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The Star Online: Business

The wonderful world of Les’ Copaque
Disney profit meets expectations
China inflation cools, leaving scope for policy easing

Posted: 09 Nov 2012 05:06 PM PST

LES' Copaque Production Sdn Bhd sees itself as becoming a "mini Disney".

The studio that produces the wildly popular Upin & Ipin animated series has begun its diversification into other areas such as product licensing and merchandising, restaurant chain and musical theatre. And of course, it also wants to develop a theme park.

Interestingly, all this started out as a kind of hobby and not by design. As the company's creative director Ainon Ariff says, "Kami buat suka-suka. Sekarang kena kerja pula!" (We did it for fun. Now it has become work!)

Ainon shares an office with her husband, managing director Burhanuddin Md Radzi, at the company's headquarters in Shah Alam.

Burhanuddin was formerly head of engineering services company Dayang Enterprise. When his partners decided to list it in 2004, he opted to sell off his shares. "I didn't want to run a listed company," he explains.

With a lot of cash in hand, he was spending a lot of time at the golf course. "My wife told me I could not go on like this. We then contemplated what to do with the money and she proposed producing a film," Burhanuddin tells StarBizWeek.

Was it an animated film? "No, no," Ainon replies. "Kita manalah minat kartun! (We weren't cartoon fans!) We didn't know anything about cartoons."

They just wanted to produce dramas for fun. But then fate intervened their daughter introduced them to her three friends who were fresh graduates from Multimedia University. The youths were keen also to produce a 3D animated film.

After seeing their work, Burhanuddin agreed to put in the capital. He and Ainon set up Les' Copaque at the end of 2005 (Les' Copaque came from the local slang "last kopek", which means "final chance".)

Eight months after operations started, the three youths along with other newly-recruited staff created a 12-minute clip "a kind of trailer" for the animated movie Geng: Pengembaraan Bermula (Gang: The Adventure Begins). This achievement convinced Burhanuddin that the movie project was feasible.

"Initially they wanted to do all sorts of genres. But after doing research among others, we followed MDeC (the Multimedia Development Corp) to Cannes - we found that Asia was hungry for animation that is tailored to our culture and that would benefit the children," says Burhanuddin.

"At that time, Malaysian children were living with cartoons like Mickey Mouse and Tom & Jerry and Japanese anime (animation) which was violent. My wife proposed to create animation with a kampung setting that promoted local culture and local values.

"The boys didn't quite agree; they wanted to do a superhero series. I told them that a superhero has no connection with the local audience and it would be more difficult to continuously generate ideas for it compared with a story with everyday setting like Upin & Ipin."

(A few years later, the Multimedia University graduates left Les' Copaque to set up their own company, Animonsta Studios. They created a superhero-based animated series called BoBoiBoy.)

The five-year-old twins Upin and Ipin were not intended to be the stars of Geng: Pengembaraan Bermula. In the original script, they had only minor roles.

However, Les' Copaque decided to introduce the two cute-looking kids early on to the potential audience in order to test the market.

It led to a series of six five-minute Upin & Ipin episodes on TV9 during the Ramadan month of 2007.

"I was thinking of catching the Malay market. We thought the best way to attract them was through Islamic content, so we focused on the subject of fasting for the first time," he says.

The content fit nicely with TV9, which in the previous year had been relaunched to target "Malays with traditional values" via programmes such as the country's first religious reality show, Akademi al-Quran.

Ainon says she and Burhanuddin wrote all the scripts although their names did not appear in the credits as writers.

Upin & Ipin became a hit. "A lot of people commented about it online. That boosted our confidence and we recruited more production staff," says Burhanuddin.

The next year TV9 asked them to do more episodes, and Les' Copaque churned out 12 more episodes on fasting.

Later Upin & Ipin's Islamic content was toned down in order to sell the series overseas.

Burhanuddin says that by end-2008, the animated movie was finished and the company had a staff of 40 then.

