First, the fact that the Japanese craze for Pokemon is two years ahead of the United States: Yep, that's true. But Japanese tastes in entertainment, well, they're a little creepy. Not French-Jerry Lewis creepy, but close. We're talking pornographic comic books (Manga), baseball games that end in a tie, and a game show called "Tolerance" that features people freezing themselves, getting pecked by chickens, and clawed by panthers, all for a chance to win a trip to Hawaii. And face it, "Hello Kitty," which I remember from my time in grade school, never lost popularity in Japan, and virtual pet Tamagotchi, which enjoyed a brief rage here, is more like a way of life in pet-starved Japan.
Nope, for every karaoke that we have adapted from our nihonjin brethren, there are hundreds of things -- like octopus-on-a-stick, kabuki, and rental families -- that have blessedly resisted exportation from the Land of the Rising Sun. To point to Japan as the harbinger of things to come in the U.S. is like pointing to bowling alleys as the next wave of American fashion.
But this time is different, right? Well, no, not really. It has the ability to regenerate for video games, like the Crash Bandicoot and Donkey Kong franchises, but remember, those are Nintendo, and 4Kids gets nothing for them. Nada. Niente. And those two franchises, the most successful in video game history, have been hugely resistant to keeping much momentum in other non-video realms. In fact, you'd have to look back to the classics of Disney, Peanuts, Sesame Street, and Looney Tunes to find animated franchises that maintained much in the way of sustained sales over a wide array of products. And remember, in all of these cases, the producer of the basic product, the owner of the franchise, controlled the shots. Oh, and another thing -- each of those properties had sustainability by being relevant to people of several age groups, where Pokemon has succeeded only in making the majority of adults willing to give Barney another shot. 4Kids is no Disney. Pikachu is no Mickey.
4Kids is a marketing agency. So sure, they've got a great financial picture. They don't produce anything. So top-line growth necessarily will help drive excellent bottom-line numbers, unless, of course, 4Kids is run by Beavis & Butthead (to mention another short-lived multimedia phenomenon). Which it is not, nor would I dare make such a comparison. You know the drill, they use it in Congress all the time: "Some would say that the gentleman from Minnesota is a slack-jawed yokel�." Not very nice, and not at all appropriate. Particularly not for a family-themed company like 4Kids, nor for a competent and capable CEO like Al Kahn.
So the film has grossed $82 million thus far. And 90 companies have signed up to do licensing of one kind or another. I noticed that Rexall will be making Pokemon vitamins. (I wonder if they'll include Betty Rubble to make up for her egregious exclusion from the Flintstone vitamins?) These licensing deals will be excellent sources of revenue for 4Kids. But are they sustainable? More importantly, are they sustainable long enough to justify the rich valuation given to the company? Time will tell, but if Pokemon is a dying fad everywhere outside of Japan next year at this time, 4Kids' share price will be much lower than it is now.
Remember, share prices are based upon the potential for future earnings. Next year -- heck, next MONTH -- it won't matter that the company had a bang-up Christmas 1999 (which it will); those earnings will have been current, and won't have much bearing upon the continued growth of the company. Big margins come with the territory of being a marketing company. Big sales growth comes from being attached to a white-hot fad. Sustainable growth comes from neither, not very easily. Hundreds of companies and hundreds of properties have gone before 4Kids and Pokemon. Very few kept from being relegated to the toy box of history.
WCW? It remains to be seen whether the collective aneurysm that has allowed pro wrestling to gain popularity in the U.S. is curable, but I don't expect the likes of Goldberg to go away or to gain too much additional mindshare in the U.S. (and I use the term "mindshare" very loosely). And if there's one thing that James Bond franchise could use, it's marketing. The product placement and tie-in opportunities for 007 are pretty saturated, though if 4Kids wants to sell exploding pens and missile launching BMWs, well, then I may have to change my tune.
But as for 4Kids' bread and butter, Pokemon, I think they're counting a bit much on the fickle tastes of the 6-12 crowd. And those tastes are kind of like the weather in Massachusetts in April -- if you don't like it, just wait a minute and it'll change.
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