Yet Another Value Podcast - Joe Boskovich on WildBrain $WLDBF

Episode Date: February 18, 2021

Joe Boskovich, a partner at Old West Investment Management, dives deep into his investment thesis on WildBrian (WLDBF), including why he thinks Apple could drive the Peanuts brand to the next level and how WildBrain Spark could be a huge growth story.Joe's Twitter: https://twitter.com/boskovic64Old West Investment website: https://www.oldwestim.com/pressChapters0:00 Intro2:10 Quick discussion of IDT and their spins5:55 WildBrain investment thesis overview21:30 Devil's Advocate: Haven't these franchises been passed around a lot?35:00 Could the Apple partnership get the Peanuts brand growing again?46:35 WildBrain Spark: just another YouTube channel, or real growth asset?1:00:45 How does this compare to LGF's valuation?1:10:55 Quantifying WildBrain's upside ~3 years out1:19:30 Bonus point: could WildBrain go D2C?

all right hello and welcome to the yet another value podcast i'm your host andrew walker and with me today i'm excited to have my friend joe boscovich uh joe is a partner at old west investment joe how's i'm doing great uh thanks for having me on i i told you earlier that i you know listen to several of your podcasts and you have a lot of great guests and impressive stock pitches so so uh i hope i don't don't disappoint but uh for having me on look thank you for that but let me start the podcast instead of you pitching me, let me start the way I started everything, and that's by pitching you. You know, we've chatting off and on for probably a year and a half or two years, and I was telling you before the pod started. I think one of my favorite things about you is you and I started chatting about some of the IDT spinoffs, which I think are a major portion of y'all's holdings.

But, you know, at Old West, I think the three major themes are IDT spinoffs, a Canadian entertainment company, and then uranium company. And, like, the three things, like, they're all completely different and just kind of the intellectual flexibility to be able to look at and value these things with completely different valuation processes, completely different pieces. You know, most people are kind of like me and they say, hey, I like cable companies and maybe I step a little bit out and I look at the content companies. But you guys are just in three wildly different sectors. And I really like that flexibility. And obviously, the returns have been there too. So anything you want to say about that or should we just dive into Albury? No, yeah, so it's right. It does seem maybe like we own a hodgepodge of different businesses,

but I would just say, you know, the commonality with that. And, you know, we talk about one of the most important parts of our investment process being investing with owner managers and, you know, people that we think are good capital allocators and have more to gain or lose through their ownership than they do through their compensation. So, you know, I would say that would be the underlying theme across all of those holdings. So if you look at it through the lens of smart capital allocation and people that are aligned with shareholders, then maybe it's not so much of a hodgepodge. But yeah, definitely if you look at it from a sector standpoint. Let me ask you a question because you and I, again, we met talking about one of the IDT spin-offs.

That's Howard Jonas's company. And I think Howard Jonas, among value investors, he's got a long reputation. He's done a lot of spinoff's straight path was obviously the headliner here. But, you know, one thing I've thought a lot about Howard Jonas is it's almost John Malone like to the extreme where John Malone, you know, every deal he does, you do well, but he does better. And with Howard Jonas, one of the issues I've had is, you know, he pays himself really well. And I think it all works out really well for shareholders. But, you know, I think back to an 8K IVT filed in January, they're looking at spinning off. I think it's net to phone, one of their subsidiaries. and they gave Howard 5% of Nets of phone before they spun it on, right?

Like they just gave it to them. And yeah, this spinoff probably creates a lot of value and they built a lot of value there. But at the same time I look at that, I'm like, man, it's just, it feels like heads he wins, tails he wins a lot. Do you feel like that or how do you kind of look at that? Yeah, you know, I guess I and I saw that filing too, you know, on Net2 phone. And, you know, I guess all I could say is, is. you know, I think when they spin it off, you know, and I think valuations today are totally

wacky, but, you know, if you were to compare an asset like Net2Fone to, you know, ring central by 8, I mean, it's just that is worth, you know, multiples of the entire IDT, you know, market cap. So, you know, look, I think you will do very well. You know, we've been invested in a lot of the entities. And when he does offerings, you know, it's typically done through a rights offering or, you know, he typically tries to include the larger shareholders. You know, so I'm not going to disagree. I'm not going to sit there and say 100% of the time, you know, he's aligned with shareholders, but I think, you know, more often than not. And, you know, we as shareholders, right, obviously also have the ability to sell a spin or buy more of a spin on.

the open market. So, you know, we do own all the spins, but different weightings. So, you know, once an asset is spun, you know, we don't necessarily treat it as just an IDT spinoff. We try to analyze it from a company's perspective. And guess what? That's why, you know, a name like Raphael Holdings is a very large portfolio waiting and, you know, certain other names like, you know, IDT are smaller positions. I like IDT. One thing that I've noticed over the years is, and I've been wrong now because the stock's done so well, but it seems like oftentimes a lot of the spins don't get a lot of credit from the public markets until after their spun. So yeah, look, I don't think he enriches himself or he's as self-dealing as a lot of the other, I guess, spin-off

masters, you know, and I've gotten to know them fairly well, and we've enjoyed being a shareholder. And I, like I've said this before, you know, I think his greatest success is are ahead of them. So, so I'm pretty pumped on Howard Jonas companies. Well, Raphael is not the subject, but of this podcast, but my limited understanding of the science there is that the potential there is pretty enormous. And, you know, it's not just on the financial side, but if that succeeds, I think just for all of humanity, I think it's going to be pretty enormous. But that's not the topic for today. The topic for the day is actually a Canadian company. It's on the smaller cap side, but the company is Wild Brain. So I'll just turn it over to you. What is

wild brain and why are you guys so interested in it? Yeah. So Wild Brain is a children's content and Brands company. They're actually the largest owner of kids TV shows outside of the major Hollywood studios. So I think that gives it a huge advantage in terms of its scale and size. But, you know, so what does the company do? They make children's cartoons and then they distribute those cartoons across the various linear broadcast platforms, streaming platforms, and on their advertising video on demand

network, Wild Brain Spark. And then for a second income stream, They license all the consumer products based on their programs. You know, I think one of the great competitive advantages or characteristics of this business is that it's a vertically integrated business, you know, meaning that they control the entire supply chain. And I think that's really important to understand from the get-go. So, you know, as I mentioned, they own a lot of their IP. And in a lot of cases where they don't own the IP, such as the case with Sonic, which we could talk about recently, they just announced a deal. Because of their vertically integrated structure, they are able to negotiate, you know, certain rights where even though they're not the copyright holder, they essentially capture the same economics as if they did own that IP.

You know, from a distribution standpoint, they're the captain of their own ship where they, if they want to and if they choose to, they could control that distribution either through their Avod network, Wild Brain Spark, which we could talk about that more in a bit. But, I mean, huge, huge eyeballs and watch time and just some of the metrics that they show are incredible. And, you know, one of the great things about, so Wild Brain Spark, but then they also own four Canadian linear broadcast channels so they could distribute their content on those channels as well. And I think that's really important because they're not beholden to, you know, some offer or deal from some other service where maybe they don't like the economics. They could go and grow a brand on their Avod network, which they have done with several brands. it's been successful and we could talk more about that too. And then I would say lastly, you know, they control their own destiny, uh, destiny from a consumer products licensing standpoint through their, their, um, uh, licensing agency, wild brain CPLG, where they

represent their brands and about 400 different partner brands. Um, but so, look, I, I, I think there's three qualitative factors that are very important that make this a really, really compelling investment in my in my opinion um you know so one would be a strong management team and we've talked about this before but you know really the cornerstone of our process is investing in management teams that we think are great and allocate capital efficiently and um you know are aligned with us as shareholders and that's definitely the case with wild brain and then i also think you know one of the catalysts for unlocking value is oftentimes a new management team and that's also the case with Wild Brain. In 2019, they named new CEO, Eric Ellen Bogan. Eric Ellen Bogan has

a storied career in creating kids' content and developing great franchises. He was the CEO at Marvel in the early 2000s before it was sold to Disney. Then he co-founded a company called Classic Media, which became one of the largest owners of branded kids content. They owned brands like Rocky and Bullwinkle, Lassie. In 2012, he sold a classic media to DreamWorks Animation, where he became an executive at DreamWorks Animation. He was the head of DreamWorks Classics

and the head of DreamWorks International Television. And then, as we all know, he sold DreamWorks Animation to NBC Universal, where he became an executive at NBC Universal and actually started up Classic Media, as a division again under NBC Universal. And he joined the board of Wild Brain as an advisor in the middle of 2018. And as I said in August of 2019, he was named CEO.

