Genius Brands International, Inc.
(“Genius Brands” or the
“Company”) (NASDAQ: GNUS), a global brand management
company that creates and licenses multimedia entertainment content
for children, released a letter to shareholders from Chairman &
CEO Andy Heyward. The complete letter follows:
Dear Friends and Shareholders,
As I write to you, and with our 3rd quarter 10Q
set to be released later today, I am extremely excited to share key
business developments that are building powerful assets for Genius
Brands shareholders.
Today’s update can be summarized through 5
pillars of asset creation that individually and in the aggregate,
are actively moving forward and driving long term value for
Genius.
They are:
- KARTOON CHANNEL!
- STAN LEE UNIVERSE
- OUR TENTPOLE ANIMATED CONTENT BRANDS
- THE GENIUS BALANCE SHEET
- ACQUISITIONS
PILLAR #1:ACQUISITIONS
I want to start today with ACQUISITIONS, by sharing that
this morning we announced the acquisition
of CHIZCOMM. With
over $100 million dollars in annual aggregated media spend,
ChizComm is the largest single purchaser of children’s media in
North America. They spend more on children’s
advertising, than anyone including well known kids advertisers like
Hasbro, Mattel, or Lego. The acquisition of ChizComm
and ChizComm Beacon Media will be a transformational event for
Genius Brands.
ChizComm today represents more than 30 major toy companies and
has worked for some of the most powerful and iconic brands in the
children, family media and toy industries. Once again, the
acquisition of ChizComm will be a transformational event for
Genius Brands.
-
The ChizComm marketing agency, will enable us to put
rocket fuel into the growth of Kartoon Channel!, its
viewership and ultimately Kartoon Channel! revenues. As
viewership grows, so does revenue alongside it. And that drives
significant value for Genius Brands.
-
The ChizComm media buying agency will provide us
with additional standing as a content provider, with our broadcast
partners.
-
The ChizComm toy and gaming client base will provide
Genius unusual access to the key companies that are the backbone of
the children’s consumer product business, with billions of dollars
of revenues, in significant part driven by licensing of animated
entertainment properties such as those created and offered by
Genius Brands.
Founded by Harold and Jennifer Chizick,
the ChizComm management team is world class with offices in
Toronto, New Jersey, and Los Angeles. Harold Chizick served as VP
Marketing Services for Spin Master Toys for years before starting
the agency alongside Jennifer Chizick. Donna
MacNeil, the company President in Toronto, was Publisher
of Kidscreen, the leading trade journal in kids media, and highly
regarded by all in the kids media business,
and Kathleen Campisano previously led
the Barnes & Noble Toys and Games buying division with
significant growth during a ten year period before joining as CMO
of ChizComm and running U.S. operations.
The ChizComm acquisition will be strategic because it
will not just be a valuable business in its own right,
but it
will enhance Genius’
existing businesses of broadcasting, licensing, and
distribution, thus becoming a virtuous
circle.
As you know, we have raised capital in recent months in part
because we wanted to be able to take advantage of strategic
acquisition opportunities to unlock what we believe is significant
value for Genius Brands and its shareholders. We are using
part of that cash to pay for ChizComm, and a portion of the
acquisition price is being funded with Genius Brands stock.
Just as Pixar, Marvel and Lucasfilm were smart acquisitions that
drove value forward for Disney, we equally
see ChizComm as accretive, not dilutive, and though
smaller, in the same vein, driving value forward for Genius Brands
now and for years to come.
PILLAR #2:KARTOON CHANNEL!
Since launching Kartoon Channel! on June 15th, we have
been laying the groundwork for a powerful kids distribution system
and a valuable and growing asset to the company and its
shareholders, for years to come. By all metrics, we are rapidly
moving forward. The aggregating of an unmatched library has been
job one. Our focus now moves to growing the audience.
Our marketing team is hard at work executing plans to grow the
audience, in exciting ways to match the quality of
programming we are creating.
When we launched Kartoon Channel!, we described it as ‘like
a Netflix for kids, but free’, and that has not changed. Like
Netflix, we are an On-Demand streaming programming service.
