A Chaotic world order
In the frenetic world of trading cards, an interloper called Chaotic is threatening the dominance of Pokemon and its ilk, thereby granting new strength to the money-losing television production and merchandising company that unleashed the game little more than a year ago.
Chaotic, which features tribes of warring monsters, has stood apart in the trading-card game industry since its launch by New York’s 4Kids Entertainment Inc. in October 2007 because of a new weapon: syncing the game’s online version with the physical card game.
It became the bestselling trading-card game in Canada and reached No. 3 in the U.S. last year, deposing the venerable Magic game and trailing only Pokemon and Yu-Gi-Oh, according to distributor reports.
Online, Chaotic has surpassed Magic’s popularity, according to figures provided by each. Magic the Gathering has 150,000 registered players, its website says, while 4Kids Entertainment executives say the Chaotic website, www.chaoticgame.com, had attracted 1.25 million registered players since its launch.
Bryan Gannon, chief executive of Chaotic USA Entertainment Group, a San Diego technology development company that is 4Kids’ partner in the venture, had a ready explanation for the game’s soaring popularity. “The codes are built in the card, so there’s an exact duplicate in the digital world,” he said. That allows players to trade, battle and build creature armies interchangeably between the physical and online card games.
Chaotic’s success coincides with a relatively strong video game industry, which enjoyed 11% sales growth in 2008 despite layoffs, the credit crunch, the mortgage crisis and the recession.
4Kids announced Friday the fall release of the Chaotic video game for various consoles, including Nintendo’s Wii and DS, Xbox 360 and Playstation 3.
It helps that Chaotic is cheap. 4Kids has integrated its 48-card Starter Deck (usually priced at $14.99 in stores) with the online game at no additional cost.
Chaotic’s mix of online and real-world success hasn’t gone unnoticed.
Last month, Sony Online Entertainment acquired PoxNora, an online trading-card game that involves free play at a basic level with additional premium subscription and purchasing costs for cards and game pieces.
This spring Sony plans to launch a physical trading-card game for Free Realms, a multiplayer online trading-card game, under a licensing agreement with Topps.
“It’s a huge revenue driver, and we’re just beginning to explore it,” said Scott Martins, director of development for Sony Online Entertainment. “It’s a way to keep our readers engaged.”
At 4Kids, which bought the rights to Chaotic from a Danish company, trading cards have been a defender against a flood of red ink. Some of the company’s properties, such as Teenage Mutant Ninja Turtles and Cabbage Patch Kids, are aging. A few years ago, 4Kids lost the license to Pokemon.
For the first nine months of 2008, the company’s net loss widened to $17.2 million, compared with $6.6 million in the first three quarters of 2007. But the company’s San Diego-based trading-card arm, which didn’t exist in the year-earlier period, brought in $14.7 million of the company’s $49.4 million in revenue for the nine-month span in 2008.
Though fourth-quarter figures won’t be released until March, 4Kids Entertainment Chief Executive Al Kahn told investors in November that he expected the company to turn a profit for the quarter and in 2009, reflecting “the financial benefits of the various steps we have taken in the past two years to invent 4Kids, not only as a merchandise licensing company, but also as a trading-card company with multiple Internet platforms ready to compete in the digital age.”
Gannon said he knew where the future lay.
“The result of it is a vast improvement in our business model,” Gannon said. “You need that for companies to survive and evolve and change.”
Kahn remembered, “We had always been somewhat anxious to get into the card business ourselves.”
With the company’s second season of the companion Chaotic television series airing on the CW network, and 4Kids Entertainment recently naming Spin Master as its licensee for Chaotic toys, Kahn’s initial worries have proven to be unfounded.
“The last two years was a retooling process for us,” Kahn said in an interview. “Getting in the trading-card business with Chaotic, our hope was that it would bear fruit in a positive manner.”
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