One of the first things he did as CEO was changed the name of the company from DHX Media to Wildbrain, which was the name of its Avot asset. he renamed the avot asset wildbrain spark you know and really for the last four or five quarters he's been putting the right management team in place putting some of the right deals in place and i i you know i think uh really writing the company to emerge as a as a as a dominant force in children's media and you know so that would be one uh two um and you should look for this with any business and i've heard you talk about it before but what is what is their competitive vote Right. And I think with a brands company, you know, particularly in children's, but in all media, I think that competitive moat is also is often served up as a as great IP or a great franchise. And, you know, I would at least suggest. And it's one of the things that I've learned in different media investments is is the only way to truly know that you have a, because a lot of small media companies particularly, they talk about their IP.

And we have this great portfolio of IP, we have these great franchises. But like I said, I would suggest that the only proof that you have great IP or the only proof that you really have a great franchise, it should be borne out in high margin consumer product sales. And I would say if you don't have that, either you don't have a great franchise, maybe you're building a great franchise, but I would equate that more to speculation than investing because, you know, you never know what's going to resonate with an audience. You never know what's going to be big.

As you know, some of the silliest ideas become the biggest successes. And a lot of things that you think are slam dunks, flop. You know, and then maybe management just hasn't done a good job at building the IP. And I think that's also definitely the case with Wild Brains past management. You know, they lack the expertise to kind of push certain IP through. the whole process of brand extension. And that's why I'm excited about some of the other portfolio properties outside of the Peanuts franchise. But as a good example, the example I always use is Disney's Pixar's car franchise. Right. So one of the most successful franchises

of the last 20 years. But if you look at it from a pure content production standpoint, I mean, it's been successful obviously from a revenue standpoint, but it hasn't made the company a lot of money. I think cars won, Disney made about $100 million and they lost money on cars too. And that's because of the huge production content costs, you know, huge advertising and marketing spent promoting the project. So like I said, very underwhelming from a theatrical production standpoint. But cars from the sale of lunch boxes and, you know, health and beauty aids and food products and, you know, bedsheets and so on has made Disney north of $20 billion. So, you know, what is Wild Brain's great franchise, and I believe it is the Peanuts

franchise? You know, now you could think whatever you want about the Peanuts franchise. You know, the content's kind of old and stodgy. Until recently, there has been no new content made for that franchise in decades. But it is a fact that Peanuts and Snoopy is the number eight character brand in the world. If you look at global retail sales, the Peanuts franchise does $1.6 billion a year in global retail sales. And I think what's even more impressive is the fact that there's been no new content made in decades. Just imagine the power if they turn the franchise around.

And we could talk in a little bit about the new Apple TV. content deal, but it's going to be huge. And I'm, I feel fairly confident that it's going to make Peanuts one of the top kids brands of today's generations. So, you know, that would be one, like I said, great franchise should be tied to, you know, great consumer product sales. And what's interesting is if you look at Wild Brain, you know, they bought the Pean's franchise in 2017. In 2017, if you looked at Wild Brain's financials, I want to say maybe it was like seven or eight percent of total revenue was tied to consumer products where today it's like 45 percent. So, Just an example of how great franchise brings consumer product sales, and that's really

changes everything. And then lastly, and to me, the most exciting part of this investment, and I think this makes a good investment, a potential great investment, and the home run investment would be if you could identify a breakout business within the larger business. And in Wild Brain's case, it's their Avod Asset Wild Brain Spark, which, you know, as you've had the shift of eyeballs away from, you know, linear television to non-linear television. In the kid space, particularly, you know, YouTube's really been leading that charge. And I think they, today, they, you know, they grab like 20% of all kids' views.

And Wild Brain Spark is either the first or second largest network of content on YouTube. And if you look, I'm the watch time and the numbers, it's crazy. It's like four billion views per month. They claim that one out of three kids globally watch. content on the Wild Brain Spark Network. Long, long runway for growth. And, you know, if you looked at this past quarter, which was announced last week, you know, revenue for Spark grew 70% sequentially over the last quarter.

And I mean, you know, what is a digital media asset growing at, you know, 30, 40, 50% year over year with great network? affect properties. What is that worth? I mean, it's definitely not worth the nine times EBDA multiple that you have for the, you know, the bigger brands company today. You know, I think today's multiples are wacky, but, you know, the market today is, you know, values and asset like that, a digital media asset that's EBITDA positive, you know, at a multiple of revenue. And if you were to apply that same revenue to just spark, and I'm not claiming that's the right multiple, I think, like I said, things are wacky. I mean, you can make an argument that

today just sparks worth the entire market cap. So, you know, to wrap it up and then we'll go into discussion, but yeah, this new management team, they're just getting started. They're transforming and turning around this company. You know, you've started to see investor sentiment really changed on this name. A lot of the analysts in Canada have been scarred by the former DHX media. And, you know, one of the things that we look for investments are situations where the return is very asymmetric, right? Well, we handicap the downside, but if executed properly, and we could talk about why I think management will execute properly and why they've already started to execute properly,

if they do that, this could be a complete home run. And, you know, so if you look at the market cap today is about $450 million, they have about $450 million in net debt, so an enterprise value of $900 million. And, well, on the downside, I would argue that just the Peanuts franchise is worth the entire enterprise value. And, you know, you could draw that conclusion in a number of ways. But just if you look at comps, you know, last year, Hasbro brought entertainment one largely for the Peppa Pig franchise. And they paid $4 billion for that asset, which, you know, would suggest that, you know, wild brain steak and peanuts is, you know, like I said, some work. worth the current enterprise value.

And I think it'll be a lot more as Apple continues to change this brand and make it one of the top kids brands in the world. And so that's from a downside perspective. I think the peanuts franchise is worth the enterprise value. Now from the upside perspective, you know, you take the peanuts franchise and what they're doing with Apple TV plus other library content, which I'm excited about and we can talk about. plus consumer product sales, which, you know, isn't even baked in any of these estimates, plus the advertising opportunity at Wild Brain Spark the Avod Network,

plus the ability for the Avod Network to discover new IP, discover tomorrow's hits, and then partner with that IP. I just think, you know, all of those five buckets together equals, you know, lots of ways for Wild Brain to win, Wild Brain to win big. You know, one thing Eric said when he, Eric Elmbogan said when he first came to the companies, he said, you know, I believe at Wild Brain, we will have several of the next big hits in children's content. What are the chances that we create that next big hit?

He said, we won't. We're not even going to try. And I think, you know, like I said, you have a lot of great ideas out there that never come to fruition and a lot of silly ideas that do. But with their ability with Wild Brain Spark, and they've invested a lot of money into ad tech and understanding, you know, audience viewing patterns. But, you know, their ability to say, hey, this piece of IP is really popular amongst, you know, 12-year-old girls in France. Let's take this content, put it on our Avod network where we have, you know, 200 million subscribers. you know, we already represent, you know, 650 different kids brands and have huge engagement.