But unlike Netflix, we are free with no subscription
fees.* We are advertiser supported. And unlike Netflix,
we are exclusively for kids. We expect Kartoon
Channel! to become a profit center of Genius Brands going
forward for years to come, and believe it will prosper because
of:
- The caliber of the core children’s content itself
- The technology of how and where we deliver that content to
children
- The extremely kid friendly interface.
(For those of our shareholders who have not yet
visited Kartoon Channel! I encourage you to visit the
site on one of the many platforms where it is
available).
We remain focused on having programming for kids which is SAFE,
POSITIVE, ENRICHING, DIVERSE, and KID FRIENDLY, PARENT FRIENDLY,
and ADVERTISER FRIENDLY. Since our launch in June, we have debuted
a brand-new architecture which is now carried on a number of
platforms including:
- Amazon Prime
- Amazon Fire
- Apple TV
- Apple iOS
- Android TV
- Android Mobile
- Roku
- Comcast Cable
- Cox Cable
- Tubi
- Dish/Sling
- and online through Kartoonchannel.com.
In other words, Kartoon
Channel! is now available virtually
everywhere.
Additionally, we have done a deal with the world’s #1 TV
manufacturer, Samsung, to carry
the Kartoon Channel! app on their Smart TVs. Theirs
is the leading smart TV app platform and the Kartoon
Channel! app is available on Samsung right now. We are in
discussions with other manufacturers, and expect to announce
similar deals in the near future.
Kartoon Channel! has seen steady organic growth and we are
finding that viewers are not just staying for a single episode, but
watching multiple episodes in one sitting. (I'm also pleased to
report that Kartoon Channel! audience response has been
extremely high with a 5-Star rating in the Apple App
store for example, versus even Disney+ with a 4.5
rating.)
In September we launched KARTOON
CLASSROOM! to coincide with
back-to-school. Kartoon Classroom! is a sub-brand and
offering on Kartoon Channel! for digitally infused
learning.
We will also soon be launching a Kartoon
Classroom! microsite (website within a
website) before the end of the year to help parents, daycare
professionals, and professional educators reinforce with their
kid’s lessons taught in the shows.
Each week we continue to roll out new and compelling
programs. In addition to existing series from the Genius
Brands catalogue such as Warren Buffett’s Secret Millionaires
Club, Thomas Edison’s Secret Lab, and Martha & Friends, we
are also showing selected shorts and promotional episodes of
our hit Rainbow Rangers(also running on Nickelodeon)
and Llama Llama(Netflix).
We have acquired proven and recognized branded programs
including:
- Angry Birds
- Babar
- Yu Gi Oh (Arc V)
- Pac-Man
- Pig on the Hill - in partnership with Pierce Brosnan
- Mellodees (from the hugely successful DJ Marshmello)
We have also launched the “KARTOON CHANNEL! MOVIE
OF THE WEEK” with our first slate of feature films
including:
- Stan Lee’s Mighty 7
- Beauty and the Beast
- Snow White
- Cinderella
- Jack and the Beanstalk
- and running this week, HERCULES
The reception has been strong, and we will be shortly migrating
these to the “KARTOON CHANNEL! FRIDAY NIGHT FAMILY FUN FILM.”
Kartoon Channel! now has several thousand
episodes that have been acquired of high quality children’s
content with positive values and enriching stories. We have
gender-neutral series for boys, for girls, for toddlers and for
older kids, and many which are for parental co-viewing.
Nickelodeon was launched in 1979. Over the years it grew, and is
the single most valuable asset in Viacom, today worth several
billion dollars. Cartoon Network, and Disney Channel followed
similar trajectories for their parent companies, Warner Brothers,
and the Walt Disney Company. We can not represent that we
will enjoy these same successes let alone that of Netflix, and
others, but kids viewing habits today are migrating to digital
networks, to YouTube, and to Apps, and not just on TV sets, but
also on computers, game platforms, and cell phones, and that
aggregation of platforms is where Kartoon Channel! lives
because that is where today’s kids are.
Kartoon Channel! lives off advertising not
subscription fees. We are excited that if you go to the channel,
you will see that we have now brought in prominent kids advertisers
including McDonalds, Lego, Playmobil, and
family-oriented advertisers like Wells Fargo.
