It started with Ryan Lee believing there were too many bees, butterflies and bunnies in children’s music: why not have a song about a “fierce” animal such as a shark?
Fast-forward four years and “Baby Shark”, the infectiously catchy tune about a youngster and its family, has been played more than 7bn times on YouTube, making it the platform’s most-viewed video. SmartStudy, the South Korean kids music company that Mr Lee co-founded a decade ago, made $88m in sales last year, the majority of which came from the company’s copyrighted rendition of the traditional US camp song.
“Having a hit leads to infinite possibilities,” said Mr Lee, explaining that live events, toy deals and other types of licensing contracts such as selling material to streaming platforms are as profitable as the song itself.
The success of “Baby Shark” is illustrative of how avenues for self-publishing such as YouTube have become a lucrative starting point for companies producing content aimed at children, but their popularity has forced the world’s biggest streamers to adopt a different approach.
Netflix and its peers have long been adamant that when they strike content deals, the movies and TV series they purchase must be pulled off competing platforms and made exclusive to them alone. But children’s entertainment companies have managed to dodge this approach and keep their content on several channels at once.
SmartStudy has struck non-exclusive deals for material with platforms from Amazon Prime to China’s Tencent Video and Youku. It is now co-producing a “Baby Shark”-themed TV series with kids channel Nickelodeon, which is likely to end up on the broadcaster’s subscription-based platform Noggin, available through Amazon — but the “Baby Shark” videos available for free on YouTube will stay put.
“Now they have a completely different mindset — they realise that if [a hit children’s show] is not on my platform, people will leave,” said René Rechtman, chief executive of the London-based kids media group Moonbug Entertainment.
In July the company raised $120m in a fresh funding round, much of which it spent on acquiring two of the largest kids’ brands on YouTube, animation series CoComelon and Blippi, which makes short educational videos.
CoComelon launched on Netflix soon after the deal, and in October became the platform’s third most-watched show in the US, according to Mr Rechtman. But the show also remained on YouTube, where it continues to make advertising revenue. Moonbug would not disclose how much it had made from the brand.
The children’s entertainment market has become increasingly important to the likes of Apple, Amazon and Netflix, which are battling against traditional groups such as Disney for subscribers to their streaming services. Together the four groups are now spending up to $3bn on kids shows annually, according to PwC. Around 6 in 10 Netflix subscribers watch kids and family content on the platform, according to the consultancy.
“The years have passed and Netflix’s original subscribers, first-mover millennials, have aged with it [and] will now have younger children of their own,” said Daniel Gadher, an analyst at Ampere Analysis. Shows to keep toddlers occupied have become essential as Netflix and its peers move away from just attracting subscribers to retaining them in the face of growing competition, he added.
Although there is a limit to how many different streaming platforms individual viewers will pay for, platforms are differentiating between expensive prestige shows such as Netflix’s The Crown, which double up as marketing, and content that generate fewer subscribers but millions of people will watch for hours, such as shows for toddlers.
“As long as there’s no ultimate platform that dominates the industry, kids media companies will continue seeking non-exclusive deals,” Mr Lee said.
Mr Rechtman added that the experience of recent lockdowns has increased the importance of platforms being able to offer a library of programmes that will keep youngsters entertained: “Covid-19 has accelerated a trend where all these platforms realise ‘oh my god, I not only need to attract subscribers, I also need to make sure there’s enough depth for them to spend a lot of time [watching]’.”
Singapore-based One Animation is another company that has sold children’s TV series non-exclusively to streamers such as Disney-controlled Hulu and Amazon Prime.
Buyers are starting to realise that content for kids is “complementary rather than competitive”, said Sashim Parmanand, chief executive.
Children’s content makes up the biggest share of video available to watch in the US on Disney+ and Amazon Prime, compared with other categories such as drama, comedy or crime and thrillers, according to figures compiled by Ampere. On Netflix it accounts for 12 per cent and 10 per cent on Hulu.
Brands that are born and developed relatively inexpensively on YouTube will be increasingly important to most of these companies, said Mr Rechtman. “Disney’s model is difficult to follow — how many people have a couple of hundred million to create and market something like Frozen?” he asked.
But the path to success has narrowed for those creating shows for YouTube. In September last year, the platform and parent group Google paid $170m to US regulators to settle claims that it had illegally collected personal data from children without their parents’ consent.
Stricter rules around children’s data privacy introduced by YouTube early this year have made advertising slots around videos aimed at them less valuable with some YouTube-focused brands losing up to 90 per cent of revenues, said Ms Parmanand. “I’m sure a number of people have dropped out [of the industry],” she added.