DHX to cut slate, staffing after strategic review

DHX will invest in more shortform based on properties such as Teletubbies

Canadian children’s content giant DHX Media has concluded a strategic review, resulting in staff cuts, the reduction of its development slate, a focus on premium originals and greater investment in shortform for its YouTube business WildBrain.

The review, initiated in October last year, was potentially going to result in the sale of part or all of the company, the offloading of some of its assets or a merger with another party. This followed a sharp drop in the company’s share price since September 2017.

Michael Donovan

DHX said the company had received interest from multiple parties for a variety of its assets, business combinations and strategic partnerships. The main deal to come as a result has been DHX’s sale of a minority stake in Peanuts to Sony for US$178m.

Other steps taken include: reducing the development slate and production pipeline to focus on key, high-profile properties; staff reductions, including licensing its interactive games business to a third party, which included assuming all related employee costs; reducing its overall facilities footprint by 35,000sq ft; and consolidating its Vancouver animation production from two studio facilities into one.

The company also appointed a new leadership team as previously announced, including a CEO, chief financial officer, chief operating officer, president and chief commercial officer. DHX said the new management team would “improve execution and culture.”

The combined strategic and internal review process, once fully implemented, is expected to generate US$8.5m in annual operating savings, DHX said.

Additionally, as a result of the strategic review, DHX’s board of directors has suspended the company’s quarterly dividend, effective immediately, freeing up about US$7.7m annually to invest in its WildBrain business and to continue paying down debt.

Michael Donovan, executive chair and CEO of DHX Media, said: “We are well positioned to enter our next stage of growth, focused on what we identified during the strategic review as the two largest opportunities for kids’ and family content: accelerating investment in our WildBrain network to capitalise on the rising popularity of kids’ content on YouTube; and better leveraging our IP portfolio to produce premium originals for major streaming services.

“We believe this refocusing of our strategy will allow us to deliver significant growth while generating free cash flow to pay down debt.”

The WildBrain strategy will see it invest in more shortform content for YouTube based around new and classic brands within its library, which includes properties such as Peanuts, Teletubbies, Strawberry Shortcake, Caillou, Inspector Gadget and Degrassi.

It will also “pursue potential channel acquisition opportunities” online. Donovan said that the content for streaming services and key broadcasters would focus on kids’ shows with “greatest consumer products potential.”

DHX was formed in 2006 through the merger of Decode Entertainment and Halifax Film Company and has since become one of the world’s largest producers and distributors of children’s shows. It also operates Canadian networks Family Channel, Family CHRGD, Family Jr and Télémagino.

In related news, DHX subsidiary Peanuts Worldwide has signed an exclusive agency representation agreement with CAA-GBG for Peanuts in China and Asia, excluding Japan, through to June 2023.

China and Asia are under-monetised territories for Peanuts, holding the potential for significant growth for the brand, DHX said.