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Industry Report: Animation

Case Study: Cálico Electrónico - Animation and Innovation


- Albert García explains why with Cálico Electrónico the production company Nikodemo Animation discovered that word of mouth is still the most credible and effective form of advertising.

Albert García is the owner of the Production company Nikodemo Animation. He is also an academic coordinator and lecturer in the Master of direct marketing and digital marketing – idec UPF.

What is Nikodemo Animation?
Nikodemo isn’t a normal company. We’re «weird», very «weird». First of all, Cálico Electrónico, which is our main brand or product, was created by accident. It wasn’t planned, we didn’t do a study first, it wasn’t a focus-group-based invention, etc. It was just a coincidence that it was created for a commission of a wizard for an e-commerce shop. The shop owner liked the invention, and the customers liked it even more. The shop owner commissioned a small animation series.
The character’s unique style meant that he connected quickly with an audience eager for an irreverent and very loutish style, which was the key to its success.
We have always tried to break the rules… although I suppose this is more because we don’t know them rather than wanting to break them. But it’s true that we are a company created on the Internet for the Internet. By chance, we started to use Flash as a production tool, not because we were big fans of Flash, but simply because the company’s founders are two designers who used Flash.

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Has the company always worked with the Internet?
No, the company partners were faced with a challenge in 2005, when they unconsciously and irresponsibly accepted the commission to produce a full-length animated film with Flash, more for pride than money. A year and a bit later, after not much sleep, no weekends off, no holidays, etc., 15 people were able to produce a 90-minute animated film. The most interesting part was learning about launching on the Internet. We learned a lot, because we also used a technique, again through lack of knowledge, which helped us to save a lot on costs and because in the end it enabled us to get close to our audience in a way that another type of medium would not have made possible. I started out in Nikodemo to add value to the company. We set about developing a business plan with the idea and aim of bringing together enough financial resources to turn the company around, since, at the time, it was living off two main things: making productions for others (the film is an example) and some licences, and the only thing we were doing with them was taking the minimum guaranteed amount of money. We were not tapping into any of the benefits of having hundreds or thousands of fans, not just in Spain, but worldwide.

What was the idea behind the business plan?
We drew up a business plan so that we could bring people onboard, develop the Internet business model, make the company international, prepare the leap into television. The business plan we are implementing at the moment is based on the creation of new brands, exploiting the community, developing more contents and keeping the rights to the end, internationalising our brands (which is easy to say, but complicated to do) and trying to adapt the success of Cálico on the Internet to other formats, like television, cinema or video games.

Where did you get the money from to start producing?
We found a venture capital called «LaCaixa CapitalRisc», which is a product offered by La Caixa, an enormous financial group. This investment gave us the financial backing we needed to start. Just under a month ago, we concluded a participating loan with ENISA, Empresa Nacional de Innovación S.A., which has made it possible for us to implement our business plan and the television series without needing to find a co-producer to invest. Because the problem was that we went to the television channels and they said «Great! Come back when you’ve got the finished product and we’ll be sure to buy it off you». But we needed the money to develop the series.

How did you manage to convince La Caixa to invest in the project?
La Caixa was convinced by our extremely strange four-legged combination of things that are not usually found together. On the one hand, we do multiplatform, our contents can work on both a mobile phone and in the cinema (which we have also tried), we do animation (we’re called Nikodemo Animation), we also do advertising and contents for brands, and we consider ourselves to be an Internet company, although I have to admit that there’s no money in the Internet yet, although it’ll come one day. I don’t know if we’ll take the Internet to the tele, or if we’ll put the tele on the Internet, but we’ll manage it one day.

