This might be one a winner, but it will take some time to see.
The market thinks so, the pop started yesterday when the PR was released.
4Kids Entertainment Acquires Rights To YU-GI-OH!
biz.yahoo.com
I copied this from RB. He found it in the WSJ
Wall Street Journal Article - Apr 17th
April 17, 2001
Small Business Suite
4Kids, Its Pokemon Fad Faded,
Bets on New Asian Characters
By MICHAEL SELZ
Staff Reporter of THE WALL STREET JOURNAL
As chief executive officer and the largest shareholder of 4Kids
Entertainment Inc., Alfred Kahn brought Pikachu and Pokemon's other
"pocket monsters" to America.
4Kids is the exclusive agent outside Asia for licensing merchandise and
distributing films and television shows based on the video game. The New
York company's commissions in the past two years helped it amass $118
million in cash by the end of 2000. In the same period, Mr. Kahn himself
collected more than $12 million in bonuses.
But with Pokemon's popularity waning, the question arises: As Mr. Kahn
watches Japanese TV, attends Tokyo toy fairs and video-game
conferences, and mines the cartoon libraries of Asian animation houses,
will he put another monster in his pocket?
Among the characters he currently is betting on: Ultraman Tiga, a
superhero created by the special-effects director of the first seven
"Godzilla" films, whose live-action TV series has aired in Japan for 30
years; Kinniku-man, an animated space-age wrestler entertaining Japanese
kids for 15 years; "Tama and Friends," a 20-year-old Japanese cartoon
featuring feline and canine characters that will begin airing in the U.S. this
fall; and another fall U.S. TV debut, "Cubix," an original
computer-animated TV series, which 4Kids is co-producing with two
South Korean companies, and which follows the adventures of a boy and
his robot pal.
"Does Al Kahn have a son of
Pokemon?" wonders Warren
Isabelle, whose Ironwood Capital
Management in Boston is a 4Kids
investor, if only because cash
accounts for two-thirds of the
debt-free company's assets. "I don't
know."
Investors don't seem to be expecting
one. 4Kids' stock closed at $11.80,
down five cents, as of 4 p.m. in New
York Stock Exchange composite
trading Monday, well below the
$93.25 it was selling for in late 1999 at the height of Pokemon mania.
Mr. Kahn insists he doesn't need another megahit. After Pokemon's wild
success, 4Kids is poised to become an efficient global provider of
entertainment content for children between the ages of three and eight, he
says. It has strong ties to Japan's creative storytelling community, and the
know-how to turn those stories into merchandise.
Because 4Kids mostly only licenses properties -- keeping as much as 40%
of the owner's royalties -- it can gamble on new ventures "without risking
the ranch," Mr. Kahn says. 4Kids lets others build factories and own
inventory. It employs just 100.
The company does incur some production costs, including adapting
Japanese stories and characters to suit a U.S. or European audience. But
its gross profit margin of 66% last year was greater than that of makers of
movies, toys, video games and other companies that supply children's
entertainment.
Mr. Kahn was determined to keep costs low after witnessing the demise of
his former employer, Coleco Industries Inc. He was an executive vice
president of marketing and product development at the toy maker when it
obtained rights to produce Cabbage Patch Kids in 1982. By 1988,
Coleco filed for bankruptcy-court protection from its creditors. Too
optimistic about the product's longevity, the company failed to keep
expenses in line with falling demand.
By the time Coleco sought protection, Mr. Kahn was at 4Kids helping
make a deal with Japan's Nintendo Co. to be the exclusive licensing agent
outside Japan for Mario, Donkey Kong and Nintendo's other video-game
characters. In 1998, two years after Nintendo created Pokemon, Mr.
Kahn introduced it in the U.S. and spawned a $10 billion spending spree.
Through 4Kids' more than 500 licensing agreements, Pokemon appeared
in, among other things, films and TV, toys, playing cards, candy, cereal,
vitamins, shoes, blankets and pillows. From 1998 to 2000, 4Kids' net
income soared to $38.8 million, or $2.96 a diluted share, from $2.7
million, or 27 cents a share. Revenue during the same period leapt to $88
million from $14.7 million.
But like earlier fads -- from Hula-Hoop, Ouija boards and yellow "smiley"
faces to Teenage Mutant Ninja Turtles and the Mighty Morphin Power
Rangers -- the Pokemon craze cooled. The second Pokemon film,
released by AOL Time Warner Inc.'s Warner Bros. unit last July, grossed
$43.7 million in the U.S. -- half the take of the first movie, according to
Exhibitor Relations Co., an film-industry research firm. Box-office
proceeds of the latest sequel, which opened April 6, totaled $11.4 million
after eight days -- less than half the gross of the second film over a
comparable period.
NPD Group Inc., a market-research firm, says some Pokemon products
remain hot items. But the goods failed to move fast enough to meet the
bullish expectations of Hasbro Inc., 4Kids' toy licensee that accounted last
year for 39% of 4Kids' revenue. When Alan Hassenfeld, Hasbro's
chairman and CEO, announced in December that it might report a loss or,
"at best, break even," in 2000, he blamed the unexpected results largely on
an erroneous outlook for its Pokemon trading-card game.
While the game cards "are still selling well," he said, "we were too
aggressive in our forecast following incredible demand in 1999 and 2000."
In the past two years, even as demand for Pokemon products subsided,
the property's share of 4Kids' revenue rose to 95% from 52%. The
growing reliance resulted in a sharp decline in the company's fourth-quarter
performance. Net income plunged 40% to $8.5 million, or 65 cents a
diluted share, from $14.1 million, or $1.08 a share, a year earlier. Revenue
for the period dropped 45% to $19.2 million from $34.9 million a year
earlier.
Mr. Kahn is hoping such characters as Ultraman will rescue his company
from slumping sales. To sustain 4Kids, he plans even to wager again on
Cabbage Patch Kids. 4Kids obtained last year the right to license
world-wide merchandise based on the dolls.
"A whole generation of kids never saw them," he says.
Write to Michael Selz at michael.selz@wsj.com |