We'll put it on our wild brain hub channels and see how it does and maybe, you know, take it to other territories. But their ability to do that and then to partner with that IP and maybe have some sort of economic stake in the IP or in consumer product sales, yeah, I think it's a great blueprint to make this just a, you know, phenomenal long-term investment. Perfect. Well, hey, that was a great overview. But, you know, one of my favorite things about this podcast is, I've known, you know, this was DHX media for a long time. And I've made the story for a long time. I remember Deborah Fine pitching it in 2017 at I was soon. And as you said, like a lot of Canadian analysts, you know, I think I just had that mental block that this thing is a time suck. This thing is a suck. You know, the new CEO came in in 2019. One of my favorite things is when I was refreshing for this, I was surprised by how. how positive I was on a lot of, especially with the Q2 numbers, a lot of the financial turnarounds and stuff. So I was very surprised with how well the turnaround seems to go in,

but let me place a devil's advocate on a couple of the points that you made here, right? Yep. So I think the first point you made is the downside protection is in the brands, right? So when we're talking brands, I think their big brands are, they have, is it Kalu, Kalu? Yeah, so I wouldn't say in the brands, in the Peanuts franchise. Yeah, so Peanuts franchise is the big one, right? So the Peanuts franchise is the big one. They bought that from Iconics in 2017. I think they got an 80% state for $345 million. And I think strawberry shortcake was included in that as well, right? So I think the first thing that people would come out and say, hey, okay, I get peanuts as value, right? But all these brands that they've got, you know, peanuts have been passed around. Iconics bought it for $17,000, $17,000, strawberry shortcake packs, around telotubbies. I think they bought it for like less than 30 million in 2013. So I think the first pushback would be, hey, if a major media company really wanted one of these brands, they could have had one of these brands in the past. So why are these brands kind of, you know,

obviously the Snoopy TV show on Apple is maybe a little bit of a game changer for peanuts, but why are these kind of passed over brands that might be a little bit also runs? Why are they worth so much now, so much more now than they were when they were kind of getting transacted a couple years ago yeah so so i guess you know to start we should probably start at the beginning because i think it'll give better context for the yeah go ahead of this discussion but so in in i want it was 2006 maybe 2007 the two Canadian media companies that merged it was a decode i think that's how you pronounce it decode entertainment and halifax film company that's how you get the dhX and i i i I think the concept behind what they were trying to do in concepts seem great, right?

So really what they did is over the next 10 years, they rolled up, you know, six or seven different children's brands because it was kind of a, you know, a fragmented industry. And, you know, the big players in the business, like at Disney, they're not necessarily buying brands. They're creating their own franchises. And, you know, if you read Bob Eiger's book, one of the big changes that he brought to Disney was, you know, to get away from releasing new feature films, but, you know, concentrate on the current franchises that they have. And, you know, that's what Disney's been largely focused on

for a long time. So they're not out there, you know, rolling up old IP and trying to reinvent it. So I think in concept, you know, past management, it was a great idea. You know, the problem is they lacked execution and really didn't have the, I guess, the expertise to, to push those brands through every stage of brand extension, right? So, you know, the production, the distribution, and then most importantly, the consumer products, which is the really high margin business. So like you, the first time I ever heard of DHX Media was in 2015

when Debra Fine pitched at this own conference. And, you know, earlier, I told you how we look for great management teams. You know, one of the things that, one of the primary, And we could source an idea through, you know, a million different ways. Like just, you know, for example, every name I've ever heard pitched on your podcast, I've spent a little bit of time looking at because that's a smart way to source names. But, you know, one of the primary ways that we would source new ideas is we go through every SEC form four filing from the day before. So, you know, simply if we see an insider, you know, write a check for three, four million dollars buying stock and their own company with their after tax. capital, it doesn't mean we're going to go by it, but maybe this is interesting. So maybe, you know, this is a rock that you kind of overturn. And so another thing that we do is, is, is we, you know, kind of call it our 13F screen or scan. But that would be, you know, we've just developed a network of people that I think are smart. People that I, I know they're very

thoughtful in the way they, they think about names. Like I said, like you, like you, Andrew, Right. I know you're thoughtful in the way you think about names. So is it not worth a couple hours of my time to, to when you mention something to just see if we think there's anything there and try to kind of fit it within the lens of our investment process? I think that's a no-brainer. So people think ideas need to be original. But I do think it's like, hey, if somebody you think is sharp lays it out on a platter for you, like you don't have to take their word for it. But if they give you the thesis, why not just go investigate it for 10 seconds or something? and do a little work and get a little smarter on it. Yeah, 100%. Now, you know, ultimately, as you would agree, it needs to be your own idea. Because when it doesn't work out, I can't see it. You know, Andrew was wrong.

Like that can't be my, you know, postpartum analysis. But you got to make it your own idea. But anyway, so one of those managers that we've developed a great respect for over time is fine capital. And, you know, Deborah Fisch, she used to run money for the, or I'm sorry, Deborah Fine used to run money for the Tish family for their single family. office and started find capital. And, you know, more recently, her partner, Jonathan Witcher, has taken over as the chief investment officer of the company. And I think he's a very

sharp guy. He's joined the board at Wildbrain. But anyway, so go back to 15. They pitch it at the Sone Conference. I thought it was pretty interesting. Caused me to look more into it. And at the time, their kind of flagship brand was Telatubbies. And. It's just hard for me to wrap my mind around, you know, Telitubbies being an evergreen property. Just and a lot of that was personal bias. You know, I have young kids. I just remember, you know, the Telitubies coming on and just not really understanding how this is, you know, some grand slam brand that, you know, has Mickey Mouse characteristics. You know, now with that said, if you go back to the early 2000s and, you know, part of Eric Lowe's,

Hellen Bogan's, you know, mission or what he's talked about doing at the new wild brain is, you know, dumpster diving in this portfolio of IP that they have and finding the brands that they could kind of reinvent. So, you know, to get back to that, you know, with Telatubbies, so you could think Telatubbies is not a good property or whatever. But if you go back to the early 2000s, Teletubbies was doing like $2,300 million a year in consumer product sales. So regardless of what you think, That's a franchise that cranks out that sort of, you know, consumer products. And but, you know, it wasn't doing it then, right? It was an old brand. And by the way, a lot of it was past management's fault because when they bought it, it was a brand that was doing, you know, a lot more in terms of consumer products and kind of got ignored and just reintroduced to the market in the wrong way. and consumer products were, you know, rolled out too quickly.

