Discovery-Hasbro kids net faces challenges

Analyst: Hub will have tough time getting viewers, ad dollars

NEW YORK -- 10/10/10. That's the date when the kids TV market will get even more crowded with the launch of the Hub, a network joint venture of Discovery Communications and toy giant Hasbro.

Replacing the Discovery Kids channel, which has a reach of 60 million homes (to which the Hub plans to add over time), the network's main challenge is to carve out its own audience and advertising dollars in a space dominated by conglomerate-controlled players including Viacom's Nickelodeon, Disney's Disney Channel and Disney XD and Time Warner's Cartoon Network.

"At first I think it will nibble more than eat into other children's networks," said Brad Adgate, senior vp research at media-buying firm Horizon Media. "It will be tough to make inroads in getting kids viewers and ad dollars from the start."

Nickelodeon/Nick at Nite alone will make more than $1 billion in ad revenue this year on top of nearly $574 million in affiliate-fee revenue, according to SNL Kagan estimates. The research firm eyes $375 million worth of ads and $209 million in affiliate money for Cartoon and $111 million and $125 million for Disney XD. All tower over Discovery Kids' estimated $13 million and $49 million, respectively.

Although that proves it will be an uphill battle, it also means the Hub has a lot of room to grow.

Taking all Nickelodeon networks, Cartoon, Disney Channel and Disney XD and PBS Kids Sprout together, SNL Kagan sees about $1.6 billion in kids TV ad and $2.3 billion in affiliate revenue this year.

With the launch clock ticking, the Hub president and CEO Margaret Loesch, Discovery Communications CEO David Zaslav and Hasbro CEO Brian Goldner emphasized during a lunchtime outing Wednesday that they will have patience to allow the channel to find its audience. But Zaslav also signaled confidence, arguing that there are only three real competitors in the kids/family TV space, compared with dozens in the cable universe for older demographics.

"We know Disney is a great company, Cartoon does a great job, and Nickelodeon is good at what they do," he said. "But I think it's gonna be bigger than even I expected. ... There's space for us in the market, and we're really going to hit it hard."



The channel will spend a reported $20 million on a prelaunch ad blitz that will leverage the marketing muscle of Discovery (promotions on other networks) and Hasbro (stickers on games and toys packaging).

Programming-wise,
the Hub uses a mix of old favorites like "Fraggle Rock"; reinventions like "Strawberry Shortcake"; new concepts like kids pop-culture magazine "Hubworld"; and Hasbro franchises including "Transformers," "G.I. Joe" and "My Little Pony."

"They have some powerful copyrights in the Hasbro library, so I think they will do well," SNL Kagan analyst Derek Baine said.

But the Hasbro shows have raised concerns among some.

"The FCC and parents will be watching closely to make sure it is not too much of an advertisement for the toy giant," Miller Tabak analyst David Joyce said.

To counter such worries, Goldner said Wednesday: "Great characters and great storytelling are the most important thing. It can't just be a sizzle reel."

Loesch emphasized that only 25% of the network's programming is based on brands from the toymaker.

She also highlighted that the Hub's success could come from filling voids in the current market. Established players have "migrated to younger or older audiences, but there is a perceived gap in between" for ages 6- 12, particularly in the 6-9 segment, she said. "We heard that from parents, and we heard it from advertisers, too." That, she added, has helped sign about 50 advertisers to date.

To further stand out, the Hub also presents programming, particularly in the 6-11 p.m. slots, that lends itself to family viewing.

"Parents [told us] how much they would love co-viewing opportunities with their kids," Loesch said. "And surprisingly, kids wanted that, too."
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