Andy Heyward, CEO, and Todd Steinman, President, Toon Media Networks, of Kartoon Studios were recently guests on Benzinga's All-Access.
Kartoon Studios is a leading global media company that develops, produces and distributes animated entertainment for kids. The company produces content in-house, like Stan Lee's Superhero Kindergarten, starring Arnold Schwarzenegger, and acquires properties like Barney.
Mr. Heyward and Mr. Steinman spoke about the exciting prospects on the horizon for the company. Kartoon owns the rights to much of Stan Lee's IP and has a backlog of unreleased creations ready to roll out.
Kartoon Studios is a leading global media company that develops, produces and distributes animated entertainment for kids. The company produces content in-house, like Stan Lee's Superhero Kindergarten, starring Arnold Schwarzenegger, and acquires properties like Barney.
Mr. Heyward and Mr. Steinman spoke about the exciting prospects on the horizon for the company. Kartoon owns the rights to much of Stan Lee's IP and has a backlog of unreleased creations ready to roll out.
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NewsTranscript
00:00 (upbeat music)
00:02 Todd, Andy, good morning.
00:07 - Good morning. - Good morning.
00:08 - I never know what color glasses you're gonna wear.
00:11 I remember I watched the interview last time
00:13 that you did with Luke and you had the yellow glasses,
00:15 I believe, and now you're rocking the whites.
00:16 I need you and I to communicate
00:18 so I can have the same ones as you.
00:20 - Well, I'll be in therapy for many years
00:22 trying to figure this out.
00:22 (laughing)
00:23 Thank you.
00:25 - Well, hey, I'm so happy to have y'all on.
00:27 We've got so much to talk about,
00:28 but just give us a quick overview for the folks
00:30 that for some reason aren't familiar with your company.
00:33 - Well, we make animated children's cartoons,
00:36 we broadcast them, and we do consumer product licensing
00:40 of those characters on a global basis.
00:43 In its simplest form, that's what we do.
00:46 - Yeah, and I know you have a Stan Lee storefront
00:50 that was just on Amazon.
00:52 You've seen great success with that.
00:53 You also have a dedicated channel on YouTube.
00:56 How is that kind of integrated
00:57 with the broader strategy to grow that brand?
01:00 And of course, more importantly, to drive that revenue?
01:02 Andy, we can start with you, then Todd, you can chime in.
01:04 - Yeah, well, let me sort of start by saying
01:08 that we are in a period now of very rapid
01:11 and accelerating growth in our company.
01:15 That's complimented by our new CFO
01:17 and very strong financial disciplines
01:19 that have been put into place.
01:21 Our business is not affected by the price of gold,
01:26 by interest rates, by inflation,
01:28 by anything that's going on in the world,
01:30 because essentially, we make cartoons
01:32 and children continue to watch cartoons no matter what,
01:35 and children continue to wanna buy the toys
01:37 and all of the different products
01:39 that come from the cartoons.
01:40 So as far as the various initiatives
01:44 that we have really exploding for us right now,
01:48 the channel system, which is run
01:49 by this very talented man next to me,
01:52 and he actually always tells me,
01:53 it's not channels, don't call it channels anymore,
01:56 has become a real incredible growth driver.
02:00 And perhaps, Todd, you can talk a little bit about that.
02:02 - Absolutely, sure.
02:03 So there's so many different and exciting things
02:05 going on in the business right now.
02:07 And I'm fortunate enough to be managing
02:10 one of our fastest growing businesses,
02:12 which is Cartoon Channel,
02:13 and I oversee the overall media and streaming network.
02:17 So that's Cartoon Channel, Amoeba, and Frederator.
02:19 And so each of those brands has them really exciting
02:22 and significant growth happening currently.
02:26 So I'll give you guys a little bit of a peek
02:28 on what's happening on Cartoon Channel,
02:30 and Amoeba specifically, which is our streaming business,
02:33 our direct-to-consumer streaming business.
02:35 We had a phenomenal Q4 '23,
02:38 and we had a goal to reach break-even and profitability,
02:43 and we've been able to hit both of those goals
02:45 from Q4 of last year to this year, Q1,
02:50 January and February.
02:51 So that's been really exciting.
02:52 And I can give you a couple of reasons
02:56 why we've been able to do that,
02:58 but it's been a really fun ride the last couple of quarters,
03:03 particularly around the direct-to-consumer business.
03:06 - And then if we take a look at
03:08 the 20-year licensing agreement
03:10 that you have with Marvel Studios,
03:12 how does that play into the strategy,
03:14 and especially expanding the Stan Lee universe itself?
03:18 - Yeah, well, I think let's start off
03:20 with who is Stan Lee, for those who don't know.
