Like a cartoon transforming from a sketch on a napkin into a 3D rendering on a computer, Vancouver-based animation house Rainmaker Entertainment Inc. is looking to get creative – this time by transforming its business model.
Wow Unlimited Media Inc., the animation studio’s parent company of less than a year, inked a deal last month that will see it give up a 12% equity stake to Bell Media (TSX:BCE) to acquire a TV channel and help distribute Rainmaker’s content directly to audiences.
If all goes well, Wow chairman Michael Hirsh said similar arrangements – minus the equity component – could be made in other territories across the globe.
“That’s part of a triple play we’re working on together strategically,” Hirsh told Business in Vancouver.
The deal allows Wow to rebrand an existing Bell TV channel to one devoted exclusively to kids’ programming.
The second and third parts of Hirsh’s strategy involve delivering Rainmaker’s shows to Bell’s streaming platform, CraveTV, and its mobility offering, SnackableTV.
“There is a lot of stuff that goes on in the Canadian media industry that makes no sense. But I think this one makes a lot of sense,” said Curiate CEO Jennifer Chen.
Her company analyzes TV viewing habits by examining multiple platforms, including traditional live TV, downloaded video and streaming services like Netflix (Nasdaq:NFLX) or Amazon (Nasdaq:AMZN) Prime Video.
“There’s a lot more control over what gets made and what gets distributed,” she said. “Kids and youth programming is a lot less expensive to make than adult dramas. So from a cost perspective, I don’t think Bell is taking too much of a risk in investing in a content company.”
Netflix remains CraveTV’s biggest rival. The American streaming service had an estimated 5.2 million subscribers in Canada last year compared with CraveTV’s 1 million.
Chen said the Wow deal allows CraveTV to begin offering kids’ shows to subscribers so it can be more competitive with Netflix.
Rainmaker animator designer Chris Souza has worked on ReBoot and other popular series | Photo: Chung Chow
The deal also represents a big turnaround in strategy for Rainmaker after its self-financed feature film debut, Ratchet & Clank, failed to connect with critics and audiences last year.
The computer-animated movie grossed US$13 million at the box office based on a budget estimated to be US$20 million, according to BoxOfficeMojo.com.
That pushed Rainmaker to take a $10 million impairment charge on its first-quarter income in 2016.
A few months later, Rainmaker acquired New York-based Fred Siebert’s Frederator Networks and Ezrin Hirsh Entertainment Inc. in a deal worth an estimated $17 million. That deal was funded in part through an $11 million private placement.
Wow was created as the parent company overseeing Rainmaker’s animated production efforts and Frederator’s YouTube distribution, which attracts 700 million views a month.
“Frederator didn’t have a fully integrated animation studio as part of it,” Hirsh said.
“While they were producing great shows, they had to go to other people’s studios. So now we’re able to make our own shows in our own studio [Rainmaker].”
If Wow takes a business model similar to those in other countries, Chen said quality animated content will be easy to translate to other markets. But she remains skeptical the SnackableTV mobility offering – the third plank in Hirsh’s triple play – will be successful.
SnackableTV offers smaller clips to users on mobile devices as opposed to full-length episodes.
“It’s not a consumer need. It is a business need on the Bell side to experiment with this.”
