show and more, reaping a gusher of royalties for Nintendo and itself.
Nintendo first hooked up with 4 Kids in the late 1980s, when the company was called Leisure Concepts Inc. The connection was Alfred Kahn, who had helped popularize the once-ubiquitous Cabbage Patch doll in 1983 when he was an executive vice president at Coleco Industries. He left that company three years later and, in 1987, joined Leisure Concepts, then best known as licensing agent for "ThunderCats," a children's TV show criticized as being just a vehicle to sell toys.
Having become friendly with Nintendo executives during his Coleco days, Mr. Kahn got in touch with them when he joined Leisure Concepts. After contracting to become Nintendo's trademark-licensing agent, he made deals for everything from Game Boy shampoo to Super Mario Bros. Christmas lights and ornaments.
It was Mr. Kahn's colleague, Thomas Kenney, who first spotted Pokemon's potential in the U.S. He joined 4 Kids Entertainment in 1993 to head up the newly created program-syndication division. Like Mr. Kahn, he had a background in toys: He had been head of advertising at Tiger Electronics Inc., an electronic-toy company that was sold to Hasbro Inc.
In February 1997, while attending the Tokyo Toy Fair, Mr. Kenney paid a visit to the offices of Shogakukan Productions, which produced Pokemon TV shows in Japan. "I loved it immediately," Mr. Kenney says. His enthusiasm increased when he later saw 100,000 Japanese kids cram into Nintendo's Science World Exhibit to get the 151st Pokemon character for their Game Boy cartridges.
"Nintendo wasn't sure it wanted to support [Pokemon] outside the U.S.," says Mr. Kahn, now chairman of 4 Kids Entertainment. "Historically, role-playing games have been more successful in Japan than elsewhere."
At Nintendo of America Inc. headquarters in Redmond, Wash., Gail Tilden, the executive who oversees Pokemon in the U.S., notes that the Japanese company not only had doubts about how kids in the U.S. would accept a Japanese role-playing game but also "had concerns that maybe the audience would not embrace that style of animation." She says that Minoru Arakawa, president of Nintendo of America, was a "big believer" that Pokemon was exportable to the U.S. But, she adds, there were other "senior executives who had some skepticism."
In Japan, Nintendo had marketed Pokemon over the previous three years by first introducing the video game, followed by toys, comic books and trading cards -- all leading up to the TV series. That strategy was reversed in the U.S., where the TV show came first. "When Al and I bought the show, [Nintendo] said they didn't know if that would work here, either," Mr. Kenney recalls. U.S. broadcasters were equally uncertain. "I had to fight everybody," Mr. Kenney says. "No network would take it."
So 4 Kids Entertainment imported the show themselves, dubbed episodes into English and "rotorscoped" them to remove Japanese letters, then gave them free to TV stations to air in exchange for a portion of the advertising revenue. On another front, 4 Kids signed up Hasbro as Pokemon's master toy licensee.
These benchmarks convinced Nintendo that Pokemon had a chance in the U.S. Before the premiere of the "Pokemon" TV show in September 1998, it mailed 1.2 million videos to Game Boy customers explaining the Pokemon concept -- 150 cute, gender-neutral characters with special powers battling each other under the guidance of human trainers. Within a few months after its premiere, "Pokemon" was the top-rated syndicated kids' program. Nintendo then released the first Pokemon video game in the U.S., followed by trading cards, comic books, home videos, books and a best-selling compact disk. Indicating the fever pitch of the craze, 55,000 kids swarmed the Mall of America in Minnesota last month for the "Pokemon Summer Training Tour '99."
Airing Episodes
After the TV success of "Pokemon," Time Warner Inc.'s Warner Bros. snapped it up for the WB network, which began airing episodes this past February. Next month, 4 Kids Entertainment will pull the show from syndication and the WB network will air "Pokemon" episodes exclusively 12 times each week. "Pokemon the Movie: Mewtwo Strikes Back," which surpassed "Godzilla" at the box office in Japan last year, will be released in the U.S. by Warner Bros. on Nov. 12.
Nintendo's Ms. Tilden says the company needs 4 Kids to handle Pokemon's licensing and merchandising "because it's an area that requires specialized expertise." She adds: "They know who the hot companies are in T-shirts, school supplies, tennis shoes." Moreover, licensing and merchandising is a "peaks and valleys" business, and Nintendo doesn't want to carry the overhead in a shallow period.
Fifty people work for 4 Kids Entertainment, which also is licensing agent for Time Warner's World Championship Wrestling and Viacom's Comedy Central cable channel. Mr. Kahn won't make any projections about the financial impact of Pokemon, other than to say it will be "significant and dramatic." He declines to discuss terms of the Nintendo contract.
Such agreements generally call for the licensor to receive from 5% to 15% of retail sales. Mr. Kahn says as licensing agent his company typically earns a commission from 20% to 50% of that royalty. So if Pokemon merchandise were to reach $1 billion in retail sales, 4 Kids Entertainment could earn from $10 million to $75 million. Based on Pokemon's multibillion-dollar sales in Japan, analysts expect U.S. sales to be much higher than $1 billion. Shares of 4 Kids, traded on the Nasdaq Stock Market, were as low as $5 in March but have recently been trading above $50. |
