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Vol.19 : Frank Foley (HIT Entertainment)
July 4, 2007
Shareholders reject record number of activist motions
Court OK's Bull-Dog's takeover defense
Toyota, Matsushita getting cozy
Wedding styles change with times
Expanded coverage: Wedding styles change with times
holding company：持ち株会社
private equity company：非公開株式会社
shot in the arm：後押しする助けとなるもの
USPs：独自のセールスポイントを持った提案
（ F: Frank, R: Russell ）
| R : |
Okay. I am here today with Frank Foley, who is the General Manager of HIT Entertainment Japan. We are also surrounded by penguins, and trains. Frank, in Japan HIT Entertainment is probably most famous for Thomas the Tank Engine... |
| R : |
But in fact there are a number of other properties which are equally famous such as the Guinness Book of Records, Barney and other characters such as Bob the Builder worldwide, which HIT Entertainment is involved in. Could you give us first of all the background to the company worldwide? I mean tell us a little bit about your operations in Japan? |
| F : |
Right. HIT is actually it's a collection of I think 72 companies altogether. HIT is really best described as a holding company. We specialize almost exclusively in pre-school product. Guinness World Records is one exception.
HIT originally did a lot of documentaries and non-children's programming as well, but about 2 years ago, it was June 2005 it was bought out be Apax, the European-based private equity company. And Apax looked at the whole thing and they decided where the assets really are is in pre-school. So they sold the rest off.
Actually the previous management board got the rest of the business and still continue to run it, and we specialize in pre-school. They did keep Guinness World Records, and I think you know what that says is, you know, when private equity firms buy companies, you know what they are looking for is unreleased value and they try and put in the best team to create that additional value and they move on.
And so I think they saw that Guinness World Records is just too attractive to that goal. So that was the one exception.
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| R : |
Right, otherwise focused on pre-school? |
| F : |
Preschool exclusively...
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| F : |
Worldwide. As you said, Thomas is a massive character and that's strong in almost all markets we are in. Otherwise it breaks down to market by market there, somewhere one character, one brand or another is strong.
For example, in the US, Barney is very, very strong. It's 20 years old now. Next year is their 20th anniversary I think in the US. And product has got a big - the brand has got a big shot in the arm from that and will continue.
What's so great about this job is Thomas basically. It's working with a brand that has 100% brand recognition, everybody loves it, it's not about how do we sell this thing in this market, it's about how do we prioritize. And that's... even Fox is an extremely strong brand, National Geographic is a very, very strong brand but in Japan there are challenges in really getting to the mass market of those brands.
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| R : |
Right, everyone who you need to know about Thomas, the Tank Engine already knows effectively. |
| F : |
And actually Guinness World Records is the same.
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| R : |
Right. So, but you said Thomas has been popular in Japan for about 10 years. HIT Entertainment has a whole range of different properties, Bob the Builder, for example. Surely one of the challenges for you now is to do the same with Bob and Angelina Ballerina, I believe, as has happened with Thomas? |
| F : |
I think Thomas, it's a little longer, it's may be 12, 13 15 years or so. It really picked up once it got on Fuji TV and the market really expanded from there, and its grown to - now the number preschool brand in Japan and after Anpanman, and that makes it the number one foreign preschool brand in this market and that's a huge success, that's great and yes there is pressure on us to build other brands.
The other brands that we work with are Bob and Pingu, they are sort of the - with Thomas, they are the three brands - three main brands we are working with, and as you mentioned Angelina and there are some other smaller brands as well that we do sell the stuff with, but the real focus is on those three.
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| R : |
And the best way to prioritize how you license the rights to those properties in terms of keeping those properties in the public eye and obviously bottom-line, making as much money from them as possible. |
| F : |
I think you know they are all at different stages of development, and they are sort of slightly different properties as well. So it's a different task with each one of them. Thomas is so big and so well known, I mean the retail value is public knowledge, it's somewhere around 350 million US retail for Thomas.
So that's sort of, that's one task. Pingu is a growing brand for us, it's a brand, its USPs would be it's a family brand, it's got a very wide demo, all the way from infants through to mothers, OLs, and the sort of range of - there is a sort of a unique range of products, categories that you get out of that, because that's who are selling to.
Bob is something that's very strong in some areas. It rates very well on television, DVDs sell extremely well, apparel does really well, but toys, we've got a challenge on toys, so that's the focus on Bob. So each one has its own challenges and its own strategy that's driving it.
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kid slots：子供番組枠
the be-all and end-all：最も重要なもの
vernacular：専門用語
（ F: Frank, R: Russell ）
| R : |
So describe the market in terms of your competitors? So we have a number of companies who have foreign-originated properties. Obviously Japan is a huge market, world's second largest economy, they like characters, what's the key to success would you say in terms of being able to bring a foreign property here and make it successful?
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| F : |
I think in our area, in the preschool area, you are selling to kids, so kids have to like it. And that's really where it starts and finishes. And that's driven by Television, so you've got to get on Television, so there is a bit of a, there's a B2B challenge there in convincing them to put it on Television, and that's very, very difficult.
Most of the commercial networks now have dropped their kid slots, and there is no regulatory requirement on them to broadcast kids programming. So it's all going to NHK, so you really - if you're talking about broadcast, you're talking about NHK and you're talking about NHK Channel 3. So getting on television, that's the first task, and then when you want to get on television, the kids have to like it. If the kids don't like it, it just doesn't...
