4Kids Entertainment reported a 10% decline in net revenues for the first quarter of 2005 when compared with Q1 of 2004. The drop stems from a decline in licensing revenues from Yu-Gi-Oh!, which earns the bulk of the company's licensing fees as well as a decline in advertising revenue for the 4Kids TV block, which runs on the Fox network on Saturday mornings.
4Kids' Chairman and CEO Al Kahn told investors in a conference call that the company has plans to reverse the downward trends in both licensing and advertising revenues. He announced that a new Yu-Gi-OH! series, Yu-Gi-Oh! GX will hit the airwaves in the fall and that it will come with an expanded licensing program, which includes new CCG releases, videogames and toys from Mattel all of which should start to have an impact late in the year.
Set in the future, Yu-Gi-Oh! GX takes place in an academy, where the young hero sharpens his duelist skills. The new Yu-Gi-Oh! GX series will run daily on both the Cartoon Network's Miguzi block (where it will be one of the few anime series) and the Kids WB starting in September. A fifth season of the regular Yu-Gi-Oh! series will get its American debut on the Kids WB in the fall.
Kahn also noted that the ratings for the 4Kids Saturday morning block had improved substantially during the last weeks of the first quarter and the first weeks of Q2, and the company has plans to keep the ratings momentum building. The popular shoujo anime series Magical Doremi (see '4Kids Acquires MagicalDoremi') will join Winx Club for a 'girls' hour' in the 4Kids block in September and the new G.I. Joe Sigma Six animated series (see 'G.I. Joe Animated Series on 4Kids Block') should add some ratings muscle.
Kahn also noted that the One Piece anime, which is part of the 4Kids block, is currently the top-rated show on the Cartoon Network's popular Toonami block on Saturday nights. One Piece is alsopart of the 4Kids block and its popularity with the older 'tweens' that watch Toonami could filter down and help its Saturday morning ratings, which have been less than stellar.
According to Kahn there are few unlicensed properties left in Japan with the licensing potential of Pokemon, One Piece or Yu-Gi-Oh!, so 4Kids is putting an increasing portion of its proceeds (the company is debt free with $130 million in cash on hand) into the development of its own series and plans to unveil three of them in 2006.
The only new 4Kids' IP Kahn identified specifically was an animated series called Chaotic, which 4Kids has purchased (not licensed) from its Danish developers. Like Yu-Gi-Oh!, Chaotic has a card game tie-in and according to Kahn has sold $53 million in cards in Denmark. Considering that the population of Denmark is only 5.4 million, the Chaotic property would be huge if it performed like that on a per capita basis in the U.S. Kahn told investors: 'this time, we are going to do the cards ourselves,' referring to the huge sales rung up by Upper Deck on Yu-Gi-Oh! cards and Wotc (and Nintendo) on the Pokemon CCG.