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4Kids' win-win deal

Programmer's CEO says Fox and its affiliates will profit, too 1/27/2002 07:00:00 PM Eastern

Al Kahn says his taking over Fox's Saturday-morning programming makes a lot of sense for both the network and its affiliates—not to mention his company, 4Kids Entertainment.

Kahn's four-year, $100 million deal to lease the network's four-hour block in the fall was precedent-setting and attracted the attention of affiliates and rival programmers. Affiliates have expressed concern about the influence of an outside producer, and rivals question whether 4Kids can really afford the annual $25 million price tag in a down economy.

Under a similar deal signed late last year, Discovery Communications pays less than $8 million a year to supply programming for NBC's Saturday-morning lineup.

Kahn, whose programming and merchandising company brought Pokémon
to America and The WB, believes that the deal will make everybody happy when all is said and done and the price was not too high.

"We believe that every aspect of this deal stands up and we will be profitable on every portion of it," says Kahn, chairman and CEO of New York-based 4Kids. "We believe that it is a terrific deal for us, a terrific deal for Fox and its affiliates. It will drive ratings to Fox, and it will drive ratings and advertising dollars to the affiliates."

On the price difference between the NBC and Fox deals, Kahn says it was a matter of location and the fact that Discovery will be providing nearly FCC-friendly content, unlike 4Kids. "It's hard to get good ratings and sell advertising with FCC-required programming.

"That's one of the main reasons NBC made the deal they did," he added. "Plus Discovery is only getting 21/2 hours, not a four-hour block like ours. And NBC has never really been a kids player. Fox was the number-one kids broadcaster until The WB came along. We are going to bring back those ratings."

4Kids beat out a number of rival kids producers attempting to get Fox's Saturday-morning block, including DIC Entertainment and Canada-based kids programmer Nelvana. Under the deal, 4Kids will supply four hours of kids programming each Saturday, including one half-hour of FCC-friendly fare, which Kahn has already made a deal with DIC to supply. Fox provides affiliates a half-hour each week of FCC-friendly sports programming, including seasonal NASCAR and Major League Baseball shows aimed at kids. Fox executives are putting together a deal to supply affiliates with the other two mandated hours of FCC-friendly programming.

Don't expect Pokémon
on Fox's lineup next season. The franchise is committed to The WB, Kahn says, adding: "We don't want to do anything to damage our relationship with them. They have been great to us. They made us." However, a pair of other Japanese imports, Ultraman-Tiga
and Kinnikuman, are headed Fox's way, he says.

In a meeting with Fox executives during the NATPE convention last week, the Fox affiliate board asked to see the details of the deal before signing off on it. As FCC licensees, local stations are ultimately responsible for everything broadcast on their air, said Mark Higgins, who was elected chairman of the board of governors at a separate meeting.

Affiliates appear inclined to give it their blessing. "I think we all felt better after [new Fox President Tony Vinciquerra] briefed us on the main points of the deal," said Higgins, vice president and general manager, WOFL(TV) Orlando, Fla.

Fox and its affiliates also discussed, without resolution, extension of the inventory-buyback plan in effect since mid 1999 and due to expire at the end of June. Affiliates are paying Fox about $170 million over three years for prime time commercial inventory they used to receive free. Fox demanded the payments as a way for affiliates to shoulder some of the costs of programming the network.

From the affiliate standpoint, the plan has been a failure, said Cullie Tarleton, retiring senior vice president of Bahakel Communications and outgoing chairman of the Fox board. The poor economy and Fox's decline in the ratings have made the buyback plan all the more onerous, he said. Indeed, for many Fox affiliates, particularly in small and medium-size markets, the plan was "the difference between positive and negative cash flow."

A couple of affiliates have signed off on an extension, though, and talks continue with others. But Vinciquerra said he will spend the next month reviewing the current plan and looking at potential alternatives, as will the affiliate board.

November