So, you know, kind of lost a little bit of, I guess, it's secret sauce. But anyways, I just had trouble, you know, wrapping my mind around owning a company where the investment thesis was wild, was Telatub. So, you know, we kind of passed, but kept a close eye on it. And, you know, it's interesting. Find capital, you know, kind of periodically continue to increase their stake in the company. I forget what the exact ownership stake was at that point, but they had a sizable stake. And then in 2017 is when they announced the acquisition of Peanuts from Iconics

brands. You know, when they did that, I didn't really know how to think about that. You know, I hadn't done a lot of work on peanuts at that point. I had no idea that it did. one, you know, $1.6 billion in consumer product sales. I couldn't have told you that. You know, once again, all I know from my experience is, you know, my grandma loves Snoopy. My parents think Snoopy's great, but I was never a big Snoopy fan. But if you think about when we were young, when we were growing up, I mean, at that time, it was starting to become a dated brand, right? The the animation was seemed old to our generation um and there had been no new content rolled out in decades um um uh you know wild or dhx media at that time i think that you know they paid

roughly 12 times ebit da for that brand i didn't know how to you know was that a lot for that brand was that a little for that brand i just didn't really know how to how to um you you know, visualize that contextually. The stock got beat up pretty bad after that from the Canadian analyst community because they, they were already levered and they levered up even more so to buy that, to buy that piece of IP. And then I think, you know, where I changed and really started to dig in was probably about a year later. If you recall, they, so when they bought, when they bought IconX

Brands Entertainment Division, they bought an eight, the 80% stake. in the Peanuts franchise because of the Schultz only owned 20%. And then they bought with it 100% stake in the Strawberry Shortcake franchise. So a year later, they announced that they were selling half of their steak in the Peanuts franchise to Sony. And I don't remember the exact, you know, dollar amounts, but what did you tell me earlier that they bought the uh you mentioned it earlier you said what they so they bought the 80% stake for 345 i can't remember exactly what they okay so so right so they bought like this 80% stake

for 345 and i don't remember the exact number off the top of my head but a year later they announced they were selling half of their 80% stake not even half of their 80% stake 39% of their 80% stake so they still have a majority control but they sold that to to sony and i don't remember the exact number but they sold to Sony for something like 230 or 40 million. So, so, you know, effectively one year later, they sold half of that steak to peanuts to Sony. So their return on that investment was something like 30 or 40 percent, whatever it was in that one year time period. And it didn't include any a strawberry shortcake. Yep.

So I kind of sat there at that point. I go, okay, well, this is interesting, right? So clearly, based on the Sony acquisition, and, And maybe Sony could have overpaid, but, you know, Sony's a giant in the media space. So, you know, clearly based on that acquisition, Sony, that helped me put, kind of visualize the original purchase price a little bit more. So, okay, maybe they didn't overpurchase. Maybe they got a pretty good deal. Sony thinks they got a good deal.

And they still have their 100% stake in strawberry shortcake. So that's really, you know, I want to say right around there. So that's 2018. That's when we kind of took our initial stake in wildbraining, you know, continue to build it over time. You know, after that, fine capital continued to increase their stake. Then they, you know, Eric Ellen Bogan joined as an advisor. Then he became CEO. Well, if you look at it today, find capital.

I think they own close to 50% of the company. you know Jonathan witcher's on the board you have this new management team and then I think where we kind of rounded out our position and it became a core position was after they announced this deal with Apple TV for the Peanuts franchise which I think is going to be you know huge they've already started to roll out new content but I think this is it's become pretty clear that that that, you know, Peanuts is no longer going to be, you know, a brand that seemed old and stodgy to our generation and to my younger kid's generation, to your kid's generation, it's going to be a cool brand. And, you know, just a couple of their original shows I've

watched with my seven-year-old son and he's into it. You know, they had a show we could talk about a little bit later, but it's called Snoopy in Space. And, you know, he was telling me one day from school, I came home from school. And it was, this was like in kindergarten, but, you know, they were learning about astronomy and the planets and the teacher put it on an episode of Snoopy in space because it's very educational. And you kind of sit there and you go, okay, this is great, right? It's relevant to this new age of kids. Apples, we could talk about what Apple's done with the brand, but I think it's going to be pretty big. And, you know, one thing that Eric talks about is how this, you know, this has brought the best creative talent

in the industry of wild brain. And he talks about it kind of, you know, being this cycle where the best, the best talent's coming in a Wildbrain. It's highlighting the rest of their portfolio IP. And it's really kind of illuminating some of the other brands that could become big again. And it really seems that it's starting to play out. And that's one of the things that actually made me want to reach out to you about Wild Brain. Because my wife and I, after enough people told us we needed to watch Ted Lasso, I upgrade my phone and I signed up for the year of Apple Plus. And the first thing when I got Apple TV Plus or whatever, the first thing,

thing that popped up was Snoopy in space new episodes streaming now right and like I do think people underestimate like you know it's the if something's on the front page of Netflix that thing's almost going to become a hit because it gets so many eyeballs and enough people just click on it because it's on the front page of Netflix no matter how horrible that production is right in in you know the Snoopy stuff it's actually pretty good content and Apple TV is not uh it's not Netflix unfortunately right like way more people on netflix but you know just bringing a couple extra people in because hey it's front page of apple tv they click on it that gets the whole kind of flywheel for the brand growing right because now you've got some kids who are interested in snooping space maybe they're interested in the rest

of peanuts maybe they want to go buy some snoopy things and that just kind of gets the whole flywheel going so that's one of the things that really got me interested in this yeah well so you know so in terms of what what is apple doing so you know they announced the deal last year. And, you know, Eric L. and Bogan, you know, mentioned that it's, it's the largest content deal in Wildbrain's history as a company. And, you know, at first, so you sit there and you, okay, so, so Peanuts is going to be part of Apple TV's kid streaming service. And, you know, that's what it appeared to be a year ago. And I think what has become fairly obvious at this point is it's not just part of Apple's streaming service, it is Apple's anchor

property for their entire entry in a streaming for kids. And it's one of their entry properties for streaming period. And, you know, they, they, so recently they, they licensed the back catalog too, right? So all the old content, the old Christmas special, Thanksgiving special. And I mean, they, they, they, Eric mentioned. on the last call, but they paid something like 80% more than the last license that was paid by ABC television and it was part of Iconics brands. So, you know, Apple put great value on the back catalog. But, you know, in terms of what they're doing going forward, you know, they started with Snoopy in space and partnership with NASA. And, you know, that was a very well-done

property. It was one of their most popular shows, won a couple of awards. It was recently renewed for a season two. They have a number. another show that they just actually premiered a couple weeks ago. It's called The Snoopy Show. And that's been very successful. They had, at the end of last year, they, Apple TV had Mariah Carey's Christmas special. And that was number one on the Apple charts in like a hundred different countries over that week. And if you watched it, kind of the first premier guest experience or a guest experience, the guest appearance.

And this was before Snoop Dog and Ariana Grande and all that was the Peanuts gang. And then, so last week when the Snoopy show released, if you went to Apple's website that day, I mean, the Peanuts crew and Snoopy completely took over Apple's entire website. You know, so when you scroll down at the top was like the, it was like the MacBooks. And, you know, that picture, it was like Snoopy writing the Mac. book like it was, you know, his, his kennel or his doghouse. And then below, it was like Woodstock and all of his friends, you know, holding up an iPhone. And you go down and it was like Charlie Brown doing something. So completely took over that entire webpage. And, you know, Apple has ideas

to do similar things like that and exhibits in their stores. And like I said, I agree. You can't compare Apple today, at least, to Netflix. But, you know, and I don't want to compare peanuts to Mickey mouse because there's no comparison at least at this point. But, you know, 120 million people visit Disney theme parks every year. Well, 350 million people visit Apple stores. So it's just, you know, huge potential. It's really exciting to think what can happen. And then, and that's just, you know, Apple, but this is going to feed off everything else. You know, Cedar, Cedar Fair, all the amusement parks like Knott's Berry Farm and there's a bunch all over. You know, they, they license the, the the Peanuts characters and that's kind of their, you know, their brand for their amusement

parks. But I think all of this is just going to, it's going to feed off each other. And this is all obviously led by apples, you know, the biggest company in the world, right? In terms of market cap, it's all, it's all kind of led by their efforts. And I think it's going to be huge. And most people don't realize this yet. And, you know, so that's just the Peanuts franchise. And like I said, we can talk about other content, but I think it illuminates the rest of their portfolio. And, you know, Eric Ellenbogan has a, has a, you know, he said a couple of times, you know, the key is content everywhere, right? So they have this, they have Apple there. And then, you know, on Netflix, they have a show called Chip and Potato, which has been very popular. They just did

a co-production with DreamWorks on Netflix called Go Dog Go. That's a top 10 kid show on Netflix right now. Johnny Test is one of their properties, and that was just picked up by Netflix for another season, and they back, they licensed the entire back catalog, which I think was maybe with HBO Max. So they obviously paid up to get that. And then they have shows with, you know, traditional television, linear television. They have a show called Dorg Vandago, which is on Nickelodeon right now. They have their own AVOD channels on Roku televisions and on Samsung televisions. and then they have, you know, properties like Cloudy with a chance of meatballs is with Comcast, Xfinity.

