Nelvana to Produce CBS’ Saturday Children’s Shows

In an unusual arrangement for a major television network, CBS has agreed to hand over production of its Saturday morning children’s block to a single supplier, Canadian-based Nelvana Communications Inc.

The two-year partnership is worth $70 million for Nelvana and assures it an outlet for its programming at a time when independents are being squeezed from the business by major studios. Now that Walt Disney Co. and Warner Bros. own networks, they are increasingly supplying their own children’s programming, leaving fewer slots for outside suppliers.

Without the resources of a major animation studio, CBS, meanwhile, has seen its viewership wither on Saturday morning. Ratings hit new lows last season after the network shifted its approach from traditional animation to live-action series that satisfy federal rules requiring three hours a week of educational programs.

“The live action was not the culprit, but rather an erosion over time of the kids audience on CBS,” said Lucy Johnson, senior vice president of daytime and children’s programming at CBS Entertainment.

Although terms of the deal were not disclosed, sources said CBS may be able to staunch losses on Saturday morning because it will share in merchandising and international distribution revenue from the shows, while paying Nelvana licensing fees that are cheaper than the going rate.

Unlike its counterparts in the U.S., Nelvana receives subsidies from Canada that help defray the cost of producing animated series--about $350,000 a half-hour for a network-quality program. Rival producers say they could not compete with the $50,000 licensing fees Nelvana offered because they do not enjoy subsidies of up to $150,000 a half-hour.

Nelvana has had success with Scholastic’s “The Magic School Bus” and “Little Bear,” on Nickelodeon.

Under the two-year partnership, which takes effect this fall, Nelvana will produce six animated series.