03:23 Stan Lee is the most successful creator of all time.
03:28 When I say that, I mean bigger than J.K. Rowling,
03:32 bigger than anything of Steven Spielberg or George Lucas.
03:36 14 of the top 50 box office movies
03:40 were created out of the mind of this one man.
03:43 They include "Spider-Man," "Iron Man,"
03:47 "The Incredible Hulk," "Captain America,"
03:50 "Black Panther," "Fantastic Four," "Thor."
03:54 The list goes on, and of course, "The Avengers,"
03:58 the most successful film of all time.
04:00 We were very fortunate to become the stewards of Stan's IP.
04:06 And when we started on this three years ago,
04:10 we had no idea it was going to become what it has become.
04:13 We're now, we launched the store on Amazon.
04:16 We have a number of consumer product initiatives coming.
04:19 We are launching with our comic book colleagues
04:23 at Legible, a publishing line with Stan.
04:26 He has a tremendous amount of appeal
04:29 to many, many different people and sectors.
04:32 Right now, we have about 100 new properties
04:37 in what we call the book.
04:40 The book was what Stan left behind for us.
04:42 Most of the things from Marvel
04:44 were created in the '60s and '70s.
04:47 Everything after Stan left Marvel is in this book,
04:50 and we are rolling them out.
04:51 And you know, when we first took over the brand,
04:54 I said it's going to be Marvel 2.0, anecdotally.
04:57 It's actually, we call it Stanley Universe,
05:00 and it's just starting to buzz right now.
05:05 It was if we went into a drawer and we took out,
05:10 we opened up and we saw 40 songs from Lennon and McCartney.
05:13 Nobody had ever known existed before,
05:15 and so they're there.
05:16 So we're rolling those out.
05:18 Disney, of course, knows the value of Stan,
05:21 and we licensed to them the rights to have him
05:23 in the theme parks for 20 years,
05:25 for which they pay us royalties.
05:27 - Yep.
05:28 - We have a similar license with Marvel
05:30 to use him as cameos in their movies.
05:33 Both of these are non-exclusive licenses, I should add.
05:36 So those became the basis of kind of growing this,
05:41 and it's all being done under the creative stewardship
05:43 of one of Stan's great collaborators, Michael Usland,
05:47 who has been the executive producer
05:48 of all of the Batman movies and the Batman franchise
05:52 for the last 25 years.
05:53 He knows this brand inside and out.
05:55 So we're very excited.
05:57 There's a lot of wind in our sails with it.
06:01 - There's two main things that I took away from that one
06:03 is that it's a non-exclusive, right?
06:05 So you can go ahead and find other avenues of growth
06:08 and revenue if you'd like.
06:09 And also there's a reason Mr. Wonderful loves the royalties.
06:12 It helps with the cashflow,
06:13 so that's some great insight on that.
06:15 Speaking of money, what's the game plan
06:18 to have these successful shows like your "Rainbow Range"?
06:22 I know I just watched with my niece,
06:24 "Shack's Garage" there as well.
06:27 How are we gonna go ahead and boost the subscriber growth
06:30 and what type of shows are gonna help make sure
06:32 that the free trials turn into paid subscriptions?
06:36 - I'll grab that one.
06:38 So, obviously we've got great news on the Stan front,
06:41 and then on the younger kids side,
06:44 we are really leaning into a bunch of different things.
06:48 So we've got a successful content strategy
06:51 that was activated.
06:53 We went after a lot of new acquisitions last year
06:55 and it really paid off in the fourth quarter
06:57 where we leaned into both seasonality and holiday content.
07:00 So we drove a lot of subscription growth in Q4
07:03 from Halloween to New Year's,
07:07 when seasonally we know that there's a lot of consumption
07:09 happening typically and align those with holiday promotions.
07:14 We've really, really tightened our media efficiency
07:17 and our kind of our subscriber acquisition campaigns
07:20 and costs.
07:21 So from the beginning of 23 to the second half of 23,
07:26 we cut our acquisition costs in half
07:28 and we were still able to drive more growth
07:30 than we were in the first half of the year.
07:32 So we really hit kind of two home runs there.
07:35 We brought costs in line and we doubled acquisitions.
07:39 From a, we're now also really leaning into tech
07:43 and making some significant data informed decisioning
07:47 in real time or near real time.
07:49 So one of the initiatives we did was really put a dashboard
07:53 and data and insights together to allow us to make decisions
07:57 around consumption, programming, media costs, acquisitions,
08:01 churn, free trial conversions, and start looking at those
08:06 on a daily basis where that was never able,
08:09 we were never able to do that before.