"We decided to do a proper' production of Upin & Ipin by changing the format to seven-minute episodes so the TV stations could choose to run them as a half-hour programme comprising three episodes. To go international, we couldn't go too Islamic as it would narrow the market. So we don't portray it as Islamic content but as content that promotes good moral values," Burhanuddin says.

Disney Channel Asia started showing the new Upin & Ipin episodes. Though initially reluctant, it eventually acquired the Ramadan series as well.

The overwhelming success of the Upin & Ipin series led Les' Copaque to give its titular characters a much bigger role in the animated movie Geng, hence delaying its completion by six months.

Breaking the curse

Geng: Pengembaraan Bermula entered the local cinema circuit in early 2009. Up to then, all locally-produced animated movies had flopped at the box office.

Malaysia's first animated movie Silat Legenda (1998) as well as two more animated features Putih (2001) and Budak Lapok (2007) netted less than half a million ringgit each, according to the Finas website.

Geng, which was financed partly with a RM1mil grant from the Science, Technology and Innovation Ministry, reportedly cost some RM4mil to produce. It became as much a hit as the TV series, raking in more than RM6mil.

Not only did it break the curse on local animated films, it became the highest grossing local movie of the year, animated or not.

The DVDs of Geng saw strong sales despite being priced at RM34.90 compared to the usual RM19.90 for local DVDs. The 70,000 copies released were sold out before Hari Raya that year.

After the movie was shown in Malaysia, Indonesia began showing the TV series and later Geng: Pengembaraan Bermula.

The TV series, which Burhanuddin is proud to say remained in Bahasa Malaysia (with Bahasa Indonesia subtitles), became a big hit. The movie, however, did not collect much revenue due to the strained relationship between Malaysia and Indonesia at the time and the limited screens available.

Today, Les' Copaque produces 42 episodes of Upin & Ipin every year. How popular are the characters? Well, last year the bald-headed twins were ranked 5th among fictional characters on Facebook worldwide, just under Mr Bean,

Malaysia's animation pioneer and guru Hassan Muthalib says Upin & Ipin was well animated and the voicing and direction were very good.

"It struck the imagination. These were the first characters to be recognised in South-East Asia; I was told that in Indonesia, kids were shaving their heads bald! And it was the first local film to be dubbed in Hindi and screened in India. It was also a hit in Singapore," he says.

However, Hassan feels Upin & Ipin doesn't use the animation medium well.

"I saw the episodes that came out during Ramadan. Looking at popular culture, it's a great way to voice out messages about culture and religion, but if you close your eyes and listen to the dialogue, you will know everything that's going on in the film. So it's like listening to a radio drama.

"That's not film. In theory, a film is about delivering something visually. When you can't do that, only then you have the dialogue," he says.

"So on the positive side, Upin & Ipin has hit the market; but now they have to go to another level fulfill the conditions of the animation medium where a lot of things are visually experienced."

Burhanuddin's view on that is that Les' Copaque aims to produce something that is enjoyable to watch and has values to develop children's minds. "Producing a masterpiece that only the creative people understand will not be able to generate enough income to sustain production cost," he says.

Chris Jaques, CEO (Asia) of advertising group M&C Saatchi, took note of Upin & Ipin's success and wrote a commentary early this year titled What Upin & Ipin Can Teach Every Business in Malaysia. He wrote that Facebook is the star of Malaysia's social media, and Upin & Ipin was Malaysia's most popular Facebook page.

"Not only do these guys (Upin & Ipin) have the most popular page in Malaysia, their page is no less than four times more popular than the second most popular Facebook page. In fact, Upin & Ipin have more likes than the 2nd, 3rd, 4th and 5th most popular pages combined, with an almost incredible 5.4 million likes! It's around 20% of Malaysia's entire population and 32% of the country's Internet population," he wrote.

Burhanuddin says animation houses in Malaysia face difficulty in thriving because revenue from selling animation shows to TV stations could not cover production cost.