Who is your audience?
We have three different audiences. Our main audience, the users, is mainly male, and our main age group is 15 to 30. There’s quite a funny anecdote about this. Cálico’s traditional audience was in their twenties or thirties. When we launched the new site in July 2008, we started to conduct surveys, register users, and we realised something horrible: we were growing in the 12, 13, 14 and 15 year-old block, when this was not expected. Of course, I will deny having said this, because increasing participation in the 15-year-old target was clearly a marketing objective, but it’s true that we are viewed as something a lot more inspiring and more fun.
I have another final anecdote for you. A couple of months ago, the woman responsible for innovation in the Autonomous Government of Catalonia, from the education sector, called me and said «You are my hero, every primary and secondary school pupil in Catalonia, and I suppose in the rest of Spain as well, watches your capsules every Wednesday». I thought I was either going to get told off or it was serious. It turned out to be serious. We were offered a very ambitious pilot project, which we are working on at the moment, which consists of re-studying and redefining the educational experience of primary and secondary school students using PlayStation, Nintendo, Wii, Television, etc., with a narrative closer to the world of Cálico than the «tomes» we parents buy religiously in September.
The next audience we address is advertisers. Some of us come from the world of agencies and advertising, so we don’t think it is a strange or weird world. We have certainly started at a bad time. Advertising has had more glorious moments. Now it is more complicated, and we don’t know if it’s because of the crisis, because people still don’t trust the Internet, or because they still don’t know the medium, but it’s complicated.
Our last audience is the aggregators, which is really a mixed bag where we can put traditional television channels as well as digital aggregators. These are the people we usually deal and fight with.

How was the project developed?
We reached the conclusion that we either had to share or go under. Initially, we thought we were going to have a site to upload all the contents we were going to release every week in July 2008. Consequently, we changed the format from one 7-minute chapter per month to one 2-minute capsule every week. But we realised we were very wrong to think we would be able to take users by the hand and lead them to our site. What we did was take all the contents, take them to as many platforms and channels as possible and turn our site into a sanctuary of the brand. And that is what we are doing. You can enjoy Cálico on any platform and medium, but if you want to make a comment and say loutish things to other Cálico fans, you have to come to our website. Obviously, we have agreements with each and every one of them to share advertising income, which doesn’t give us much, if anything at all. I think it would stretch to a round of coffee with no biscuits.
With a great deal of synthesis, we have four main areas: brands, entertaining people, a community, and then there are various leverages to earn money from the affair.
Animation and the web provide the entertainment. We are thinking multiplatform, and, of course, we are still being louts, slightly irreverent, and, above all, very politically incorrect. Everything that Disney doesn’t do, we’ll get. That’s the idea.
In terms of community, something fundamental that we have learnt over time is the emotional connection with users. They are looking to Cálico and its characters for something they cannot find in other media or brands. And naturally, we have a powerful underlying tool of customer intelligence.
We currently have over 100,000 registered users. Besides their mobile telephone number, we obtain their age, date of birth, education, consumption habits, etc. And we are starting to cross-reference this information, with their knowledge, and their usage patterns, what they look at and what they don’t. We hope one day to be able to earn money from it… quite a bit of money.
As far as the leverages to earn money from our business are concerned, besides a very small e-commerce, we have a higher number of licences, advertising and sales of contents or content rights.

