Kids Turn On to Video

A fairy tale princess and a wrinkled alien may seem worlds apart, but videocassette tapes about Cinderella and E.T. are showing up next to each other these days in homes across the nation.

They are moving in alongside Mickey Mouse, Big Bird, Donald Duck and dozens of other cartoon videotapes that parents buy to keep their children entertained. Five years ago, few families owned a videotape. Nowadays, many families own at least five videos, and children watch them as much as they do television.

“It’s an extension of the electronic baby-sitter,” says Tim Baskerville, publisher of Video Marketing News, a Hollywood newsletter. He reports that sales of children’s tapes to retailers hit about $420 million last year, up from $304 million in 1987.

Parents, of course, are quite familiar with the boom in kid video. Children are natural video viewers, industry executives say, because they like to watch shows over and over. Children watch tapes that they like an average of 13 times, says Wendy Moss, video chief at Hanna Barbera, the Burbank cartoon maker.

“Kids love to memorize all the details. They feel comfortable knowing what the plot is and what is going to happen,” she says. On the other hand, “adults can’t stand to watch something more than once.”

Two recent developments have helped boost kidvid sales. For one thing, prices have dropped, making children’s tapes more affordable. Videos that once cost around $80--such as Walt Disney Co.’s Pinocchio--are priced at about $30, and some half-hour videos cost as little as $10.

At the same time, kid videos are more readily available. Several years ago, children’s videos could be found only in video stores and record shops; now they’re available at chains such as K mart and Target, where kid videos far outsell theatrical films and exercise tapes.

One Leads to Another

The children’s market got a giant boost last year from Walt Disney Co.’s “Cinderella” and MCA’s “E.T. the Extra-Terrestrial,” which quickly became the top two best-selling videos ever. According to Video Marketing News, MCA sold 12.5 million E.T. videocassettes, and Disney sold 7.2 million copies of Cinderella.

Ann Daly, a marketing vice president for Disney home videos, expects videocassette sales this year to increase by about 7%. “E.T and Cinderella opened up a whole new market,” she says. With E.T. and Cinderella, many people bought videocassettes for the first time, Daly says. “Once a person buys a videocassette, they tend to buy more.”

Walt Disney Co., with its extensive film library, easily sells the most children’s videos. According to Daly, Disney videos accounted for 60% of children’s video sales last year. That estimate includes only two-thirds of Cinderella sales, since adults with no children bought many of them, Daly says. Without competition from E.T., Daly says, Disney’s share of children’s video sales would have been much greater, probably closer to 80%.

Disney is so formidable that “whenever you try to come up with a product, you have to imagine how to make it stand out against a Disney product,” says Nancy Steingard, a vice president at Hi-Tops Video in Culver City, which had sales of $20 million in 1988. Recently, Hi-Tops licensed some big names to match up against Disney. It has produced a Fisher-Price line of preschool videos with the toy company, and it is working on a series with the McDonald’s hamburger chain. Video industry executives credit Disney with transforming the children’s market. By sharply lowering prices, Disney persuaded parents to buy movies that they had once rented. In 1985, Disney dramatically lowered the price of “Pinocchio” to about $30 from aroun $80 and as a result sold 800,000 copies. Disney came out with “Sleeping Beauty” in 1986, selling 1.5 million copies at $30. Disney followed the same strategy with “Cinderella.”

Sally Smith, director of children’s programming for International Video Entertainment, said it was hard to get parents to break the habit of renting tapes at first. About the time Disney sold “Sleeping Beauty,” IVE came out with cartoon videos based on two popular toys, G.I. Joe and Transformers. Even after lowering the price from $15 to $10, the videos just “did OK. A lot came back,” says Smith. “Video merchants didn’t know how to sell them, and consumers didn’t realize they could buy them.”

Now, more parents buy children’s videos than rent them, says Smith, “thanks to these big hits that everyone wanted to buy and take home.”