08:11 So all those things combined have really helped us
08:14 grow the business.
08:16 And I think that's a big part of it is to be able to see
08:20 and strategize around what we can do around programming
08:23 and what we can do around acquisition.
08:24 So both those things came in line.
08:27 We had some big growth towards the end of the year.
08:29 - And I do wanna point out that free trials and conversions
08:32 to paid subscriptions did soar by nearly 50% in February
08:36 compared to the same month last year.
08:38 Final question for me, Andy, I'll start with you.
08:42 International growth, right?
08:43 You wanna go ahead and get into those markets as well
08:45 because you have billions of people that you can attract.
08:48 What's the game plan there,
08:50 especially because you have some cultural differences
08:53 from say China, India, and here in the US
08:55 and many, many other countries that you wanna tap into.
08:59 - Well, we have a very, very talented executive
09:01 who's running our international business.
09:03 His name is Paul Robinson.
09:04 He's based in London.
09:06 He was previously managing director
09:08 of Disney Channel Worldwide,
09:10 and he's been growing our footprint
09:11 of the Cartoon Channel distribution system dramatically.
09:15 We're pretty much in every territory in the world now.
09:19 If we're not actually up on air,
09:21 we are contracted to be on air in the coming months.
09:24 We have some very substantial deals
09:26 that are going to be announced in the coming days
09:29 with the global broadcasters.
09:31 And Paul is leading this charge there.
09:34 Obviously, we have to dub our shows
09:37 into various different languages around the world,
09:39 and all of our shows are dubbed
09:41 in everything that you could imagine.
09:43 The obvious, your languages from French and Spanish
09:45 and Italian and German and Urdu and Hindi and whatnot.
09:50 We're pretty covered around the world right now.
09:53 It's an exciting time for growth.
09:56 It's a period where I should also add
09:58 that I neglected to mention our mainframe production
10:04 system is growing quite dramatically as well.
10:06 We have the number one kids show in the world we produce,
10:09 "Cocoa Melon."
10:10 We have the number one toy-based show in the world we produce,
10:13 which is "Barbie."
10:14 We have the number one kids show on Netflix,
10:17 "Unicorn Academy."
10:18 These are all coming out of our group.
10:20 So, you know, it's an exciting time,
10:23 and there's a lot of momentum with us going forward.
10:26 And as Todd said, but I don't want this to be understated
10:29 because it's a huge driver.
10:31 The channel system went into,
10:33 the streaming system went into profit this year.
10:36 So we already announced January and February.
10:39 Our unaudited numbers in March,
10:41 which we haven't announced anything yet,
10:44 have even grown more.
10:45 So, you know, there aren't a lot of streamers
10:48 that are in profit.
10:49 The only one I know, frankly, is Netflix and us now.
10:52 So it's a very exciting time.
10:54 We're building up a tremendous asset,
10:55 and we see, you know, just a lot of wind
10:59 in our sails going forward.
11:00 And I can quickly tell you,
11:01 we were up 19% year over year towards the end of the year,
11:05 and already in March, we're up 24%.
11:08 So we continue to extend that growth and that momentum.
11:12 - Well, hey, I appreciate you guys for hopping on.
11:14 We covered so many different topics,
11:15 but I do at least want to give you the floor real quick.
11:17 Andy, Todd, any final thoughts from either of you
11:19 before we wrap up?
11:20 - Well, you know, we're in a business
11:24 that we take very seriously
11:26 because we produce content for children.
11:28 We have a very impressionable constituency.
11:31 And I would say the single most important thing
11:34 about our brand is safety.
11:35 When parents are watching our shows
11:37 and they're watching our channels,
11:38 they know that their kids are safe
11:40 and they're not gonna see anything
11:41 that is going to be inappropriate or wrong.
11:44 And I think that's where everything will stem from.
11:47 - Absolutely, couldn't agree more.
11:50 I mean, you know, I don't have any kids,
11:51 but when I was taking care of my niece the other day,
11:53 I'm like, how do I make sure this precious individual
11:56 is protected, not just, you know, physically,
11:58 but also what she may be consuming on TV as well.
12:01 But thank you both so much for hanging out.
12:03 And yeah, look, I speak Urdu, I speak English.
12:04 So if you need someone to do a little voiceover,
12:06 you just call me, I'm one flight away from you.
12:08 - We'll be in touch.
12:09 - Awesome, thank you so much.
12:12 That is Andy and Todd,
12:14 President and CEO of Cartoon Studios.
12:16 Ticker on the NYSC American is T-O-O-N.
12:20 And thank you all for watching All Access.
12:22 (upbeat music)
12:25 (upbeat music)