A half-hour show in the country would be paid RM40,000 to RM45,000, he says. It would cost the company RM1mil to RM1.4mil to produce 13 episodes a year, but it would only be paid just over half a million ringgit.

"There is a big gap to cover. A lot of animation companies cover it by taking grants from the Government," he says.

Overseas TV stations pay even less than RTM. "The average price of a syndicated programme is US$200-US$2,000 (RM600-RM6,000). So even with a premium price, you'll only get RM78,000 per country. So you need to penetrate a lot of countries, which is very tough," he says.

Burhanuddin doesn't quite agree with MDeC's push for local animation companies to target Europe and America by having a "global image."

"Don't waste your time. The first thing you must do is create products that can be sold in Malaysia. It is important to be a hit in your own country," he says.

He opines that if a TV station approaches you, you will be paid a better rate than if you go to them. "It's not important how many countries show Upin & Ipin; it's how much are we getting for it," he says.

He points out that Les' Copaque did not approach Disney but the other way around. Now Upin & Ipin is shown on Disney Channel Asia as a first-tier show like Mr Bean.

Burhanuddin says at present, a South African TV representative has shown interest to market Upin & Ipin in the African continent. A free-to-air TV station in the Philippines has also approached him recently. "We don't go out pushing our product; we wait," he says.

As revenue from TV stations alone is not sufficient to sustain its operations, Les' Copaque has found other sources of income, such as through sponsorship whereby a company pays to have its product featured in the Upin & Ipin series.

"Telekom Malaysia was our first sponsor back in 2009. The brand was featured in the story," he says. Geng: Pengembaraan Bermula, meanwhile, had Tourism Malaysia as a RM100,000 sponsor (one of the characters wears a Tourism Malaysia cap).

"We normally give three episodes of product placement although the characters won't mention the brand," he says.

Burhanuddin says sponsors, who have to fork out RM1mil and above, also get to sell their products at its annual Upin & Ipin Carnival, which attracts more than 100,000 people, and they can use the Upin & Ipin mascots at their own events.

Les' Copaque started its merchandising business at end-2007, starting with T-shirts to launch the movie Geng. Today it has nearly 300 products.

"Our merchandise are sold in about 200 Petronas Mesra outlets and selected Esso stations. We target to have them in 300 outlets by year-end," he says.

Les' Copaque just could not expand fast enough to cover all of Petronas' outlets. "We would have to service every two weeks from Johor to Sungai Petani. You need logistics support, warehouses and marketing people," he says.

It uses two or three factories in China to produce products such as plush toys and plastic products.

Burhanuddin notes that KFC bought 400,000 Upin & Ipin figurines but they were all finished halfway through the promotion period this year.

Les' Copaque has also tied up with Carrefour whereby the latter could use Upin & Ipin in promotions while Les' Copaque gets a dedicated space at Carrefour to sell its merchandise.

Last year Burhanuddin started a food and beverage company. It also launched a new intellectual property - Pada Zaman Dahulu, a show revolving around animals in a jungle.

This year it produced a Upin & Ipin musical at Istana Budaya, Kuala Lumpur, that ran for three weeks from April 14. KPJ Healthcare was the main sponsor. The DVD of that stage musical is now being sold at KFC restaurants, with the contract calling for sale of 200,000 units up to January 2013.

The Les' Copaque group is also diversifying into the fast-food business. It launched its Kedai Makan Upin & Ipin in Mydin Mall, Ipoh last month, which serves Malay food. It has since added outlets in Bangi and Taman Melati in the Klang Valley.

"We hope to have 20 outlets by next year," Burhanuddin says, adding that it would open more outlets at Mydin Malls nationwide. So far, it has only used its internal funds rather than franchising out.

Burhanuddin and Ainon are now eyeing perhaps the company's biggest venture yet: a theme park.

Burhanuddin says the cost will likely be about RM700mil and he is hoping to secure 150 acres near the airport in Sepang. The park will also incorporate elements from Les' Copaque's other animated series, Pada Zaman Dahulu and its latest, Puteri.