Disney’s lower-price strategy boosted sales--and also dug into profits at some competitors. At today’s prices, many firms must sell 100,000 copies of a tape to make a profit, said Moss, the Hanna Barbera video chief. That’s well above the industry standard for a hit--a video goes “platinum” after it sells just 50,000 copies.

At Western Publishing, profits from children’s videos have taken a “significant drop,” says William Nahikian, vice president. Besides Sesame Street videos, Western has put some Golden Books on videocassettes, producing hits with names such as “Animal Nursery Tales.” Nahikian says he expects some companies, particularly those without extensive film libraries, to quit the children’s video business. “There will be some shakeout,” he says. “As soon as that happens, it will be profitable for the firms that remain.”

As for Western Publishing, he says, “We’re coping with the margins. . . . We’re in it to stay.”

Syndicated Shows Avoided

As with television shows and books, children change their minds about what they like to see. And this also has made the kidvid business tricky.

Once-popular syndicated cartoon characters such as Strawberry Shortcake, He-Man, Starcom and Gobots have now fallen from favor among young children--and so have their videos. Vestron, a giant video company in Stamford, Conn., was stuck with licenses for so many cartoon characters it couldn’t sell that it all but retreated from kidvid. It issued just two new tapes last year and none in 1987.

Vestron as well as other kidvid companies now say they avoid most syndicated cartoons shows in favor of classic stories. Rudyard Kipling’s “The Jungle Book” has provided fodder for videos by two companies. And Hanna Barbera, the cartoon factory that created Yogi Bear, made an eight-cassette series based on Bible stories. CBS/Fox has turned to the BBC, buying from it rights to such classics as “The Secret Garden,” and “Jane Eyre.”

It was skittishness about cartoon “fads” that persuaded CBS/Fox to decide against acquiring video rights to the “Teen-age Mutant Ninja Turtle” cartoon series last winter, even though video executive Anne Upson was a turtle fan. “It was new and original. I wanted to do it badly,” she says. “But I wasn’t sure of it. I just couldn’t take the risk.”

Instead, rival International Video Entertainment scooped up rights to the turtles, and is glad it did. Since August, IVE, based in Newbury Park, has sold 200,000 turtle tapes--a hit by industry standards.

Even IVE’s Smith, the children’s programming director who took a chance on the turtles, agrees that few new cartoons hold promise for video. “We came from an era were everyone was fighting for big licensed properties like Care Bears and Strawberry Shortcake. They had soft content and good stories. Really nothing has equaled them since.”

Some firms are trying to create their own “classics.” International Video Entertainment, Hi-Tops Video and MCA have plans to produce their own films exclusively for video. Hi-Tops met with some success with its low-budget “Baby Songs.” One segment of the tape features the song, “Today I Took My Diapers Off,” while showing children trying out a potty seat.

Hi-Tops sold 150,000 copies of “Baby Songs,” to the amazement of its management. “We would have been happy to sell 15,000,” says Hi-Tops vice president Steingard.

Original Videos Expensive

Original films for video can be costly. Take Hanna Barbera’s Bible series. The videos cost more than $3 million to make, and only now, after selling 1 million tapes, has the series turned profitable--3 1/2 years after it was first sold.

Martin Weinberg, chief operating officer for Hanna Barbera, said original videos are more expensive to make than cartoons, which cost $300,000 to $500,000 for a half hour. “At the current prices, it is very difficult to produce a home video,” says Weinberg. “If it becomes a $9.95 market, it will be extremely difficult to produce a high-quality product. The margins are minuscule.”

But even non-original kid videos aren’t as profitable as they once were. “In the early days, there was such a need for product that anything you put out there would succeed on some level,” says Hi-Tops’ Steingard. “Now with competition, and the fight for shelf space, you have to market more carefully.”

But video industry executives are encouraged by statistics indicating that the number of homes with VCRs is growing. According to the Electronic Industries Assn., 55 million homes have VCRs. That figure should rise to 71.2 million homes by 1993, according to Media Home Entertainment, the nation’s third-largest videocassette distributor.

“There is no where for the market to go but up,” says IVE’s Smith. “It takes patience, but we intend to be there for the long haul.”