Could you sum up the entire world of Cálico and its characters?
In the era of austerity we live in, what users want is an authentic voice, not artificial metal-sounding ones.
They want a genuine dialogue, things that hit home. Now we are beginning to see brands more similar to a jazz concert than a single voice, with just one tone, dictated by large brand managers, who say which type, which voice, which sound, which textures, what is politically correct or incorrect.. all that has come to an end. It’s a very cocky thing to say, but in Cálico Electrónico we have been inspired by this, by brands with multiple faces, which can be influential because people perceive them as their own, that is what is changing and what we are basing ourselves on.
In the pre-Internet era, brands were generic, a brand dictated what users wanted, and they bought it or they didn’t, but that’s what there was. There were some points of contact with users that were finite. We went onto an environment that was also closed, where brands communicated with a ton of users, there was some interactivity, which is Internet environment 1.0, and, finally, we are arriving at and developing environment 2.0, where brands are simply «facilitators». They are open brands, where, whether you like it or not, you are not the brand’s spokesperson, nor its main consumer motivator. Instead, your brand is going to be as roguish as your users want it to be.
What happens is that the brand’s points of contact multiply by thousands or millions, so the brand’s message and contents are totally uncontrollable. However hard you try, you’ll never manage to control them. This is the environment we play in, or try to at least.
The conclusion we can reach from all this is that we have to do things differently. People ask us for different things, and, above all, fewer promises and more experiences that are multiplatform, much more ubiquitous, usable contents on demand, hybridization between online and offline. We could say that the frontier between entertainment and marketing, if ever there was one, is now becoming diluted. Persistent worlds, payment to use or not, memorable experiences… This is the environment we are involved in.
It’s quite complicated to manage a social experience where there are thousands or millions of interactions. Cálico Electrónico has managed to accumulate 50, 60 or 70 million visits, without any advertising campaigns, as a result of «word of mouth». Word of mouth is still the most credible and effective publicity today. This annoys traditional brands a lot, because it puts them in a totally uncontrollable environment, but this is the environment which we want to be involved in: honest advertising, where rumours have to be managed, viral, contact network, mobile…
As far as we are concerned, the environment we are involved in is an ecosystem of conversations. Every time some nutter in Silicon Valley, or wherever, brings out a social application like Twitter, this opens up a direct channel of communication with our users. Every time a Facebook, or a Tuenti [a Spanish social network similar to Facebook] are brought out, we have a new channel of communication that has to be managed one way or another.
We deceived a webmaster to come and take care of the website, and besides that, he has a long list of tasks every time we upload another capsule. Every capsule is uploaded to 10, 15 or 20 different content platforms. It is uploaded automatically on some of them and on others we have to do it ourselves manually. In the case of Facebook, we have 13,000 followers. But working with social platforms takes a lot of time. The worst is Twitter.

Who are your assets?
We talk about a brand community, and that is, so-to-speak, our greatest asset. We talk about fans, commitment, sharing, updatedness, nostalgia for other icons, being compatible without moral requirements. The latter is very important. Somehow we have transcended traditional icons. I’m not going to talk about politics or religion, but we are looking for a generation that doesn’t have any other types of icons, because we want to get hold of our own small share of attention and relation. The company has 13 employees. Eleven of them are creative (also responsible for production, animation.. ) and then there is the financial man and myself, who «mop and scrub». Actually, we are project-orientated, and perhaps what sets us apart is that there are people who take part in the script, but who then participate in the animation, which is not very usual. It is teamwork from the very start. We put a lot of effort in and we are always behind schedule, no doubt to become millionaires one day. We need to grow more and organise ourselves differently, but right now our priority is to keep the spark and the creative freshness going before imposing structures, directors and little bosses.

How many users do you have and what is the average visit time?
On the whole, we now have 100,000 registered users, increasing every week. We have almost 400,000 unique users per month, and around 800,000 visits every month. The average session time is 10 minutes, which, bearing in mind that the videos are 2 minutes long, is not bad at all. Our videos, released weekly, accumulate 150,000 viewings per video released week after week. There are some videos that have been seen over 500,000 times already, and our video viewing total is more than 12 millions. This was a huge problem up until two months ago, when we stopped hosting the videos on our servers and we reached an agreement with DailyMotion to upload our videos on their site. The advertising income wasn’t enough to pay the electricity bill or our coffee…
Something very important, yet very hard, for us is brands that learn. One of the characteristics of our brand is that we take the comments made by our users, our consumers, very seriously, for better or for worse. The future doesn’t come by locking up brands at home and in large laboratories, but rather in development centres distributed on the network with your loyal fans or with professionals. But we’re talking about something much more open and a much more democratic «outsourcing» concept.