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| R : |
You won't to be on television for long... |
| F : |
That's to have an enduring evergreen type preschool product. There is another market where you really go into the sort of the fashion market, its more young girls, its junior high school, high school girls. I think Sponge Bob is probably, shouldn't mention competitors' products but its that sort of a phenomenon and Sponge Bob might prove to be enduring.
But I think its kicked off as Pingu did, to be honest, with junior high school, high school girls and they buy a lot of stuff but the challenge there is that they move on, and if you find you don't want a market after that and once reach out or start to smell blood and they sort of see sales falling, they quickly clear off their shelves and the next brand is in there.
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| R : |
But is television the be-all and end-all, is there any grassroots marketing, any alternative types of exposure that you can give to products if you don't have the blessing of TV? |
| F : |
There is a certain business you can build and you could create a business of up to maybe 50 million, 60 million in retail based on word-of-mouth, based on the internet, there are few brands around that have done that online and mobile. But I think to get into the really top league, to get above the 150 million, get into 200 millions and that sort of sphere, you really need broadcast television to drive it.
And a lot of that is really a B2B perception, you know to get Takara Tomy and Bandai and Gakken and these sorts of companies to invest, it's like 18 months old, but they are starting their product development - to get them to invest that sort of money in toys, they need to be sure that the brand is going to stay there and broadcast television for them is their indication.
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| R : |
Right. Is there an issue in Japan vis-à-vis the fact that these properties are foreign when Japan obviously has a lot of its homegrown properties and the idea well, you know, okay Mickey Mouse is fine, and what have you, because its part of world culture, but really we've got our own characters now, why do we need these foreign ones, how would you describe... |
| F : |
I definitely do...I think Japan is probably one of the most competitive markets for character brands, preschool and kids generally. The thing with Thomas is I don't think it's particularly seen as a foreign brand. The thing that amazes me about Thomas is that no Japanese company did it, it's a train culture and the train category was just left there for a foreign company to come out and take. It's just amazing.
I think that was the exception and not the rule, I think it was opportunistic probably of the company that was doing it at the time. They just bought - it was sort of like Rupert Murdoch buying the soccer rights in the UK and building BSkyB on the back of it, why was it that British broadcasters sat around for years and didn't give the public what they wanted.
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| F : |
It's a similar situation, it's just amazing. We came in and we captured it, and we - luckily we did it with a brand that's so unique that no one else can really come in. You know, you couldn't even come in with a shinkansen and steal the train market from us, no, because Thomas has it and its Thomas... |
| R : |
It's almost the generic example of intercultural train harmony, almost where everybody loves trains. So there is no localization of Thomas in terms of culture aspects regarding the shows and... |
| F : |
No. I think the thing about Thomas is it's its own world, its Sodor Island and its Thomas and his friends, and there are some human characters in it. But they are not really the focus, so it's sort of a culture onto itself. |
| R : |
So it's like an idealized train world which appeals cross-culturally. |
| F : |
And for a lot of Japanese kids, Thomas for them is steam train, it's become a proper noun, it is part of the vernacular I think. It's interesting though because you do need to - an important part of television especially is localization, and we are still early stages, but we are sort of playing with ideas of how to localize Thomas, and it's sort of a watch this space type thing but I think somewhere around next year... |
| R : |
Do you have any recent or upcoming developments that you're particularly excited about at the moment? |
| F : |
Yes, there is one, and now that you've mentioned it, Bob the Builder, DVD special, called 'Built To Be Wild'...
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| F : |
It's Bob and his friends out in the west...
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| F : |
Hee-haw type adventure and they find an old mine and they have to - all those sorts of adventures, it's great fun. And what we did on that, and this is actually something I took from my television background with Fox, is that one of the challenges with content, with foreign content, let's say, Thomas is foreign content, in this context Bob is foreign content, is to make that - is to communicate the excitement, the entertainment value that your product has.
And you are competing against all these Japanese brands, which parents have known, they know more about, so what I have always tried to do is to use people who would be able to bridge that gap.
And I have used a lot of foreigners, well-known foreign talent and who are respected by parents. Thane Camus, for example, is one person who used to help us a lot at Fox, and I got in touch with Thane again and he has done, he came on as a guest voiceover talent for a new character in this particular series, and he's helped us out with a lot of interviews and publicity and whatnot. We did a TV spot with him, it's running on TV Tokyo at the moment.
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| R : |
Selling Bob The Builder... |
| F : |
So watch out for Thane, and he's brilliant, the Japanese loved him, we did test market and focus groups and everything, and he is perfect, he is brilliant and all that. And Thane actually - his own children loved Bob The Builder, so it's from the heart, the whole thing that they actually loved him, he knows Bob The Builder far better than we do. He's seen the shows a 100 times. |
| R : |
So he's made his children very happy. |
| R : |
One last question. What is your experience with the Nikkei Weekly, is it a newspaper that you are familiar with?
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| F : |
Yes, I subscribe to it and I actually pass on to my Japanese colleague here, what was done on it, and I put a big circle around a couple of articles, I don't want to overload him, but you know articles related to our industry... |
| R : |
Take a look at this... |
| F : |
Would be good for him to read and I think it's excellent for anyone in business at all, for Japanese people learning, business people learning English, it's a great way to pick up vocabulary to build up just reading comprehension and all that. It's the cheapest business text you'll get on a weekly basis. |
| R : |
Can't get better recommendation than that. Thank you very much. Thank you Frank Foley. |
 Terry White / Chief Communications Officer
Amway Japan Limited 
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