The kids of Degrassi have a new daddy.
DHX Media Inc., the Halifax-based children's TV powerhouse, is moving into the teen market with a $33-million purchase of Epitome Pictures, which produces the Degrassi TV franchise.
"Degrassi is one of the great Canadian success stories. It is the most successful teenage drama, basically, in the world, " said Michael Donovan, the chief executive officer of DHX. "Something that has that kind of engagement with audiences, that's the sort of thing we're looking for."
The deal, announced Thursday, will add 469 half-hours of Degrassi as well as 216 half-hours of other shows to DHX's growing library. The company boasts that its more than 9,600 half-hours already makes it the world's largest independent provider of children's TV programming.
DHX has seen its number of buyers increase with the recent growth of digital outlets such as Netflix and YouTube, and it believes Degrassi can be a primary driver of new international sales.
"When we go into the markets, the buyers of teen drama are approximately the same people who are buying from us, so we're extending and expanding our range of offerings," Mr. Donovan said in an interview. "The teen cohort is in the vanguard of all things digital, and digital is what's happening in our industry."
"From our point of view, this is a digital play."
Epitome was co-founded in the early 1990s by Linda Schuyler and Stephen Stohn, married executive producers of Degrassi: The Next Generation, the third incarnation of a franchise that had been among the first TV shows to regularly deal in a straightforward fashion with tough issues – such as divorce, drugs and teen pregnancy – facing kids. Now known as Degrassi, the show airs in Canada on MTV and in the U.S. on TeenNick. It is further licensed in more than 140 other territories.
The purchase includes episodes from across all five Degrassi series produced since 1980, as well as Epitome Studios, which owns a 98,400-square-foot studio in Toronto. It also includes a development slate that Epitome says has at least one show likely to go into production this summer.
The Epitome principals say the sale is not their exit strategy. The deal calls for them to stay on for at least a year, with an open-ended option to remain with DHX. They say it will enable them to focus on creating shows rather than worry about corporate matters.
"I started in this business way back, when nobody knew what independent production was," said Ms. Schuyler, Epitome's CEO. "It was very fledgling. We've grown our business to be quite large now, and I think the way of the future is going to have to be to find these synergies."
Ms. Schuyler, 65, added: "I could see myself slowing down a bit in four or five years."
DHX is currently in the process of finalizing its purchase of four kids' channels being shed by Bell Media after its acquisition of Astral Media, including Family Channel. Mr. Donovan and the Epitome principals said they had not yet considered whether Degrassi might move to DHX's Family Channel.
"Anything is possible, but that hasn't been at the top of our minds," said Mr. Stohn, Epitome's president.
The deal gives DHX full ownership of Epitome for approximately $19.5-million from cash on hand and the remainder through the issuance of about 2.9 million DHX shares. In a statement, Epitome said in the most recent year ended May, 2013, the company earned about $6.6-million on revenue of approximately $24.4-million.
Mr. Donovan, who won an Academy Award for producing Michael Moore's documentary Bowling For Columbine, said he had known Ms. Schuyler and Mr. Stohn for more than two decades. "They believe the purpose of what they're doing is a social purpose – that there's a higher purpose attached to providing that kind of television offering, particularly for teenagers, that I want to be a part of."