Can you illustrate this with examples?
The first is that when we release any capsule or video, people can automatically vote for it and comment on it. Sometimes they lay into us, although the ones that do that always come back and you think to yourself «Sorry, but if this content is «shit», why do you come back every week to say it’s shit? Don’t you have anything better to do? But they still come and we are grateful for their enormously valuable contribution and we will continue to release capsules every week. But there are people who make very valuable comments and that is very useful for us.
The second example is an experiment we set up. At the end of every capsule, we encouraged our users to ask the Cálico characters questions. The only business leverage is that they sent an SMS. It gave us enough to buy coffee, because Nespresso is quite expensive… But users asked us quite interesting questions, which we then published. We selected the best question the following week in the capsules and we replied whatever we liked, but people laughed a lot.

How is money generated?
I believe that loyalty can earn money in the end one way or another. It’s true that if you want to become a multimillionaire, you should choose another business and not get involved in this garden. But those who do want to enter this business, if they are capable of reaching out to users or consumers and do it creatively, can earn a living. In our case, this is the list, a very long list, but if you add it all up, it’s enough to live on. We have advertising profit in two formats: the most conventional based on CMPs, CPCs and CPLs, and videos with poster formats, product placement, etc. We also have licences for using the brand.
Merchandising, which we are radically turning around, is another priority: next summer, a wellknown designer of hip-hop fashion, who’s very weird, but I was told she was very good, is going to present a collection on the Cibeles catwalk with Cálico Electrónico ad hoc designed pieces.
Then there is the sale of content via the Internet, SMS, etc., the sale of rights both to mobiles and television, which we are in the process of. And also the creation of contents for other brands.
We understand that the multiplatform plays in our favour, as do internationalisation and new markets (new languages), the creation of new brands that hook people in and connect very well with the audience. And, above all, our main product is easy humour and making people laugh, something which is appreciated in our times.

As far as internationalisation is concerned, Cálico is content with a very loyal following, but obviously it is mainly local, isn’t it?
There are two aspects to deal with here: firstly, 85% of our traffic comes from Spain, and the rest of the percentage is divided among the Latin American countries, mainly Mexico, Argentina, Chile, and also some in the United States. What we are going to do is take advantage or try to exploit the Cálico brand just as it is or even adapted to the Latin language in these countries. We have dubbed the three seasons of Cálico into English, and, in fact, the television series we are starting up is going to be produced in Spanish and English.

Cálico is on the website of El Mundo [a Spanish newspaper with national circulation] on its main page. What was this agreement like? Was it simply multidistribution or was it more than that?
They bought the user licence for Cálico for a year for «peanuts». It went well for them and they wanted to renew the licence for the following year. So we proposed to let them have it for nothing, but to share the advertising fifty-fifty, to which they replied that El Mundo never shares its advertising revenue, so we said «goodbye» to them.

Did you stop at that venture with El Mundo or have you repeated this model?
We have been talking with loads of people. There have even been ideas and projects presented and closed, some of them to create new brands, etc. However, at the moment, we are only interested in our own brands, so we are not interested in any idea that means developing a brand or a product for others. In fact, the loans we have received (which we will have to pay back some day) are for developing our own products. We could make a very good living making products for others, and, in fact, we have made several advertising campaigns and «when we are very hungry» we will do a bit more. But seriously, though, our position leans towards our own product and brand.

You have even done pre-releases in cinemas…
Yes, it was an experience to make fun of ourselves. In May last year, we decided to première the last episode of the third season in four cinemas in Barcelona and Madrid with a paid ticket and to release it onto the Internet the next day. It was a test to see how our fans would react. We filled the cinemas. Around 2,000 paid for their ticket. I had an experience of a lifetime. The joking that was going on in the cinema was phenomenal and the people were taking photos and filming videos not just of the screen, but above all of the people that were there. This is more or less the synthesis and the metaphor of everything that Nikodemo aims to do with its brands.

Are you also trying to find financial models with a method of payment by the user?
This is where a philosophical issue comes into play. We believe that the content needs to continue to be free. Cálico was free content right from the start and it should continue to be free. What we do have is a very well developed points system. What we are doing is developing games based on the Cálico world. In fact, there is one uploaded that has been the test, and we have more. Our idea is to develop a persistent world around the Cálico stories and for people to buy gimmicks, extras, gadgets…, using points or money.

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