Kids content is crushing it on TV and streaming

Kids and family programming deals are surging as streaming companies look to double down on content that serves a highly-engaged cohort of younger users.

Why it matters: Kids content used to be perceived as a tool to stop users from cancelling streaming accounts. Now it's a key driver for new user growth.

• "I think the big thing they (streamers) have realized is that the value of kids and family content goes beyond retention," said Chris Williams, founder and CEO of Pocketwatch Inc., a kids content firm.
• ViacomCBS CEO Bob Bakish told investors on an earnings call last week that kids and family content "was the top genre on Paramount+ for both acquisition and engagement in the quarter." Bakish cited titles like SpongeBob Squarepants and PAW Patrol as being "a key attraction to the service."

Driving the news: Pocketwatch has hired financial advisory firm Lazard as it explores potential new investments or a possible sale.

• The firm, which has exclusive licensing and production deals with major kids YouTube franchises, has received inbound interest about a possible sale as well as new investment, according to two sources familiar with the company's business. The Wall Street Journal reported about the effort last week.
• Recent activity in the space has prompted more investors to eye kids content companies, particularly ones focused on children's franchises on YouTube.
• In September, Pocketwatch brought on Xavier Kochhar, a former strategy executive AT&T and HBO Max, to help it navigate next steps for growth.
• The company, which launched only five years ago, has raised just $21 million to-date. It last raised $15 million in 2018, in a series B round led by Viacom.

Be smart: Pocketwatch's digital franchises are considered some of the most lucrative intellectual property for kids on the internet.

• Merchandise from the Ryan's World franchise, formerly called Ryan's ToysReview, generated more than $250 million in sales in 2020. With 30.8 million subscribers, Ryan's World is one of the most popular kids YouTube Channels in the world.
• Last year, Pocketwatch inked a deal with Diana, the seven-year-old Ukrainian YouTube sensation whose series, "Kids Diana Show," is one of the most subscribed-to YouTube channels in the world. With the deal, Pocketwatch launched a new series called "Love, Diana," and product slate.

The big picture: The streaming arms-race has put a premium on digital content studios, particularly those that cater to kids programming.

• Moonbug Entertainment, the UK-based digital content company that's home to the YouTube streaming hit "Cocomelon," sold for roughly $3 billion last week to an unnamed media company backed by Blackstone and led by former Disney executives Tom Staggs and Kevin Mayer, Deadline reported on Monday.
• Roald Dahl Story Company (RDSC), the UK-based firm that owns and manages the rights of the storied works from the late British author Roald Dahl, was acquired by Netflix in September.
• Alvin and the Chipmunks owner Bagdasarian Productions has engaged in sale talks, per CNBC, including with big streamers like ViacomCBS.

What to watch: YouTube has proven a breeding ground for streamers looking to adopt franchises that can easily sell toys and other products.

• Moonbug acquired kids YouTube sensations Cocomelon and Blippi in 2020 and raised $120 million to fuel more likeminded acquisitions.
• Williams noted that the recent Moonbug sale "strikes to the thesis of a lot of parts of our enterprise as well."

By the numbers: In the last month, three of the top 15 shows across all streaming platforms have been children's series, according to Parrot Analytics, a company that measures demand for video content.

Go deeper: Disney+ ushers in streaming war for kid-friendly content