We now have an explanation of the mysterious Microsoft deal with 4Kids Entertainment that was announced in January. According to the press release – “Viva Piñata” Universe Revealed — Entertainment Property Brought to Life by Microsoft, Rare and 4Kids Entertainment:
Spontaneous and fun, piñata-filled world showcased via animated television series, immersive Xbox 360 video game and wide range of merchandise.
Microsoft Game Studios and 4Kids Entertainment, Inc. (NYSE: KDE) today celebrate the introduction of “Viva Piñata,” a high-energy, mass-appeal entertainment property created by Rare Ltd. that brings a vibrant world of living piñata animals to video games, television and beyond. The “Viva Piñata” universe showcases an engaging cast of colorful, wild-roaming piñata animals that entertain and challenge imaginations.
“Viva Piñata” will offer a number of entertainment elements enjoyable for everyone — from kids to adults. The “Viva Piñata” world will include a Saturday morning 3-D animated television series, slated to premiere this fall on 4Kids TV™ on FOX, that is produced and created by 4Kids Entertainment, known for such powerhouse properties as Yu-Gi-Oh!®, Pokémon®, Cabbage Patch Kids® and Teenage Mutant Ninja Turtles®. An immersive video game developed by Rare Ltd. exclusively for the Xbox 360™ video game and entertainment system is scheduled to debut this holiday worldwide, enabling gamers to create and customize piñata-filled adventures in their own evolving world. The 4Kids Entertainment licensing program will result in additional licensed products launching in 2007. Additional information can be found at http://www.vivapinata.com.
Following the strategic alliance previously announced in January 2006 with Microsoft, 4Kids’ exclusive representation agreement includes all broadcast, home video, music and merchandise licensing rights on a worldwide basis for the “Viva Piñata” property.
I have to admit that I went to the promotional website to check out all the details because I couldn’t help wondering how they were going to handle the messy problem that pinatas exist to be bashed to bits by kids with bats. Let’s just say that the backstory is rather like Santa Claus if he got pummeled at every house he visited and then patched up before the next one. One of the main TV characters, the oddly deformed Fergy Fudgehog, “is nervous, high-strung and prone to panic attacks” because of “the thought of being bashed open for his candy.” Lots of crowd appeal so far.
However, I’m rather less interested in whether “Viva Piñata” will be a success than I am in why this is a reasonable investment for Microsoft. The kiddie fad merchandising business is big, but there are many players and many failed attempts for every one that is a success. Presumably the risk is decreased by hooking up with 4Kids although their current lineup (see also ) doesn’t show many recent winners other than snagging the Bratz doll cartoon franchise.
The story in the press is that this is an attempt to “expand the audience for its new Xbox 360 video game console beyond young, male ‘hard-core’ gamers” and I suppose claiming it as a marketing stunt is as good a rationale as any. However, the temptation is to mark it down as a typically weak attempt of a cash-rich company to expand beyond their core business. “Viva Piñata” may well be wildly successful, but it makes one wonder what’s next, Broadway shows or movies? Oh wait, Microsoft is already doing the latter.
Update: Things aren’t looking that good for 4Kids according to the AP:
Shares of 4Kids Entertainment Inc. tumbled in Thursday trading after an analyst cut his investment rating and gave a grim outlook for the company’s business.
A day earlier, 4Kids, which licenses popular characters for games and toys, posted a lower fourth-quarter profit as its revenue sank more than 21 percent. The company blamed the decline from a drop-off in sales of licensed merchandise.
The dismal report drew negative reactions from analysts. Robert Routh, a Jefferies & Co. analyst, said 4Kids’ quarterly results were “well below par,” adding that 4Kids doesn’t have any growth catalysts in sight.
As for the Microsoft deal:
… Routh cast doubt on the development. “Although sounding good,” he wrote, “predicting the success of the property at this point is very difficult.”