And then they, you know, they just announced the Sonic deal last quarter, which I think is huge in that it got me to maybe look at this company differently than I've ever looked at it before. When I have thought about this company's library of IP, I've really only paid attention to the brands where they're the copyright owner. You know, because usually if you're the copyright owner, you get consumer products and there's more upside. If you're not the copyright owner,

you're just, it's a service project. Maybe you get paid to produce, similar to like with Go Dog Go, right? The co-production they have met with DreamWorks on Netflix. The Sonic announcement changed that all because they are not the copyright owner of Sonic. And I think that this really, this is why I said earlier that I think one of the really important things to understand about its competitive characteristics is that it's a fully vertically integrated company. And because it's fully integrated, they enjoy certain benefits that companies that aren't vertically integrated don't enjoy. So the example here is you have Sega and Sega own Sonic. Sonic is one of the most popular video games ever created.

They've sold, I think, 1.1 billion game units since 1992. It was a feature film last year, starring Jim Carrey. That film did $320 million at the box office. It broke a record in that it is now the highest grossing movie ever based on a video game. character. But because of the vertical integration, like I said, Wildbrain's not the copyright owner, but they own the distribution rights to the past shows, which I think right now are being distributed through HBO Max. But they also represent the brand with their licensing agency, Wild Brain CPLOG. So they represent the Sonic brand throughout continental Europe, in the Middle East,

in Africa, and I think other parts of the world, too. But so Sega, Sega's a video game company. They're not a studio. They don't have, they don't make movies, TV shows. They don't have an animation division. So, you know, if Sega wants to do something with that brand, they need a partner. They can't do it on their own. And because Wild Brain has been so intimately involved with that brand as licensing agent

and as the distribution entity, they were able to, to, to basically sign a deal with Sega, where they're producing this new content for Netflix. It's going to be on Netflix. It's called Sonic Boom. But they have negotiated terms with Sega, where this isn't a service project, they're a true partner where they have a stake in production, the stake in distribution, and the stake in consumer products. So from that standpoint, in terms of the economics, this Sonic film is no different than the Peanuts franchise, right? The Peanuts franchise, they own 41% of the Peanuts franchise. They get 41% of the consumer products royalties. Well, I don't know the exact terms

of the Sonic thing, but let's say it's 50%. Well, I mean, if they're getting 50% of the consumer products on Sonic, you know, provided that the Peanuts shows and the Sonic shows are equally popular, they actually have, they'll actually make more money with Sonic. So like I said, It's that vertically integrated nature that allows them to have these economics with non-copyright IP. And so, like I said, I never really thought about it that way. So I never looked at Sonic as part of their library. But what that forced me to do is, you know, what else do they have in their library, where they're either distribution manager, where they represent the brand on an AVOD basis,

or where they represent it in consumer products licensing, well, that grows the library of IP to something that's absolutely incredible. So from a distribution standpoint, they represent Super Mario. Well, if Nintendo wants to make new content, Nintendo can't do it. They're a video game company. Maybe Wildbrain could negotiate rights there. With Sony, they handle the Avod distribution and the AVOD channel management distribution rights and consumer products licensing for Ghostbusters.

Well, Sony's a media company, but Sony doesn't have an animation division. so they would need someone like Wild Brain. And the list is big. I mean, Pink Panther, which was a big brand once upon a time. Imagine that became a big brand again. And it's just curious, George, and it goes on and on and on and on. And it just really opens your eyes as to, you know, this is bigger than just their copyright ownership of IP. It expands to their entire portfolio, provided that they're the chosen partner.

Let me switch dramatically. let's talk about wild brain spark because i i think you you mentioned when you were pitching when we were opening up the company hey if you look at the multiples for streaming services right now wild brain spark could be worth the whole company and it's one of the things when i've looked at this i i've had trouble because i can see both sides right like when i why don't you describe wild brain spark and then i'll kind of go through my my hesitations on it yeah well so i know off the bat one of your hesitations would be was my original hesitation and it's like well you know net net Netflix is the distribution right um Apple TV's the distribution is is wild brain really distribution or is YouTube the

distribution so you know that was one of you know can YouTube tomorrow turn around and say we don't want to work with wild brain and you know so that was something that I had to get passed but but anyway so so wild brain spark so you know go back five five five six five years ago, six years ago, when Avod started becoming, you know, looked like it was, you know, part of the future of kids' content, Wildbrain took their, their, basically their library of IP for their own brands and threw it up on YouTube and had a lot of success doing that and started working with, you know, third-party brands. And it's just grown and grown and grown, you know,

to the point where, you know, today, you know, they have about 800 different brands, channels on YouTube. They represent more than just their own brands. They totally represent about 650 different brands. Collectively, they have 200 million subscribers. Like I said, four billion minutes of watch time every month. You know, they claim to reach one in three kids globally. So, you know, 40% of kids globally watch content every month on the Wild Brain Network. You know, they've invested a lot in ad tech and a direct sales team. You know, and the business was really, you know, taken off. You know, I mean, I want to say grew from, you know, like it was doing $5 million in revenue and in, you know, in, you know, 2015, let's say.

And by 2018, it was doing $80 million in revenue. So you had huge growth. And then you had a combination of, you know, two things that really. decimated that business and it was temporary but you had you know COVID so you had to pull back on a lot of advertisers stopped spending the advertising dollars but you also and I'm sure you've heard of this made for kids a content so so you know basically the whole thing with YouTube is that you it's no longer contextual advertising like linear broadcast television it's it's targeted advertising where you could target the individuals watching your content and you could gather

data on those unique individuals such as you and me and the FCC came out and and basically told YouTube that you can no longer target minors so to advertise the minors it needs to be done contextually similar to the way that linear broadcast television is done yep and you know YouTube's advertising placement um you know none of it is is is is like an ad sales team. It's all, it's all based on an algorithm. And, you know, if you, you know, if you Andrew Walker want to put an ad for your, you know, your podcast on YouTube, uh, you could, you know, specify, you know, certain, um, parameters for your ad, but you really have very little control over, um, where it gets placed. And, um, so anyways, because you couldn't

tar, and a big part of their algorithm, it's all, you know, based on that, that targeting data. And because you couldn't do that anymore, it kind of just threw a wrench in to their YouTube algorithm. And you saw revenue from Wild Brain Spark, you know, fall off a cliff. But, you know, it was somewhat of a blessing in disguise in that it forced YouTube now to only start catering to advertisers that are COPA compliant. And when you think of people upload content on YouTube. It's so, you know, there's millions of people uploading content that really for a kid's format, now in order for YouTube to sponsor it, it has to be contributors that have great scale. And there's not many that have scale like Wildbrain does. Like I said, they're either

the first or second largest network of content on Wildbrain. And it's also enabled them to build lot of their own sales team. So now they're not just sitting here relying on YouTube's algorithm. YouTube is fixing that algorithm, you know, because I mean, that's big business. I mean, if, you know, on Google's last conference call, I want to say maybe, you know, 15% of the revenue was from YouTube. And kids is either, I think it's the second or third largest genre on YouTube. So that's a, you know, that's a big piece of YouTube revenue. So they're fixing their algorithm, but like I said, it's enabled wild brain, you know, they've spent a lot of money doing it, but building out their own sales team and they have a great proposition for advertisers.

