Down but Not Out : Cartoons: Insiders say the growth of cable, syndication and home video can help DIC Enterprises survive NBC's pullout from animated fare.

By PATRICE APODACA

April 21, 1992 12 AM PT

TIMES STAFF WRITER

This fall, as the television networks kick off their new lineups, there will be one notable change. NBC, once the leader in Saturday morning children’s programming, will no longer be in the kid business.

That’s bad news for DIC Enterprises in Burbank, an animated children’s program producer that last fall had four shows on NBC and stands to lose the most from the network’s decision.

DIC once commanded the networks’ Saturday morning schedules, and last year it had eight network shows. It now has just two slated for the fall--”Double Date,” a teen-age game show for NBC that is DIC’s only live-action program, and “Super Dave” on Fox.

NBC’s departure also comes at a time when DIC is under pressure from the rapid emergence of major studios into animated TV production. DIC and other big independents such as Hanna-Barbera and Marvel Productions have now taken a back seat to Walt Disney Co. and Warner Bros.

Nonetheless, DIC might be down, but it’s not out.

The impact of NBC’s pullout on DIC “was really minimal,” said DIC President Andy Heyward, because the company was diversified enough to switch gears quickly to producing more shows for other TV programmers.

Even DIC’s competitors agree that it can survive the blow of NBC’s withdrawal. “Nobody would deny it’s a setback for them,” said Kelly Ward, vice president of creative affairs at MCA’s Universal Cartoon Studios. “But I don’t think NBC pulling out is the death knell for DIC.”

Ironically, DIC can survive and prosper, industry insiders say, because of the very forces that pushed NBC out of the children’s market: the growth of cable, syndication and home video.

“A few years ago there were three networks,” Heyward said. “Today, you have four networks, you have independent TV, basic cable, home video, Nintendo. Just over the horizon, you’ve got CD-ROM, and all kinds of new technologies.”

What’s more, as NBC pulls out, other programmers are gearing up their children’s fare. Fox is boosting the number of hours it devotes to children’s shows. Turner Broadcasting System has announced plans to start a 24-hour cartoon network in October--the main motive behind its purchase last year of Hanna-Barbera. “Even though NBC is getting out of the animation field, animation as a business is probably busier than ever,” said Roger Mayer, president of Turner Entertainment Co., a Turner Broadcasting subsidiary.

The future of DIC (pronounced “deek”) has long been the subject of industry speculation since Heyward, 43, led a $70-million leveraged buyout of the company in 1987 from Radio-Television Luxembourg and French businessman Jean Chalopin, who co-founded DIC with Heyward.

Since the buyout, Heyward and his partners, Prudential Insurance Co. and Bear Stearns Co., have remained secretive about the company. Heyward holds a 35% stake, Prudential has 60% and Bear Stearns owns 5%. Heyward won’t reveal the firm’s revenue or profits, nor will he discuss the amount of debt left from the buyout.

But observers say an eventual alliance between DIC and another company remains a possibility. Last year, DIC discussed a possible combination with Polygram Records, but those talks failed to produce an agreement.

Heyward now says an announcement about DIC’s future is imminent, but declined to reveal any details about a possible deal. “There’s something brewing, but we’re not ready yet” to discuss it, he said.

But in the meantime, industry insiders say DIC’s quick change of gears is the main reason DIC will survive an expected shakeout among independent animators. As DIC’s network presence has waned, it has roughly doubled the amount of programming it sells to cable stations such as the Family Channel and the Disney Channel. “WishKid,” for instance, a Macaulay Culkin cartoon that debuted on NBC last fall, has moved to the Family Channel.

DIC has also doubled the number of shows it sells in the syndication market. For instance, its long-running “Inspector Gadget” series, mostly recently featured on Nickelodeon, is now being syndicated with new characters stripped into old episodes. “ ‘Inspector Gadget’ is worth more today than it was when it was produced 10 years ago,” Heyward said.

The blossoming first-run syndication market is another area DIC is increasingly emphasizing. Its new “Stunt Dawgs,” for example, will go directly into syndication for sale to local TV stations, rather than running first on a network.

DIC is also the exclusive supplier of children’s programming to the Spanish-speaking Univision network. It’s working on an animated version of the “Classics Illustrated” comics that it hopes to sell on videocassettes. And it’s producing one-time specials, such as a show based on the popular Troll dolls that will be syndicated for a Thanksgiving airdate.

Meanwhile, DIC is also pushing hard in fast-growing foreign markets. With partners Scottish Television and Italian media concern Silvio Berlusconi Communications, DIC is producing a $26-million animated series scheduled for worldwide release in 1993. Rock star Rod Stewart is doing the musical soundtrack for the show, called “The Hurricanes” after a fictional, globe-trotting soccer team.

While such co-production ventures are potentially highly profitable, they also involve more risk. When producing for networks, companies are paid fees up front that cover the majority of production costs, which average $250,000 to $300,000 per show. Without the network fees, DIC and its partners must arrange for outside financing, and then hope to recoup their investment as the show is sold into various markets.

“It’s a money-raising problem, but potentially there could be greater rewards,” said Ken Spears, vice president of Ruby-Spears Productions, an independent animation company.

That’s because producers usually don’t make money off the networks anyway. Production companies generally make their profits on network shows only after the shows are sold into foreign and syndication markets. It’s a game that big studios are better able to play because of their financial strength and because the cartoons are seen as a way for studios to promote the characters used in their films, theme parks and merchandising divisions.

The studios have also raised the stakes in TV animation by spending big money on their programs, using the newest computer technologies to give their shows more sophisticated looks. “The conventional wisdom is, to compete, you must do a quality, entertaining show,” said Gary Krisel, president of Walt Disney TV animation. “The things being blown away are lower-end, cheaper productions.”

Such realities haven’t escaped Heyward, who said he has been investing heavily in computerized animation as a way to stay competitive with the major studios. It’s also a way DIC can be ready to exploit emerging technologies such as compact disc interactive machines (CDI), which plug into TV sets and feature entertainment, education and graphics packages.

As the children’s TV market grows increasingly competitive, programmers and producers are also turning more to established characters, such as those that Disney and MCA have made famous through their films and theme parks. The networks look for “brand name properties, something that has a pre-sold quality to it,” said Jennie Trias, vice president of children’s programming at ABC.

So independents such as DIC are constantly on the prowl for already-known characters. DIC’s new “Super Dave” series, for instance, was spun off from the live-action Super Dave Osborne show on the Showtime cable network. Its “Sonic the Hedgehog,” now in development for ABC, was derived from a Sega Enterprises video game.

DIC is now gearing up for its fall production, and will soon boost its employment to the usual summer level of about 300 from its core staff of about 70, Heyward said. And as new stations and technologies emerge, Heyward hopes to capitalize on the growing demand for children’s shows. Programmers have one thing in common, he said, “and that’s software. People need the characters.”

DIC Enterprises Fall 1992 TV Schedule

DIC Enterprises is a Burbank-based producer of children’s television shows. Founded by Andy Heyward, a former writer for rival cartoon factory Hanna-Barbera, DIC is one of the largest independent suppliers of animated television programming. In recent years, however, DIC and other independents have been pressured by the emergence of major studios such as Walt Disney Co. and Warner Bros. in the animated television market.

Broadcaster and program:

NBC: Double Date

Fox: Super Dave

Turner/TBS: Captain Planet

Family Channel

The New Archies

Hey Vern, It’s Ernest

Prostars

Wishkid

Inspector Gadget

Super Mario Super Show

Super Mario World