Russian Producer CTB Looks to Build Merchandising Business

Toys, clothes and other products based on successful animated kids properties have created what is believed to be Russia's first licensed merchandise business, which is hoping to grow via a possible China deal.

One of Russia's most successful independent producers, Sergei Selyanov, has created what he believes to be the country's first merchandising business based on the licensing of popular entertainment characters.

Selyanov's hits run from recent domestic box office hit animation films Three Heroes on Distant Shores and Ivan Tsarevich and the Gray Wolf (aka Prince Ivan 2) to the iconographic films of Alexey Balabanov, including Brother, Of Freaks and Men and Cargo 200. But he said he is earning around $10 million a year in royalties from branded goods spun off from two popular animated children's TV series produced by his company, St. Petersburg- and Moscow-based CTB.

One of the cartoon characters is Luntik, a small fluffy purple creature with four floppy ears and big eyes, is the star of The Adventures of Luntik, which runs daily on Russian public television network Rossiya. The character, born on the moon and then fallen to earth, is hugely popular with its pre-school age audience. Its name is based on the Russian word for "moon."

For slightly older children, Barboskiny, a soccer-mad little dog and his pack of friends, is another daily series of four-five minute shorts.

Both series have big followings in Russia and licensed merchandising ranging from DVDs and games to plush toys, action figures and school exercise books, clothing and food products. They are licensed with images of the characters, developed by CTB and its production partner, animation studio Melnitsa.

"The cartoons have been running for the past five years, but we only started licensing merchandise 18 months ago," Selyanov told The Hollywood Reporter. "Our other animated films, such as [feature] Three Heroes, are also popular. We've also sold licenses based on that [film], but not all films are capable of merchandising."

Merchandising deals are running in Russia, Ukraine, Belarus and Kazakhstan -- all core markets for CTB's mix of cartoons, entertainment features and edgy art house fare -- and "active talks" are underway with a major Chinese licensing company, he added.

The company also has revenue sharing agreements with Google and YouTube, which host videos of Luntik and Barboskiny. So far, the company has notched up 1.5 billion views for them.

Selyanov is a keen advocate of a legal, transparent copyright market in Russia. In 1996, he ensured that theatrical feature Operation New Year also went out on licensed VHS. More than 550,000 copies sold, helping develop a legitimate home video market in Russia, which was until then dominated by pirated VHS tapes.

He used the profits from that deal to make Brother, directed by Sergey Bodrov Jr., which fast became a cult classic in Russia and among cineasts worldwide and was a breakthrough film for CTB.

Selyanov, who has recently begun making international co-productions that include Quentin Dupieux's law enforcement comedy Wrong Cops, takes a realistic view of the potential to develop merchandising in the Russian and regional market.

"It is possible to grow the business," he said. "But the figures are not huge and we are not Disney. German rights, for example, might earn us a few thousand [dollars]. We don't need to think about such small figures. China is a different question."

Last month, CTB was at AFM with films that included new soccer movie Kicking Off and last year's hit comedy Jungle, among other catalog titles.