I mean, if you just want to compare YouTube to the cable networks, for example, and if you look at viewers per month, so wildbrain spark on their network, their viewer per month, their viewers per month, is basically double Cartoon Network, double PBS Kids, and double Nickelodeon, the only cable network that has higher viewership and watchtime and engagement than Wild Brin Spark would be Disney. So, you know, they have a great,

they have a great sales pitch to advertisers. You know, and also you've seen advertising dollars shift from linear to non-linear. And so the global kids advertising, market's about $4.7 billion. So that's the total addressable market. Well, in 2012, 9% of those advertising dollars went to nonlinear. Well, today it's about 40% and it's growing. So, you know, so of that 4.7 billion, roughly 2 billion is now being spent on non-linear. And, you know, YouTube in terms of kids' content is the 800-pound gorilla.

and Wild Brain Sparks Network is a big part of that. Let me push back a little harder on this because as you said, like there were both attractive and unattractive things that said here. So I think you said it when your first pushback and the thing you had to get over was, hey, this is not Netflix, right? This is a YouTube channel and it's a whole bunch of YouTube channels that are very widely watched,

but YouTube is the distributor here, right? So when I hear that, I do kind of think like, A, obviously, you know, they got hit by YouTube, by not being able to target miners anymore. But, you know, at some point, if YouTube really got pissed off at them or something, YouTube could change the algorithm. So people are just pushed away from Wildbrain's things. Or, you know, I also think like, hey, a legacy cable channel right now.

Now, they face all sorts of other issues, but a legacy cable channel trades for six or seven times EBITDA, whereas, you know, a Netflix trades for 20 times sales or something, right? So why when I am looking at this at Wild Brain Sparks, why am I not? thinking more legacy cable channel, obviously with different dynamics, but why is it worth more than legacy cable channel? Why is the brand and the moat better than that? Why is it more on the kind of Netflix side than that? Yeah. Well, so I think for one thing, if you look at some of the third-party brands that have engaged Spark, I mean, brands like Paw Patrol, right? Paw Patrol, Nickelodeon handles their linear broadcast efforts.

Well, they've partnered with Wild Brain, Spark, to represent their entire Avod push. And there's other big brands that have done that as well. So, you know, I understand what you're coming from, but I would just say, you know, Eric talks a lot about how, you know, he's been doing this for a long time. And 100% of the time in his career,

add dollars follow eyeballs and it's that and if that watch time you know continues like it has been and and they are one of the largest beneficiaries today at least of eyeballs in this nonlinear world ad dollars are going to follow and um you know like i said you had that that that hiccup but it appears that that from the copa compliance stuff but it appears that that business segments rebounded you know, revenue grew 70% sequentially from last quarter. So I think this past quarter, they did like 15, 16 million in revenue. And, you know, the company believes strongly that they have a large and a long runway, you know, for growth. And not just, you know, with traditional advertising. So, so by the way, with what they're doing right now with the direct sales advertising team,

they're able to charge much higher CPMs than what would be typically assigned to the YouTube algorithm. And I think on this last conference call, Eric even mentioned in answering one of the analyst questions that, you know, YouTube, when they place an ad, the splits 50, 50, 50 percent goes to YouTube, 50 percent goes to the creator. But with this direct sales effort, I think it's, you know, YouTube still gets their take, but a lot of the incremental margin goes to Wild Brain. but you know also where they've seen big growth it's not just from advertising it's from content

production so you know one of the big things they're doing now are these toy unboxing videos so yeah i i mean it's pretty crazy what kids watch today but you know kids will watch you know a kid unwrapping a snoopy toy and being all excited and jumping up and down well that's not considered um a commercial that's content that they're producing for that that brand which which makes the slice of, you know, at least the pie that wild brain spark could gather, you know, that much bigger. So I don't know if that, you know, fully answers your question, but what I, you know, what I can tell you is the company has been talking a lot about how they've been spending a lot of money on ad tech and they've been spending a lot of money

on their sales team building that because everything that they've seen, you know, suggests that this is a huge growth, growth area for them. And then, you know, I would also mentioned that that's just for advertising sales. And, you know, advertising sales, you figure over the next year, if they, if they do what they did last quarter, the opportunity is about 60 million, you know, I think just advertising sales could grow to, you know, two, three hundred million. But, you know, potentially where wild brain spark is even more exciting is, is their ability to discover tomorrow's hits. And, you know, they've talked a lot about that. And, you know, I've told you, right? You know, a doll brand is big amongst 12-year-olds in France, and you could take

it to the rest of the world and help them grow that presence. And if you look at what they've done for some of these brands, it's pretty amazing. So, you know, just as one example, you know, so Sunny Bunny's is a Russian kids property. And now this is going back several years ago. So I think that they were trying to prove the concept several years ago today, you know, it'd be different, right? They'd have economics in the brand. They'd participate in consumer products. But, you know, so Sunny Bunny's had a season one in Russia on the Disney channel in Russia. And after their season one, their YouTube channel had 1,200 subscribers.

So they went to Wild Brain Spark to help them. They hired them as their channel manager to help them grow their Avod presence. And WildBrain grew that channel from 1,200 subscribers to, I think it was like 400,000 subscribers and 2 billion views. and that success, you know, help that brand grow, helped them secure a master toy partner. And I think last year, that brand was ultimately bought by Disney. But, you know, Wild Brain Spark was the one responsible for kind of putting that brand on the map.

So, you know, if you go look at the brands they're dealing with now at Spark, like I said, they're, you know, they're handling the channel management for brands like, you know, Paw Patrol, which, you know, clearly with a brand like that, they're just brand. brand manager. You know, Pop Patrol doesn't need their help. But, you know, there's a brand called Spookis, which is a South Korean owned property by a company called Key Ring Studios. And they hired Wild Brain to, for their channel management. And Wild Brain just created a full-length film on YouTube. And it's like the number one watched a movie on YouTube of all time. And so, you know, they've helped discover a lot of brands and they're taking economics in some

of these brands. So, you know, I think that'll come to fruition. So, yeah. Again, it goes back that the Netflix home screen thing that I love like, and it's one of the things I'm trying to debate. And it seems like you, you follow on the distribution side. But the person who owns the distribution, you know, if Wild Brain does that with their channel ownership and everything, like they can see, as you said, oh, this is getting interesting in South Korea. So let's get some economics. Let's roll this out worldwide. If it's a hit, you know, we're going to make 20, 30, 50 times of money. We're going to build this huge international brand. And I just love having that distribution to do that. We're coming up on the end. So I just want to like kind of wrap all my devil's advocate

into one last thing. So, you know, when I look at the stock market, like I look at something like a company I've thought a lot about Lionsgate, right? I don't know if you know or not, but Lionsgate owns, they own stars, the, you know, pay video channel that most people know, right behind HBO. They own Stars and then they own Lionsgate, which is the movie studio and the TV production company. They made Hunger Games. They made Twilight. They made Mad Men. So they've got a big movie and TV production studio with lots of rights there. And I look at that and I say, hey, the enterprise value there is about $5 billion. CBS offers to buy stars from Lionsgate for about $5 billion, maybe 18 months two years ago, right? So obviously things have changed a little

bit. But I think when you look at it, you could say, hey, the market is valuing stars. The market is valuing linesgate four stars. And it's basically putting a zero on the TV and film production studio and all that sort of stuff. And there were management issues. There's a lot of other things there. But, you know, I look at something like MGM, which is James Bond, Rocky, a bunch of other classic films. They're for sale. And it doesn't seem like people are beating down their door. Right. So when I look at Wildbrain, I do wonder like, hey, the market just does. doesn't seem to care. And there doesn't seem to be a lot of demand for people to kind of go out and buy it. It seems to be much more people. They're willing to license. They're willing to take your shows.