And because we live off advertising, not subscription fees, that
again is where the synergies with ChizComm Media becomes
so extremely powerful for Genius Brands.
Moreover, the addition of marketing and media buying expertise,
now positions Genius to enjoy those synergies and fuel new
opportunities with broadcast clients and toy companies, for
innovative offerings, reach and engagement in a rapidly evolving
landscape, as we fuel the growth of Kartoon Channel!.
PILLAR #3:TENTPOLE ANIMATION
BRANDS
There are 4 Genius Brands’ Tentpole Animation Brands
These are existing animated series and upcoming animated
series. They are:
- Rainbow
Rangers
- Llama
Llama
- Stan Lee’s
Superhero Kindergarten
- Shaq’s
Garage
We consider these tentpole brands because they each have the
possibility of breaking out and becoming substantial
businesses.
Of course, one never knows which will thrive and which will not,
so we have a portfolio approach of multiple brands.
Our core brands share three attributes which we feel advantage them
over content without these attributes.
- They are EVERGREEN which means like
a Tom & Jerry, or a Flintstones or
a Scooby-Doo, they can live for generations being relicensed
again and again and again, long after they have paid for their
original cost of production
- They are INTERNATIONAL, which means they
are not just products for the U.S. market, but rather, also like
a Tom & Jerry or a Flintstones or
a Scooby-Doo, they can live anywhere. They are global
businesses.
- They have DUEL INCOME STREAMS. Not
only are they valuable programs which continuously are licensed to
broadcast and generate money from license fees, but they have a
second income stream in Consumer Products. The characters
have a second life in toys, video games, publishing,
apparel, backpacks sleep wear bedding, school supplies, costumes,
and numerous categories of licensed products.
In the case of Genius Brands, our core properties will
ultimately reside on Kartoon Channel! and drive
viewership forward there, and build the value of that asset,
similar to Disney core brands like Mickey Mouse, Winnie
the Pooh and Duck Tales, reside on Disney Channel and
Disney+.
RAINBOW RANGERS (Playing on Nickelodeon and
Kartoon Channel!) Rainbow Rangers is now just coming into the
market. Early products from Mattel are in Walmart, Amazon,
and Target.com. Going beyond just toys, there are a
significant number of licensed products in a variety of categories,
many of which are already in the marketplace.
The series is broadly distributed overseas, and we are assigning
international licensing agents as we speak. Due to COVID-19 and
supply channel challenges, this took longer than we would like to
see and it is too early still to get a read, however we are pleased
to see things moving.
Our goal now for Rainbow Rangers, is to add additional
retail partners (both brick and mortar and online), and
simultaneously work to build a global presence for the show
through Kartoon Channel! and global partnerships. By the end
of Christmas season, we will have a good idea of the performance of
product at retail and how big the brand can be and we look forward
to sharing that early in the new year.
LLAMA LLAMA(Playing on
Netflix and Kartoon Channel!)
Llama Llama is currently in an exclusive retail promotion
with Kohls with plush toys and books. Initial reports have been
strong. We have over 50 Llama Llama licensed products in
a broad range of categories.
Over 30 million books have been sold since Llama Llama was first
introduced and it continues to be a top-selling series in
children’s’ literature. We see this as a brand that will grow
and endure for many years.
STAN LEE’S SUPERHERO KINDERGARTEN(Playing on
Amazon Prime and Kartoon Channel!)
When Stan Lee created Spider-Man, he said, “With Great
Power comes Great Responsibility.’” Years later, when he
created Superhero Kindergarten, he
said, “With Great Power
comes Great
Mess.”
Stan Lee’s Superhero Kindergarten was the
last series created by the iconic Stan Lee, and it is simply crazy
superhero kindergarten fun. It stars Arnold Schwarzenegger
as Captain Fantastic, a former superhero now charged with
teaching a special group of kids how to develop their superpowers.
Starting with Arnold and Stan, there is nothing about this
show that is not in the category of excellence. The head
writer was the head writer of SpongeBob SquarePants, and did
some of the best stories ever written in kids television. Iconic
film director, John Landis (director of The Blues
Brothers, Three Amigos, Animal House, Coming to
America, Beverly Hills Cop III, Trading Places, Honey, I
Shrunk the Kids TV and Michael Jackson’s Thriller), is the
voice director for the series.
