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Thursday, Mar 28, 2024

Fun Done at Toy Channel

The “Transformers” movie franchise has been one of the most successful series in history, grossing more than $1 billion in domestic box office alone. So it would have seemed logical that a network that owned TV rights to the characters based on the Hasbro Inc. toy line would be a can’t miss. Not so fast. This month, Margaret Loesch, founding chief executive of the Hub Network, stepped down after nearly four years leading the Burbank-based children and family cable channel. She claimed the network was in “excellent financial shape” and was on the cusp of major success. Few agree. The joint venture founded in 2010 by Discovery Communications Inc. and Hasbro has yet to bring consistent income to its owners, and analysts who follow the network agree that content has improved but remain cautious about any upbeat financial projections. “I don’t know when it is going to be a meaningful contributor to the bottom line,” said Jaime Katz, an analyst with Morningstar Inc. in Chicago. The Hub features live action and animated content offerings that include not only “Transformers” but shows such as “Family Game Night,” a game show pitting two families in a competition based on adapted Hasbro board games. The network reaches more than 70 million U.S. homes with programming that was originally aimed at children ages six to 12, but that target demographic is now broadening under a new strategy this year that is putting an emphasis on family shows. Syndicated sitcoms and dramas, including repeats of “Happy Days” and “Family Ties,” have been added to the lineup. And this fall the network will air its first unscripted series, “Parents Just Don’t Understand,” with Joey Fatone, of N’Sync fame. But it’s still a relative newcomer to a crowded children’s programming market, competing against the Disney Channel and Disney XD, owned by Walt Disney Co. in Burbank; Nickelodeon, a division of Viacom Inc. in New York; and Cartoon Network, owned by Turner Broadcasting System, a division of Time Warner Inc. in New York. Like Hub, all three of those competitors have a presence in Burbank. Sean McGowan, an analyst with Needham & Co. LLC in New York, said one reason the network is struggling is that it is the only children’s channel backed by a single toy company. So other big toy makers, such as Mattel Inc. in El Segundo, have refused to advertise on it. “Other companies that advertise include food companies and video game companies,” McGowan said. The joint venture partners also may have thought they could benefit from Hasbro having the license to manufacture “Star Wars” and Marvel characters as toys. But instead of shows based on those characters appearing on the Hub, they are other networks, including those owned by Disney, which holds the licenses for much of the intellectual property. “I think they had some hope that the programming could wind up on Hub,” McGowan said. Uneasy fit? Neither company returned calls for comment, but Hasbro management has been taking an aggressive attitude in public statements about the Hub. Chief Executive Brian Goldner told analysts in February when discussing earnings that the Hub draws the highest audience of children who watch with their parents – a desirable viewership for advertisers given how parents hold the purse strings. “Since its launch, the Hub network has been the most co-viewed children’s network in percentage terms versus all kids cable networks,” he said. And in a conference call in April to discuss first quarter earnings, Hasbro Chief Financial Officer Deb Thomas reported the Pawtucket R.I. company benefited from a $1.3 million profit that quarter from Hub, compared to a loss of $1.1 million in the same period a year earlier. However, other earnings reports dating back to 2012 indicate the network contributed nearly $8.5 million in losses to Hasbro, including just one quarter when it recorded a profit. Discovery Communications, in Silver Spring, Md., does not break out figures related to The Hub in its financial statements. What is certain is that both companies have a lot invested in the network that replaced Discovery Kids, a channel that began airing in 1996. That network was seen as successful by Discovery executives, but it was an uneasy fit with the core programs the network offered and there was an opinion that a dedicated children’s channel could be done better and have more of an impact. Hasbro entered the picture and a deal was struck for Discovery to sell off half of Discovery Kids for $300 million, with the two companies partnering on the new network. Discovery handles advertising, distribution and other operational requirements; Hasbro provides studio-produced programming from its own production company, Hasbro Studios, opened in 2009 in the Hub’s Burbank headquarters. For its part, Discovery gets programming that it doesn’t have to make, while Hasbro can get a consistent message out about its brand to parents and their children. “They also don’t have to fight for time or space on a channel like they would on another network,” Katz said. Veteran executive Analysts say there is no doubt that Loesch was a big loss, though it’s unclear if the departure was entirely voluntary. In a statement released June 12, all Loesch said was that she was leaving when her contract expired. She had previously worked for other children’s programmers, including as founding chief executive of Fox Kids Network. And her experience, which stretches back decades, also includes work in consumer products. McGowan called her the perfect person to head up the young network. “With her departure, you are losing a person aligned with their markets,” he added. Loesch’s announcement set off press speculation in the entertainment industry about the Hub and whether Hasbro and Discovery were butting heads over its future, though Katz downplayed such talk. “There is enough representation at the senior level that both teams will get their needs met,” she said.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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