That’s Entertainment

Never before has children’s media been so ubiquitous. Inexpensive DVD players now send Disney movies and Dora cartoons flickering from the head rests of countless SUVs, portable DVD players whir on seat-back tray tables of innumerable airliners, and Laurie Berkner songs pour from the ear buds of iPods at pediatric waiting rooms and the local playground.

All feed a generation of kids growing up with electronic entertainment on tap at all times. A recent Kaiser Family Foundation study of more than 1,000 households found that 83 percent of children under the age of 6 in the U.S. use some form of screen media every day. And it starts young, the report found, with 61 percent of babies a year old or less watching an average of 1 hour and 20 minutes of TV a day. By the time they’re 6 years old, 90 percent of kids are watching an average of just over two hours a day.

Sales figures bear that usage out. According to DVD sales tracking service Nielsen VideoScan, children’s non-theatrical DVD sales grew by 15 percent per year on average since 2003. In 2005, they topped $1.2 billion in sales. In the traditional rental market, mail-order DVD service Netflix has seen its subscriber base rise to 5.2 million members on the strength of 62 percent year-over-year membership growth. The company, which carries 3,700 child- or family-oriented titles, has a goal of signing up 20 million more households in the next five years.

The children’s audio market is harder to calculate, as the category has yet to be broken out from general CD sales by the industry’s principal statistician, Nielsen SoundScan. Overall sales in the CD market fell approximately 4 percent in 2005, the company says, driven downwards by slumping sales of adult CDs in a period when industry and consumers alike are still coming to grips with the changing purchasing options of digital downloads. Anecdotally, though, children’s music has never been more popular, or in such demand, as today’s parents and grandparents seek to share a love of pop music with their children, and a host of children’s artists with a flair for creating songs that appeal to both kids and their parents have sprung up to make that job easier.

Yet, despite all that, children’s DVDs and CDs aren’t the runaway success that one would expect them to be in such a prime children’s retail channel like independent toy stores.

Leah Arnone, owner of Duck Duck Goose in Steamboat Springs, Colo., says that children’s audio, in particular, “doesn’t do that great” compared to the toys or children’s apparel she stocks, yet she carries CDs, because they help liven the tone of her store.

“It’s a slow sell, but I always have them,” she says. “As a business owner I like to have people walk into my store and hear children’s music, so it just kind of helps with the theme of things… and I might as well be selling it if I’m playing it.”

Arnone currently stocks a small selection by popular children’s artists like Joe McDermott, Brady Rymer, Dan Zane (whose CD Catch That Train recently began appearing in Starbucks) and Imagination Movers, a New Orleans-based group described by their record label as “a combination of Mr. Rogers and the Beastie Boys.” She also stocks CDs of classical music for babies “because new moms are in that mode of listening to nice lullabies.”

Adult-friendly kids’ music artists “definitely” sell better than generic kids’ music, Arnone says, especially to grandparents. “They’ll hear it in the store, think it’s fun and buy it.”

Children’s music (and kids’ DVDs for that matter) is by and large ordered through third party distributors—for Arnone it’s Austin-based Big Kids Productions—and is “not that much of a risk,” she says, “because I can return them (to the distributor), but I never do because they usually sell, eventually.” Prices are generally keystoned so margins are typical of what an independent retailer would expect.

At Talbot’s Toyland in San Mateo, Calif., DVDs are starting to make their presence felt, replacing both VHS-based home video releases and the store’s former selection of audio CDs, says Carolyn Feeney, buyer and store manager.

“We used to do a lot more [in CDs] than we do now, but we’re only one store, so we’re not really big enough to carry a selection compared to Toys “R” Us, or especially Target,” she says. Instead, she’s focusing on CD-with-book packages and has just begun making the switch from VHS tapes to DVDs. “Right around the holidays, people stopped buying [VHS] so we’re going over to DVD exclusively now.”

When it comes to DVD selections, Talbot’s caters to younger children, Feeney says, mainly with series like Sesame Street (which “is big all of the sudden”) and some Disney titles. She does particularly well with Scholastic’s The Magic School Bus, she adds, and rounds out her assortment with some generic DVDs about trucks and other vehicles that appeal to boys. She sources titles through distributor New Sounds.

In general, the switch from VHS to DVD has been a good one for retailers, Feeney says, since DVDs take up so much less shelf space and pack so much more into an individual purchase.