The show is in the middle of production, and we will deliver the
first episode tease next month. Arnold and John are in
the recording studio weekly doing his voice recordings, and we all
agree they are “FANTASTIC!”
We have high expectations for both the series and the consumer
products worldwide and are currently in discussions with a MAJOR
RETAILER to carry the toy line.
SHAQ’S GARAGE
The last series, I want to take a moment to discuss is our
recently announced Shaq’s Garage.
Shaq’s Garage features a group of insanely imaginative
vehicles, owned by Shaquille O’Neal that
get into larger than life adventures.
For a long time, we have been talking to Shaquille about doing
an animated series together and we finally found the right
concept.
Let me describe it as ‘TOY STORY meets HOT WHEELS
meets SHAQUILLE O’NEAL.’
Shaq’s Garage has the most amazing
vehicles anyone has ever imagined. Not unlike Toy Story,
nobody but our audience knows they are actually “alive,” with real
personalities and voices. Not even Shaq himself, who only
sees them at the beginning and ending of each episode before and
after each adventure, unknowing that they lead lives as amazing as
his own!
We chose to do this series first and foremost because we saw it
as an opportunity to tell heartwarming stories with adventure,
comedy music, and diversity. We also saw it as an opportunity
in success to take an ownership position in a major category of the
toy industry... "vehicle play." It is no small
fact to mention that Mattel’s Hot Wheels does almost $1
billion dollars annually in die-cast vehicle sales. The
Disney movie Cars did several billion dollars of sales
itself over a 4-year period, in the die-cast vehicle
category. We think that Shaq’s Garage has every
possibility to become a hit animated series, and an important
player in the vehicle play category, taking substantial market
share with it. Shaquille is not just an NBA legend. He
is one of the most sought after and successful businessmen in the
country, and beloved across all sectors. He is selective of
the companies he gets in business with and has promotional and
sponsorship relationships, including American Express, Kellogg’s
Frosted Flakes, Papa John’s Pizza, Carnival Cruises, The General
Insurance, Icy Hot, and Reebok , among
others. We are proud to be among them, and that
Shaquille O’Neal has now become a significant shareholder of Genius
Brands.
Shaq is fully committed to promoting SHAQ’S
GARAGE using all of his fan base, social media and
promotional tools, to turn the series and the licensing program
into a major success
PILLAR #4STAN LEE UNIVERSE
When we first announced the transaction to acquire the rights to
the Stan Lee name, likeness, signature, consumer products
licensing, and intellectual property rights, we described it
as one of the last great prizes in
Hollywood.
Today, we believe this more than ever. After all, Stan Lee
was the creator/co-creator of more billion-dollar properties
than anyone ever,
including Spider-Man, X-Men, Iron Man, Black
Panther, Guardians of the Galaxy, Captain America, Captain Marvel,
The Incredible Hulk, Thor, The Avengers and so many more. In
fact, Stan Lee created 5 of the top 12 box office hits of all time,
including the #1 box office hit of all time, Avengers:
Endgame.
We have important things coming forth with this one of a kind
asset. I am authorized to share today that we
are now working with Marvel Studios on an important Stan Lee
initiative which we will be announcing shortly. Like
everything that Stan Lee ever touched, I can assure all our
shareholders it will be significant, and the announcement will be
worth the wait.
PILLAR #5:BALANCE SHEET
The balance sheet of Genius is immaculate. We have zero
debt. A fact that very few companies anywhere can state. We
have a war chest of over $100 million dollars sitting in cash.
As we seek smart acquisitions to accelerate the company’s
growth, we will use our cash, our shares, and our balance sheet
cautiously and judiciously to create value for our shareholders.
We are building an important business, and the
cleanliness of the balance sheet is one of our most important
tools.
Our shareholder base has expanded from individual retail
shareholders to include a broad array of funds, including many
premier funds, such as Vanguard, BlackRock, and CalPERS (California
Public Employees Retirement System) among our top 15
shareholders.
Genius Brands has exceptional liquidity, and regularly trades
volumes in excess of 20 million shares per day. We attribute this
to the passion and loyalty of our shareholders. Without your
support, none of our accomplishments would have been possible.
