The global animation industry has been gliding through a growth phase for much of the last four decades, according to Michael Hirsh.
But unprecedented demand triggered by streaming services like Netflix Inc. (Nasdaq:NFLX) and Amazon.com Inc.’s (Nasdaq:AMZN) Prime Video is setting the current spurt apart from historical growth, said Hirsh, a mainstay producer in the Canadian animation industry going back to the 1980s.
“Thirty, 40 years ago, you were dealing with very limited shelf space, whereas the streamers have unlimited shelf space,” said the CEO of Wow Unlimited Media Inc. (TSX-V:WOW.A), the parent company of Rainmaker Entertainment, one of Vancouver’s oldest animation studios.
“They buy lots and lots of different shows, and so we’re definitely seeing our animation growth basically supported by the growth of the streaming business in animation.”
In addition to striking deals with Amazon and Netflix, Wow landed a deal with Bell Media’s Crave service to program the Canadian streamer’s children’s content.
The arrangement came after Rainmaker acquired New York-based Fred Seibert’s Frederator Networks Inc. and Ezrin Hirsh Entertainment Inc. in a 2016 deal worth an estimated $17 million that 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 about 700 million views a month.
Bell took a 12% equity stake in the new parent company a few months later, and Hirsh said the deal to continue programming Crave’s children’s slate is in the midst of renegotiations.
He said he expects to make an announcement soon with regards to the Crave partnership.
Add together the acquisitions and global demand for content, and what was formerly Rainmaker has seen five-year revenue growth climb 673.2%, from $10.2 million in the 2014 fiscal year to $78.6 million in the 2018 fiscal year.
“We’ve built a backlog of contracted shows to around $70 million. And to give you a sense of perspective on that … last year’s animation sales were around $35 million,” Hirsh told Business in Vancouver.
“The backlog is also showing we’ve got great growth coming.”
Netflix’s public position on investing heavily in children’s programming is also feeding his optimism for future growth.
“Not only does it help bring in new subscribers but it helps to retain the existing subscriber base. It’s very hard to take things away from kids,” Hirsh said.
To keep up with growth, Wow has expanded its production facilities, added new equipment and begun outsourcing work to Indonesia, Japan and South Korea to supplement the animation done in B.C.
While Rainmaker has been leading the way on content production, Wow’s other subsidiary, Frederator, has allowed the parent company to tap into the distribution side of the business through its YouTube channel.
“It’s very important to our business model because it gives us a 360-degree exposure in the business.” Hirsh said. “We’re not just making shows but we’re promoting those shows, working out the strategy for tactics for successfully launching a show and making it into a hit brand.”