But they really want to build a lot of this stuff. Does that make sense? Is that a concern for you at all? Because when I look at wildbrain, hey, if Apple's rolling out so much of peanuts, Apple buying Wildbrain to get full control of peanuts, it makes all the sense in the world long term. But it doesn't seem like that's where the market's going. It doesn't seem like that's the direction. Yeah. So it's funny, you know, to go back to that 2015 pitch by fine capital at the Sone conference, you know, I think, you know, now they were obviously early, very early, but they've, you know, bought down and really lowered their cost basis. So this will be a great investment for them. But, you know, one of the things that I think they hit right on was that kids content, particularly animated content, is different than all of their content.

Yep. You know, in live action, you know, it's kind of like you have your movie, you know, you get money up front from the content production, but then, you know, and maybe there's a revenue drip for, you know, in perpetuity, but not really. It's kind of like you start all over and you go back to the drawing board. Unless you have a truly great movie or franchise that is timeless. So like Miracle on 34th Street, every Christmas people are going to watch that. You know, you mentioned MGM, the Rocky franchise, the Rambo, you know, Rambo, you know, a couple of franchises like that, like that.

I think those are timeless. People are going to watch those again and again and again. But for the most part, live action is just very different than animation. And it's really hard to build a timeless franchise. You know, with kids content, it's a little different. And I think because new generations are always popping up. So new generations of kids will watch the same. It's like my kids right now on Cartoon Network, you know, my younger son loves Scooby-Doo.

Well, those are the same Scooby-Doo episodes. It's not new animation. Those are the same ones I watched years ago. Because it's animated, it's kind of, it's much easier to, you know, take into different languages and across different territories. And the most important part that and you, and this is what's tough about live action. Unless it's supernatural or like mystery, like a Harry Potter, live action just doesn't really lend itself to consumer products like animated content does. So, you know, I think that's pretty huge. We've talked about the Peanuts franchise.

The one thing we didn't talk about, though, was, you know, the ability to do this with other library IP. So this is where, like I said earlier, I think, you know, the Peanuts franchise today is worth, you know, roughly the enterprise value. I think it'll be worth much more as Apple, you know, fully rolls out and develops his content and makes the brand significant again. But in terms of the other portfolio IP, like Strawberry Shortcake and Telitubbies, now that's where potentially this becomes a home run investment, but that's based on management execution. And will management execute? I think they will. But just to give you, you know, one example of the potential here. So, you know, Strawberry Shortcake, which management's pretty excited about, I am too.

There's been no new content created for strawberry shortcake in decades. In the early 90s, strawberry shortcake was created as a one-hour film for 20th century Fox with an investment of $250,000. Over the next four years, Strawberry Shortcake did $5 billion in consumer product sales. I mean, $5 billion in consumer product sales, it does nothing today. In Eric Ellen Bogan's first call, a conference call is the new CEO. He was talking about their portfolio of IP, and he talked about how one of the things that really shocked him when he came in is if you look at Telitubbies, he said in the prior calendar year, Telatubbies had done less than a million dollars in consumer product sales. This was a brand that was doing two, three hundred million dollars a year in consumer product sales in the early 2000s. So that, that right there, and like I said, with those brands, it's based on execution.

I think Peanuts is kind of already there with execution. I think consumer product scales could grow significantly. But I think that right there, high margin consumer product sales is really one of the main differentiators from live action and kids animated content. When you think of, so Strawberry Shortcake and Telatop, you know, I'm just trying to think, and I'm positive there are examples of this, but are there brands that, you know, did hundreds of millions of sales in the 90s, 80s, whenever you want to call it, lie dormant for 10, 15, 20 years, and then had a relaunch, a successful relinch. And I'm talking kids

brands specifically. Can you think of any? Yeah, I mean, I don't know. I haven't studied other content types enough to know that. You know, maybe Scooby-Doo. If you remember, Scooby-Doo had that, that movie with Matthew Lillard. Yeah, and I think, like, Albin and the Chipmunks has had a bunch of relaunch movies, the Trolls movies, which I really enjoyed the first Trolls movie that DreamWorks put out. Obviously, that resets it. Smurfs had to come back. I was just trying to think of, like, consumer focus products, but I'm sure there are plenty.

And look, nostalgia plays right now, right? So I would not be surprised if there's just a nostalgia angle. Well, I'll tell you what I find, one of the things that I find interesting, and I don't really know this, right? Because I've never launched a consumer product strategy for a kid's brand. You know, Eric's been there for six quarters now. And when he first got there, he talked about, you know, the upcoming toy launch, you know, for the strawberry shortcake franchise. Well, I mean, you know, here we are six, six quarters later. And, and, you know, there's been no toy launch. They haven't even really created the new IP that they've been developing. And I, and I just

think, you know, when he talks about it, he's like, we test the hell out of this. We test the hell out of it, focus groups, you know, and I mean, when you look at what past Wild Brain did with some of the past relaunches of brands like Telitubbies and stuff like that, I think there is an expertise involved with creating franchises. And, you know, like Eric always says, you need to lead with a content. He says, lead with the content, chase with consumer product. And I, you know, I think he's developed an ability to do that and be successful doing that. And, you know, this is kind of unrelated, but I put this sheet of paper in front of me because I think this is, you know, very important. You know, one of this is from their summary consolidated financial statements from a couple of quarters ago for their fiscal 2020.

But, you know, one of the biggest changes under Eric has been to focus on what he thinks could be their great franchises. And he's really brought a mentality of quality over quantity where I think past management was just focused on putting stuff out there. And I think companies are focused on putting stuff out there. So, I mean, so this is, you know, pretty crazy. He's been there for six quarters now. So he was there for partial fiscal 19 and all fiscal 20.

So if you look at proprietary half hours of content delivered, plus third party titles with distribution rights, half hours added in the library. So in fiscal 2018, they had 228 half hours. In fiscal 2019, they had 168 half hours. In fiscal 2020, it was 74 half hours. So he's gone from 228 so under prior management 228 half hours of content delivered or produced and Eric Ellen Bogan this past fiscal year did 74 so 228 to 74 yet if you look at company revenue revenue is basically flat over the last three years so so I mean I mean that I think that right there is very very telling yep and and you know they're looking for great deals great content deals and if they don't get that great content deal, guess what? They're going to go build the brand on the Avod Spark,

and that's what they're doing with Strawberry Shortcake. And they'll continue to build that brand on Wild Brain Spark, their Avon network, until a netflix or someone comes along with, you know, some great deal where the economics make a lot of sense and they're able to make a lot of money on it. Let me. Yeah. We're kind of well over an hour, but I've really enjoyed this. Let me wrap this up with, you know, not in our Super Bowl case, not in a Super Bowl case where, you know, Wild Brain Spark becomes the next Netflix and Peanuts is, you know, the most valuable franchise on Earth. But when you run a reasonable wool case, you know, and we look forward three years from now, right? Like, they do have a lot of convertible debt, if I remember

correctly. There's a lot of stuff out there. But what are you kind of playing for here, right? If I remember, I don't have my screen up, but I think the share price is about $3 per share Canadian right now. What are you playing for in three to five years, do you think? Well, so this is, so first, one thing that I think is really interesting, and you're right, they do have a lot of debt. On this last conference called the CFO, Aaron Ames, and he's been very conservative in past guidance. And he did make a remark that basically starting now, that debt will no longer so much be serviced with existing cash flow, but they are going to start significantly reducing the leverage or the the operative leverage through EBDA growth. And, you know,

right now, I think they're like at 5.5 times is there debt leverage. And he said that they feel very comfortable that by the end of this fiscal year, they'll be in the mid-fours. So, you know, I think that tells you something about what they see around the corner. And then I think if you just take their existing library and some of the, you know, the pieces of IP that they have identified, identified, you know, obviously peanuts, strawberry shortcake, telitubbies, in the night garden, inspector gadget, you know, and it's kind of a big range, but, you know, assuming that each of these brands, you know, dependent on the deal could, you know, add something, you know, let's say between 5 to 10 million EBITDA per, you know, per property. And what enables them to do that

once again is, is, is their distribution, owning their own distribution. They could build these brands until they get the right deal. But if you just, you know, add that, that EBITDA margin from those different properties, plus the revenue growth in advertising at WildBron Spark. And, you know, I've told you, I think they could get to, you know, to 300 million. I think that Eric Ellenbogan very easily hits this top incentive target, which is $11 per share. You know, so, you know, we will own this. And I don't plan on selling any shares until it hits that $11, you know, price target. And I would argue that by then we're going to know a lot more.