The management team of Genius Brands, and our Board of Directors
believe in the future of our Company. None of us has sold a
single share of the Company’s stock because we believe in the value
being created and the prospects for growth that we are putting in
place.
We also recognize that Value doesn’t come over night, and there
will be volatility along the road. But we continue to build assets,
increase our animated program catalogue size, grow our channel
footprint, invest in acquiring top tier animated content, invest in
growing our licensing business, and lastly investing in our people.
In Genius Brands senior management, we have some of the most
accomplished people in children’s media, who have joined us from
the senior ranks of iconic companies like Disney, Warner Bros.,
Hasbro, Marvel, and major retail outlets.
When all is said and done, we are committed to building
value by making timeless animated entertainment for children, that
is positive, diverse, and enriching. We distribute this content
worldwide, and license it onto consumer products which delight and
entertain children. Regardless of COVID-19, regardless of
interest rates, regardless of political parties or elections, kids
around the world continue to watch cartoons.
As we build our catalogue, and
look at the pioneers in children’s entertainment who came
before us, we are reminded that animated programming for children
is an enduring business of global value.
Sincerely,
Andy HeywardChairman & CEOGenius Brands International,
Inc.
*Additionally, Kartoon Channel! is available add-free, with a
subscription, on certain platforms for families who prefer this
experience.
About Genius Brands
InternationalGenius Brands International, Inc. (Nasdaq:
GNUS) is a leading global kids media company developing, producing,
marketing and licensing branded children’s entertainment properties
and consumer products for media and retail distribution. The
Company’s award-winning ‘content with a purpose’ portfolio includes
the upcoming Stan Lee’s Superhero Kindergarten, starring Arnold
Schwarzenegger and in partnership with Alibaba; Rainbow Rangers for
Nick Jr.; Llama Llama, starring Jennifer Garner, for Netflix;
award-winning toddler brand Baby Genius; adventure comedy STEM
series Thomas Edison's Secret Lab; and entrepreneurship series
Warren Buffett's Secret Millionaires Club. Through licensing
agreements with leading partners, characters from Genius Brands’ IP
also appear on a wide range of consumer products for the worldwide
retail marketplace. The Company’s new Kartoon Channel! is available
in over 100 million U.S. television households via a broad range of
distribution platforms, including Comcast, Cox, DISH, Amazon Prime,
Sling TV, Apple TV, Roku, Amazon Fire and more. For additional
information, please visit www.gnusbrands.com.
Forward Looking
Statements:Certain statements in this press release
constitute "forward-looking statements" within the meaning of the
federal securities laws. Words such as "may," "might," "will,"
"should," "believe," "expect," "anticipate," "estimate,"
"continue," "predict," "forecast," "project," "plan," "intend" or
similar expressions, or statements regarding intent, belief, or
current expectations, are forward-looking statements. While the
Company believes these forward-looking statements are reasonable,
undue reliance should not be placed on any such forward-looking
statements, which are based on information available to us on the
date of this release. These forward looking statements are based
upon current estimates and assumptions and are subject to various
risks and uncertainties, including without limitation, our ability
to generate revenue or achieve profitability; our ability to obtain
additional financing on acceptable terms, if at all; our ability to
repay our outstanding debt; the potential issuance of a significant
number of shares to our convertible note holders which will dilute
our equity holders; fluctuations in the results of our operations
from period to period; general economic and financial conditions;
our ability to anticipate changes in popular culture, media and
movies, fashion and technology; competitive pressure from other
distributors of content and within the retail market; our reliance
on and relationships with third-party production and animation
studios; our ability to market and advertise our products; our
reliance on third-parties to promote our products; our ability to
keep pace with technological advances; our ability to protect our
intellectual property and those other risk factors set forth in the
“Risk Factors” section of the Company’s most recent Annual Report
on Form 10-K and in the Company's subsequent filings with the
Securities and Exchange Commission (the "SEC"). Thus, actual
results could be materially different. The Company expressly
disclaims any obligation to update or alter statements whether as a
result of new information, future events or otherwise, except as
required by law.
MEDIA CONTACT:pr@gnusbrands.com
INVESTOR RELATIONS
CONTACT: ir@gnusbrands.com
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