Operating
& Financial Review

Channels

Programme
Distribution

Consumer
Products

Online &
Interactive

CONSUMER PRODUCTS

Following the opening of new consumer products operations in the last fiscal year, we successfully integrated this division with our other lines of business, maximizing the synergies wherever possible. Our strategy has been to expand our portfolio by acquiring agency rights to leading third party brands and at the same time focus our effort on the major revenue-generating properties in order to improve average yield and total margins. As a result, we decreased the number of our active properties from 32 to 20 and more than doubled the average yield. This successful strategy increased the division’s revenues by 43% and more than doubled its operating income.

In addition, our licensee base throughout Europe has seen significant expansion. We currently have more than 200 licence agreements with over 160 licensees in 30 markets.

Pursuant to our expansion strategy, in January 2001 the company acquired certain pan-European merchandising and promotional agency rights to the Harvey portfolio, which includes several popular properties such as Casper the Ghost, Little Audrey and Richie Rich. We also acquired the pan-European merchandising agency rights to the recently released Final Fantasy movie, which was released in Europe in August 2001, together with the latest version of the very popular Final Fantasy computer game, in addition to Totally Spies, a co-production between Marathon, TF1, Mediaset and Prosieben.

Demand for Digimon merchandising rights remained strong in the period in the UK and France, following high ratings performances for the television series as well as the feature film spin-off. We expect Digimon to remain a major property in the coming fiscal year.

We also expanded our operation in new directions, including music, video games and promotions. Two Fox Kids branded music albums were released in the Netherlands in conjunction with BMG. The first album reached #1 position in the Dutch official sales charts before Christmas and remained there for 13 weeks, achieving platinum status. The second album has also enjoyed similar success, already at gold status and still selling well.

We also succeeded in forming several strong retail alliances, including promotions with Woolworths, Tesco, Hamleys, Toys Us, Giocheria, Deichmann and Auchan. In addition to these, our properties and brands were promoted by leading consumer goods companies, including Fromageries Bel (28 million cheese boxes), United Biscuits (24 million packs of various products), Schweppes (15 million soft drinks), Danone (13 million packets of biscuits), Kellogg’s (6 million cereal packs), CPW (6 million cereal packs) and Procter & Gamble (1 million products). We also secured several major promotions with quick-service restaurants such as McDonald’s (13 million Digimon Happy Meals in the UK, France and Switzerland) and KFC (1 million Digimon Kids Meals in the UK). As well as generating revenues, these character-driven promotions cross-marketed the Fox Kids channels and online businesses to millions of children across Europe.