"There are investors who have shown interest, and we hope GLCs (government-linked companies) will come in. We hope we can start work by the end of the year," he says.

Burhanuddin has spent RM400,000 out of his own pocket for the feasibility study. Despite the perception that Les' Copaque has enjoyed much government support, he says the only funding it has received from the Government was the RM1mil for Geng: Pengembaraan Bermula.

He says Les' Copaque could grow even bigger with more government support.

For example, it doesn't have enough staff now to do outsourcing work. "We have 150 employees. To do outsourcing, I would need a staff of 400," he says.

Les' Copaque's turnover from TV production is expected to remain about RM12mil this year, as it doesn't actively market its series; but merchandising revenue is growing rapidly. "This year we expect to hit RM7mil, up from RM2mil last year," he says.

So, when is the next movie starring Upin and Ipin coming out? The target date has been delayed before, and the concept, initially said to be a space adventure, has reportedly been changed to a historical setting (Laksamana Upin & Ipin).

Ainon says the script, which has been revised over and over, hasn't been finalised. "Potential sponsors for the film dah beratur (have formed a line) but until we get a very solid script, we won't embark on it," she says.

She adds that production will normally take at least two years, "so expect it to be out by 2015."

However, the duo want to keep the theme a secret at present.

He expects the next movie to cost RM8mil (including marketing) and to generate RM20mil in revenue.

"We are the only local animation studio that has proven it can spin off into other businesses. And we manage the business ourselves. We're sort of like a mini Disney," he says.

Disney profit meets expectations

Posted: 09 Nov 2012 03:59 PM PST

LOS ANGELES: Media giant Walt Disney Co posted higher quarterly profit, lifted by an increase in visitors to its theme parks and revenue gains at sports juggernaut ESPN.

The company that recently announced a blockbuster deal to buy Star Wars producer Lucasfilm reported diluted earnings per share of 68 US cents. That matched expectations from Wall Street analysts surveyed by Thomson Reuters I/B/E/S. Net income for the quarter that ended in September rose 14% to US$1.2bil.

Looking ahead, Disney faces challenges that will pressure results for its fiscal first quarter from October to December, chief financial officer Jay Rasulo told analysts on a conference call. Among them, sports rights' costs would increase by US$170mil while home-video sales would decline by US$150mil in light of tough comparisons to Cars 2 a year earlier, he said.

Those issues would not hurt full-year earnings for fiscal 2013, Rasulo said. "I'm confident we will have solid earnings growth for the rest of the year," he said.

Chief executive officer Bob Iger said that Disney was entering a "transition year" after making investments in projects such as the "Cars Land" expansion at Disneyland Resort in California and a new cruise ship that launched this year.

Results for the just-ended quarter were driven by the media networks unit that houses ESPN, the Disney Channels and ABC. The division posted operating income of US$1.6bil, a 7% gain from a year earlier.

ESPN brought in higher rates from cable operators and reduced its marketing costs although advertising income fell, Disney said.

Morningstar analyst Michael Corty said Disney produced "another solid quarter" particularly with its cable networks business, though he noted that revenue was below what some analysts expected. Overall revenue rose 3% in the quarter to US$10.8bil. - Reuters

China inflation cools, leaving scope for policy easing

Posted: 09 Nov 2012 03:59 PM PST

Saturday November 10, 2012

BEIJING: China's annual consumer inflation eased to its slowest pace in nearly three years in October, official data showed, giving policymakers scope to further loosen monetary policy if needed to support growth in the world's second biggest economy.

The consumer price index rose 1.7% from a year ago, slower than the 1.9% posted in September. Economists polled by Reuters had expected inflation to hold steady.

The headline consumer price index reading was the lowest since January 2010.

"The CPI I think came in a little bit lower than we expected and the market expected, and further confirms that inflation is not a main concern for the government for now," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong. - Reuters

Kredit: www.thestar.com.my

Jumaat, 9 November 2012