A puzzling venture: declining stock price is no plaything, for Lancit, the producer of 'The Puzzle Place' and other children shows

Black Enterprise, Nov, 1996 by Carolyn M. Brown

In the last two years, children's television has introduced a new crop of shows aimed at multicultural audiences, from Happily Ever After: Fairy Tales for Every Child (HBO) to Ghulla, Ghulla Island (Nick) to The Puzzle Place (PBS). And why not, ethnic children's programming is one of the most lucrative niches in television right now. Popular playschool-oriented shows often lead to money-making licensing and merchandising product-related deals (toys, clothing, games, etc.).

All of which should signal a significant financial boost for Lancit Media Productions Ltd. (Nasdaq: LNCT), the producers of The Puzzle Place and Reading Rainbow (PBS). Still developing high-quality original programming is costly.

Production and royalty-related revenues for the first three months of 1996 were $1.2 million, compared with $7 million in last year's first quarter. The company witnessed about $5.6 million in initial royalty revenue during the third quarter of 1995, with the premier of The Puzzle Place. But at the end of the season, Lancit had to pay agent fees and other service costs, diminishing those revenues.

Its stock price dropped from a three-year high of $16 as of last August to $115/8 this past August. An investor who put $1,000 in Lancit stock a year ago would find his or her position worth only $723.75 today.

The stock was selected by an optimistic Sydney L. Harris, account executive at GKN Securities in New York (November 1995). Harris points to the company's lack of aggressive marketing and promotions for the sluggish performance. He is still impressed by the commitment to the shows by the husband and wife owners of the company, noting that the lifetime of popular children's programs, such as Sesame Street, is 20-plus years. He does concede that he's not actively buying the stock, but maintaining a hold position.

Despite its present financial lull, Lancit has attracted significant corporate underwriting grants to complete 65 episodes of The Puzzle Place, taking into account the portion of project funding expected to be contributed by the company's partner on the project, KCET. The management at Lancit believes that its strong cash position and overall liquidity enable it to meet its current commitments, while continuing to pursue growth opportunities involving production, post-production and licensed-related activities. It's also looking to form strategic alliances with larger media companies, which could generate additional revenue and production capital.