You know, so by then, we're going to know a lot more about what this company's future looks like. And, you know, they just announced the Sonic deal. And by the way, I didn't even mention Sonic, right? It didn't even have time. Sonic's something that could be a lot bigger than, you know, I, at least from the conference call, they seem to hint that this is of the type of caliber deal that, you know, that Peanuts is. And then he mentioned, you know, stay tuned for many more, you know, new announcements like that, which makes you think about the rest of their library.

You know, I mean, one that we didn't mention at all is they just finish a script for, the Green Hornet. So, you know, they negotiated once again with the copyright owner of the Green Hornet. They're going to produce new children's content. And they did this with, you know, Kevin Smith, who I guess wrote the pilot. But now they're, you know, they're going to shop that around to some of the big, you know, S-Bod services. But the Green Hornet's another one that, you know, really lends itself to consumer product sales. So I'm not even, you know, when I think about where this company's headed, I'm not even really thinking about consumer product sales for any of the brands outside of peanuts, which I think could be sizable, for sure, with Sonic,

you know, but hopefully with Strawberry Shortcake and Greenhorn and some of these. You know, but like I said, I, you know, by the time this stock is 11 bucks, you know, I would expect us to have a lot more clarity on, on, you know, the EBITDA contribution from something like a Sonic, from something like a peanuts. They've said, you know, in past calls that they don't really expect, you know, meet of these deals to start hitting the financials until fiscal 2020. Well, right now, we're, we're, you know, they just reported Q2 fiscal 2021. And that's the great thing. Like, by the time in your case where it hits 11, like they've hit that flywheel where, hey, we've proven we can

take the Sonic and take it to the next level through our distribution. And Wild Brain Spark is in another 200 million, another 200 million kids are watching it. So a lot more people are coming to us and saying, hey, can we have the sonic deal because we know it's going to be even bigger because your distribution is even bigger and better and you've proven it out. And you almost get that flywheel going in that sense. Yeah. I mean, you talk a lot about the flywheel. I feel like that's you should copyright that word flywheel. I hear you. I wish. It'd be smarter people than me came up with that. No, but, but a hundred percent, right? So I have no doubt that this sonic deal came about because of what they have shown with the Apple Peanuts.

Now, the content has to be good, but if the content's been good, and they've demonstrated the ability to make great content with the new Apple peanuts content, that'll lend itself to consumer product sales, and other brands are going to see what they did with a Sonic franchise. And then so, yes, when Nintendo wants to make new animated content for Super Mario Brothers, who is their partner going to be? It's not going to be Disney. Disney's, you know, they're too big.

They're doing their own things. There's not a lot of games in town, right? And if it's Wild Brain and Wild Brain has demonstrated the ability to do what they have, and by the way, I mentioned Super Mario just because the back episodes are part of Wild Brain's distribution catalog. Comcast is making the Super Mario movie for 2022, though, right? Yeah, well, so what's interesting. Yeah, so the movie's different, right?

So like Paramount made the Sonic movie. So maybe the TV and the movies are done differently. Yeah. Well, so what's different is it's my understanding that, you know, consumer rights that were tied to the Sonic movie, you know, that's owned by Sega. So once again, it's all, you know, and that's kind of what's hard with media too.

Every deal is different, right? Every deal is different. No deal is the same. And as investors, you're kind of, you know, in the dark as to the specifics of the deal. Because like with the peanuts thing, you know, Apple doesn't want, Apple doesn't want wild brain, you know, disclosing, you know,

maybe, you know, certain economics because they don't want to give those same economics, you know, to people that they're dealing with. So, so, you know, like I said, I, and one of the hard things with media is so much of it is based on your belief in management executing. But that's one of the reasons. why I feel comfortable with this position at these prices is because, like I said, from a downside perspective, I feel like so much of it is just in, you know, the Peanuts franchise. And I would expect, you know, as this stock starts to run, you're going to have more clarity with a lot

of the other things like, you know, like Sonic, like Strachshortcake. You'll have other deals announced, which, which, you know, in theory should have, should help you have a moving price, you know, target. So, you know, I say 11 bucks, but, you know, who knows? Maybe when it hits 11, you know, all feel comfortable with, with a $20 stock. And, you know, a lot of that is, like I said, it's really all based on execution. But the one thing that's for sure is their portfolio of IP has done it before, you know, reinventing it's not going to be easy. But, you know, I would argue that, that, you know, something that was great once, at least has the workings to potentially be great again in the right hands.

Well, hey, I think we're going to wrap it up there, if that's okay with you. We're way over time, but that, you know, this is an interesting one. And I'm excited we went as in depth as we did. Jay Bosco, thanks so much for coming on the pod. And we might have to do you. Oh, he's saying one more second. What's going on? One more thing.

So, you know, there was a really interesting comment on one of the analysts asked. This was a question that I had a long time ago, too. But, you know, you're having this great success on YouTube. Have you thought about, you know, launching your own A-Bod network where you're the distribution arm? I highlighted that line when I was reading the transcript. Absolutely. Yeah, go ahead.

And, you know, it's so, so A, Eric answered that question with saying right now all the eyeballs are on YouTube. So, you know, this is a, this is an Eric. for us to attack and attack hard. You know, they've diversified beyond YouTube where they're, you know, on several of the other A-Bod platforms. But then, you know, if you go, you know, if you buy a Roku, you know, a Roku, wildbrain, they have their own channel on Roku TV.

If you buy a Samsung channel, they have their own A-Bod channel on Samsung TVs. So I think that they, you know, they're dabbling in that somewhat. but you know it's i mean it's one thing to launch your own uh distribution service but it's another thing to have have the eyeballs right so it's like you know you could have you could have your own app but if you know the only users of the app are you know you your mom and your your girlfriend you're never going to make any money right so i think uh they you see the wheels turning. You see them, you know, kind of dip in their foot in their water in terms of other distribution, but the eyeballs are with YouTube. And from, you know, what the company says,

the company, you know, talks about how YouTube is a, is a great partner and a partner where they have a great relationship with. And particularly in this COPA compliant world where you can't target kids, you know, the wild brain spark network is, is a network. that's important to YouTube. And, you know, so I would argue as long as you could be a great partner with YouTube and YouTube values you as a partner and you, you know, you value YouTube as a partner, you know, that seems like a silly recipe to mess with. So. Well, let's leave it there. Joe, this has been great.

We'll have to have you on to talk maybe an IDT spin or some uranium at some point. But look, the conversation about it's been great and you took it into a lot different places. So thanks again for coming on. Thank you. I appreciate it, man. Perfect, man.