“The Magic School Bus series might have been on 20 tapes but now the same thing is on only 10 DVDs,” Feeney says, so while it may look like she’s stocking less, “we’re not cutting back on the titles, they just take up less space. We’re trying to still carry what we did on tape.”

Like Duck Duck Goose’s CDs, Feeney finds that at her store, DVDs sell mostly as impulse purchases, with people “coming in looking for something else, then see them and pick one up.” The exceptions are the more infant-related titles like the Baby Einstein series. As impulse buys, DVDs don’t get much attention in the way of special merchandising at her store. “We put them in a prime location and people just see them,” Feeney says. “They’re a slow, steady sale. They pretty much sell themselves.”

“I think over the years some of the toy stores have found they do well with the category and continue to carry it; others have found they don’t do so well and either cut back or cut it out entirely,” says Regina Kelland, director of children’s marketing at Rounder Records, of the mixed opinion about the category at specialty stores. “I think it’s just based on the selling patterns of a particular store and what’s going to work for them. I think there are times, too, when things ebb and flow—one minute you’re the darling and another moment you can’t get arrested; right now kids’ audio is a darling, and that’s by virtue of some of the really huge titles that are out there now. I think some of the stores that have previously cut down will see all the talk in newspapers and magazines about the market and think, 'Maybe we’d better test these waters again. If we carry a little bit maybe we should expand that section or if we’ve taken it out all together, maybe we really ought to look at if, at least in the short run, it’s going to be viable for us.’”

While retailers themselves may be not be blown away by the sales of children’s DVDs and CDs in their stores, content producers stress the appeal of such products to not only their core consumer audience, but also to the retailers themselves.

“Because they’re educational, they’re an evergreen, non-seasonal product,” says Dennis Federouk, president and CEO, of educational children’s video and audio producer The Brainy Baby Co. “[Children’s media] can become one of the foundation blocks of a retail store, especially in today’s media age.” And from a business perspective, they’re small-retailer friendly in that “they carry extremely good margins and are returnable.”

Brainy Baby is just one of many content producers looking to increase its sales through specialty retailers. According to some estimates there are more than 750 [video] titles out there trying to gain access to small retailers’ shelves, Federouk says. “So, it’s very crowded but there are only a few products at the top that have succeeded,” he says “and that’s because of either marketing, or for a company like ours, content and word of mouth.”

Brainy Baby has been in the children’s media business for 12 years and “small retail stores are a tremendous part of our distribution plan,” says Federouk. “Brainy Baby has always supported the specialty retail store and will continue to do so. We do not sell our product in an environment where it can be discounted to such a level that it no longer makes sense for specialty retailers to carry it. We try to do everything we can—from our Web site to our customer service line—to redirect consumers who are inquiring about our products to go to their local retailer to find them.”

The company recently began diversifying its core DVD series into other growth opportunities, such as kids’ sports, fitness and exercise, and even a faith-based video that will launch in early 2007.

At fellow content producer Braincandy, the strategy is “going specialty for at least the next 12 months to build awareness of the brand,” says Sam Reich-Dagnen, co-founder of the Seattle-based producer of an eponymous series of DVDs and related audio CDs centered on the idea of inspiring children to experience the world through the five senses.

According to Reich-Dagnen, “the whole market is fairly underserved” when it comes to children’s media. “There are a couple big brands and a couple me-toos scattered out there, and then there are certain videos you never see in the specialty market but you’ll find in Barnes & Noble. For us, we find that the specialty market is the perfect place to establish the brand because that’s where the influencers are—the moms who tell other moms about cool new products. I know because I’m one of them.”

In return, the company has gotten “a lot of positive reception from the specialty market,” says Reich-Dagnen. “The first store that started carrying us in Seattle didn’t carry any DVDs and very little music and the only reason they stocked us is because they thought the content was high-quality and a child who they let watch it had a really positive reaction to it—they could see that there was a lot of thought behind it.”

The company just released its third DVD last month, Fingercandy: Discovering My Sense of Touch, and has signed a distribution deal with Kid Rhino.

Like Brainy Baby, which has spread from DVDs and CDs to a larger brand that’s home to books, toys and other merchandise, Braincandy has its sights set on a wider product mix that may make it more than a just a children’s DVD buy at specialty toy stores in the near future.

“We’ve already created some prototype toys and we’re talking to another partner about a television series,” says Reich-Dagnen. “That’s what gets you to being a full-fledged media brand instead of just another me-too.”