• by Wayne Friedman , David Goetzl  @dgoetzl, August 10, 2006

Months after 2006-07 deals ordinarily would have been wrapped up, the languishing kids' TV advertising marketplace has claimed its first major victim: media buying shop Summit Media Group. During a quarterly earnings conference call Wednesday, 4Kids Entertainment CEO Al Kahn said the company closed its Summit unit due to an uncertain future in the kids' media buying and planning business.

But a glance at the events leading up to Summit's shuttering on June 30 suggests a different story--that Kahn intended to keep Summit running under the 4Kids umbrella, but opted to close it after clients followed former Summit CEO Shelly Hirsch to a new media buying operation.

"We felt that it was a business where the margins were shrinking and constantly under pressure because the commissions that Summit was being able to charge were being pressured by the clients to become lower," Kahn said on a conference call with investors Wednesday.

But an SEC filing seems to contradict Kahn's argument. Summit's revenues rose steadily from $3.9 million in 2003 to $6 million in 2005, according to the filing. And net income rose from $512,000 in 2003 to $1.7 million in 2005. Only in the first quarter of 2006 did the business appear to go sour, with a $200,000 net loss.

In February, Kahn also indicated he wanted to keep Summit running. In an interview back then, Kahn said he tried to persuade Hirsch--one of the most influential buyers in the kids' marketplace, who resigned ostensibly for personal reasons--to remain at Summit. Kahn also said that clients who had been informed of Hirsch's departure gave no indication they would shift their business. And he named industry veteran Lee Ravdin to replace Hirsch as Summit's president.

On Wednesday's conference call, Kahn also said that closing Summit--a leading player in the kids' media arena--made sense due to a "potential conflict" arising from 4Kids' role as both a media buyer and seller, including selling ad time on the four-hour Saturday morning block on Fox. But 4Kids had functioned on both sides since Summit was launched in 1992. In recent broadcast seasons, Summit clients bought some $900,000 worth of ad time on sister operation 4Kids TV.

Kahn's plans to keep Summit going look to have gone awry as clients opted to move their business to the Beacon Media Group LLC, a new agency formed with Hirsch as CEO. In addition to client losses, Summit also suffered from staff defections as former Summit executives Tom Horner, Lillian Lebron and Paul Caldera joined Hirsch at Beacon. (The four executives own Beacon.)

A call to a 4Kids representative was not immediately returned late last night. Kahn could not be reached.

Kahn and 4Kids then filed an unfair competition suit. But in late June, 4Kids and Beacon reached a settlement whereby Summit would close its doors in exchange for payment and services worth $2 million from Beacon.

Beacon is now essentially the old Summit operation. Like Summit, its 30 clients and $150 million in billings make it a force in kids' media buying and in the current kids' upfront. Former Summit clients now at Beacon include leading toy marketers Jakks Pacific, MGA Entertainment and Capcom.

Hirsch would only say: "We are happy and the clients are happy. Every single client made the move."

Beacon and 4Kids will likely continue to do business together. Part of the settlement agreement calls for Beacon to attempt to persuade clients to buy time on 4Kids TV at a collective level equal to, or greater than, the $900,000 that Summit clients have spent there in recent seasons.