Complex channel Relationships - first cut

Companies within the Animation industry exist within a complex system of channel relationships and there are significant challenges to get access to segments of the animation entertainment market that will yield bottom line results for the organizations involved.

Animation entertainment is such that a property or content is often distributed through multiple channels simultaneously with pre-emptive and corresponding marketing activity which utilizes elements of the animation property itself in campaigns. Animation properties are also released differently across different platforms and ‘Each type of animation medium – film, television, internet, interactive gaming, home video/DVD – is characterised by a unique distribution structure.’ (Raugust)

Animation properties are often exploited further through ‘off screen’ product branding and licensing of ancillary merchandise which expands the channel management complexity substantially. An example of this is the strategic two year partnership from 2007 between DreamWorks Animation and McDonald's, which gives McDonald's worldwide promotional rights to new DreamWorks animated properties 2005 (movie marketing update)

This provides a significant challenge that faces the animation marketeer is the managing a range of complex channel relationships that provide access to the market.

Channel structures in the animation industry are complex because access to the market depends on the strategic relationship of the branded content, with the needs of the television entertainment exhibition industry and its relationship to the consumer, its advertising partners and market regulations.

Further complexity in the channels occurs because often animation properties have more than one owner, often from different geographical regions. Complex international ownership models are not preferred but often necessary to gain sufficient funding through co – production arrangements, reduce risk through cost savings in labour and or tax benefits, provide market access and gain market intelligence, particularly surrounding the issue of market regulation.

It requires the strategic management of the Relationship between the BRAND offering, (or portfolio of brands,) the use of complex and numerous CHANNELs to the targeted SEGMENT of the market.

The brand equity that is realized in a successful branded animation product, i.e. Sponge Bob square pants is transferred upwards into Nickelodeon’s brand equity/value. This equity is further moved upwards contributing to the brand equity of the parent conglomerate, Viacom. Once an animation property has a strategic brand value within the structure of such a conglomerate it can then be leveraged synergistically across the widest possible range of opportunities

Animation can be seen to primarily use vertically integrated channel marketing systems. This is reflected in the fact that most animation is distributed by its parent company or affiliates. Companies that do not fall under the direct ownership of the major conglomerates often have strategic relationships as value added partners with them to some extent, and utilize there channels and market access to deliver there content. This relationship model can be seen in the relationship between Pixar and Disney

PIXAR and DISNEY

Pixar is currently one of the most successful animation brands in the world. As an animation production company it has mastered the medium, in terms of creativity, technology and channel management. This can be seen its slate of international blockbuster feature films, Toy Story, A bugs life, Toy story 2, Cars, and Ratatouille. Its success as company is cemented by its recent acquisition January 24 2006 by Animation media giant the Walt Disney Company for US$7.4 billion in stock.

Pixar was founded by Steve Jobs in 1986 as an independent high end 3D animation company. In 1991 Pixar entered into a 5 year strategic channel relationship agreement with the Walt Disney Company that covered co – production financing, co – branding, co- ownership of rights. In the agreement Pixar would produce five films which the Walt Disney Company would market and distribute through its channels networks. In this original agreement “Disney was to get 87% of the distribution proceeds” (Kumar), although this seems to be a premium price to pay it can be seen to reflect Pixar a channels management strategy whereby complexity and consequently risk is reduced substantially by giving “Pixar an expert partner in the film business with great marketing capabilities” (Kumar).

In this way one solution to the challenge of complex channel relationships is to reduce risk by partnering with experienced players in this area.