Children’s content online should be subject to CanCon rules says Nikolai.com founder

A Canadian kids website has folded af five years in the trenches as spooked venture capitalists pull back from risky online projects. Though Isabel Hoffmann says her Nikolai.com site was in the pre-profit stage of its business plan, the failure to score second-round financing has forced the company into bankruptcy. In place of the usual site content, Hoffmann has posted a passionate letter to over 350,000 registered members of the site explaining her reasons for shutting down. Part of her anger is directed at the Canadian government, which she says isn’t doing its part to encourage CanCon for kids. Her other target is giant media conglomerates, such as Corus Entertainment, which she says have made it nearly impossible to migrate quality web content onto television. Nikolai was founded in 1995 as a kids’ community site revolving around a six-year-old cartoon character of the same name. The site emphasized education, and the company produced several CD-ROMs using the character to teach history, geography and other subjects. Hoffmann was working to grow Nikolai as an online brand with hundreds of thousands of users until it could strike a television distribution deal for an animated series. The company seemed poised to strike such a deal a little over a year ago. But its partner, Cinar Corp, subsequently experienced its well-publicized difficulties. Hoffmann says prior to shutting the site’s doors, she had been working with an Asian broadcaster to produce a pilot show. The project has since been scrapped. The shame, says Hoffmann, is that the business was meeting its targets. With links from Netscape, and spending $9 million to feature nikolai.com on the AOL portal, the site was growing by a thousand users per day. First-round financing was easily achieved, and the company seemed on track to gain mindshare and establish the brand online before making the leap to TV. That all changed, however, when the bloom went off dot-com companies. She says investors who understood the long-term nature of the venture when they first came on board are now demanding immediate and unreasonable returns. When second-round funding fell through, Hoffmann says she reduced the site’s burn rate to $150,000 per month, and scaled back staff from over 120 to 45. She also introduced a small ecom component to the site with minimal success. "It was hellish," she told Canadian NEW MEDIA. "I don’t want to repeat that experience, running a company so under-capitalized." She recognizes that the problem extends beyond children’s content to a broad range of Internet plays, but says the regulated nature of kid’s content makes the situation particular challenging. "It’s only going to be the large media giants who are going to survive this," she predicts. She adds that a wave of media consolidation has made it difficult for smaller, independent producers to survive. She notes that the prime outlets for children’s programming on TV in Canada – Teletoon, the Family Channel, YTV and Treehouse – are owned by Corus Entertainment. "I don’t know, isn’t this a monopoly? Fine, own the distribution, but don’t own the content. Well, they just bought Nelvana. No one objected to that," she bemoans. "Do you think John Cassady at Corus is going to pick up nikolai.com television? He’s not. If he’s going to pick up Nikolai, he’s going to buy Nikolai. Why should he pick up content that he doesn’t own?" she asks. Online success tied to TV Television deals and featured content on broadcasters’ sites, she explains, are crucial to the success of kids’ properties. She concedes that the prevailing thought about the role of the Internet when she founded the site in 1995 was much different than today. "It was going to be the medium that equalized everybody. Well, forget it. It’s not. By the year 2000, when you have millions of web sites, that is not information that informs anyone. You cannot possibly view all those websites. What you do is where you enter. The proof is AOL." While nikolai.com paid dearly for featured content on AOL, there was still no way to derive revenues from those eyeballs without a licensing deal of some sort. Steve Comeau, president and CEO of Collideascope Digital Productions says quality educational programming for kids can exist online, but that the business model needs to be one geared towards the immediate licensing of content to aggregators. "It’s almost impossible for a producer to create a stand-alone product online and try to have it generate huge traffic," he says. His company recently signed a deal with Teletoon to feature its Ollie Under the Bed online and on television through a licensing deal. "What the hope is for online content is that you yourself wouldn’t put it online. You would sub-license it or syndicate it to an existing web brand and try to drive it that way – instead of try to market an entire presence online which is an Herculean task." The Canadian government could help, she says, by implementing both children’s CanCon thresholds for educational programming on the web, and by extending special tax credits for those producers. The worry, says Hoffmann, is that without enough Canadian educational shows, kids won’t have an alternative to commercially oriented, American programming on the web and off. "You can’t just allow the commercialization," she urges. "The large media use children to make them early consumers. They are not interested in their creativity or in the expansion of their minds," she says. "There’s a lot of talk about how our culture is different from U.S. culture, but no one is tackling the problem from the root which is where education starts. If you educate children with American culture, they’ll act American, they’ll feel American and they’ll consume American – they’ll be as violent as Americans." Comeau agrees that some CanCon regulations could be instituted for online content, though he’s not sure what form they would take. "I don’t think that on the general Internet you can legislate CanCon, and I think that there should be some CanCon things in place that mirror policies in place for traditional cable or traditional broadcasting. But, I don’t know exactly what that would be." Hoffmann says she is currently writing a book about her experience. She is no stranger to the Internet space. She is the founder, president and CEO of H+a inc founded in 1992, and established the Digital Media Studios, a new media training facility and the world’s first SGI training centre. She is also a founding director of SMART Toronto.

Children’s content online should be subject to CanCon rules says Nikolai.com founder

News | 03/22/2001 5:00 am EST

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us