(FORTUNE Magazine) – Last winter, Disney's power Michaels, Eisner and Ovitz, were eager to get a big star onto their newly purchased network, ABC. So they flew the star's people out to L.A. Met for lunch in the Disney dining room. Sat in the mouse-motif chairs. Wined. Dined. Talked licensing, creative freedom, yadda yadda yadda. At the end of their negotiations, Messrs. Eisner and Ovitz had agreed to pay a figure said to be around $10 million to secure the services of this full-fledged, bona fide star for their network.

His name is Doug Funnie.

What's that? The name doesn't ring a bell? You haven't heard of Doug Funnie? What are you, a grownup or something?

Oh, right. This is Fortune. You probably are a grownup, aren't you? (Sigh.)

Doug Funnie, as it happens, is one of the best-known, best-loved stars on television for the under-12 set. He is the cartoon star of the half-hour show Doug, one of the hottest programs among children--a show that, until Eisner and Ovitz stepped in, belonged to Nickelodeon, the No. 1 network for kids. With shows like Doug, Nickelodeon has managed in the space of a decade to utterly dominate the landscape of children's television: Last year it accounted for just over half the TV watched by kids between the ages of 2 and 11. That humongous market share gave it revenues last year of $381 million--not far behind established giants like CNN and ESPN.

But as the new television season gets under way, the fortress that Nick built is under siege, and it isn't barbarians at the gate but warthogs and ticks, postmodern superheroes and bananas in pajamas. When Disney paid all that money to buy Jumbo Pictures, the producers of Doug, it sent a clear message that children's television--once the gentle, sleepy backwater of an otherwise fierce business--is becoming every bit as competitive as its prime-time kin. Fox, which has emerged to challenge Nickelodeon for advertising dollars mostly on the strength of a little show you may have heard of called the Mighty Morphin Power Rangers, is planning a full-time children's cable network. Turner's Cartoon Network, one of the splashiest launches in television history, now is rivaling Nick in markets where they compete head-to-head. (The Cartoon Network is also attracting an alarming number of adult viewers; more on that later.) The new WB network, which has established a beachhead in the Saturday morning wasteland with cartoons produced by Steven Spielberg, no less, is planning to expand its foray into weekday programming. And oh, yes: Disney is preparing a basic cable network for children too.

Already this competition has squeezed some players out--NBC has given up the kids' market, aiming its Saturday morning shows at teenagers instead; CBS, some say, could be next to leave the field. For the players that remain, the battle will only get fiercer--and stranger--as they compete to win that most curious of commodities, a small chunk of a child's attention span. In television, as in most things, kids are fickle and arbitrary and weird. The rules that govern most industries don't work with them--for instance, the concept that a company can bank on its Tradition of Excellence. While that may work just fine for GM, a Tradition of Excellence has no sway over someone who was a zygote six years ago. Thus, while you might think that Disney has a huge advantage in programming for children, to a 6-year-old the only thing that matters is whether the stuff it's showing right now, today, is fun. (And guess what? It's not.)

But if the market is inscrutable, there's no question that it's valuable. Advertising revenue has increased an amazing 70% since 1991, to $689 million last season. Yes, it's every bit as appalling as you imagine: The dollars driving those figures come from cereal companies, toymakers, and, increasingly, fast-food companies, all of them hoping to provoke what advertising executives call (really) "the nag factor"--the incessant wheedling that will make you cave in and buy the damned product.

It was Picasso who said it took him all his life to learn to draw like a child. How does a network executive learn to think like a child? Quickly, if he values his job.


Geraldine Laybourne has a story she likes to tell on herself. In 1983, just as she was taking control of Nickelodeon, she oversaw the premiere of a new show called Going Great. It was a weekly newsmagazine about kids who were remarkable in one way or another--a typical episode featured a kid who wrote a best-seller at age 13 and a 10-year-old who played snooker on stilts. Laybourne and the other network executives thought it would be an instant hit with kids--seeing people their own age perform incredible feats. What could be better? They'll eat it up!

They didn't. Kids loathed it. The show depressed them. What kid, sitting at home in a beanbag chair, wants to hear that someone her age got a six-figure advance for his next novel? The show was off the air after 13 weeks.

Laybourne likes to talk about Going Great because for her it represents what can happen when adults assemble a children's television show without asking kids what they might like. It wasn't a mistake she made again. By listening to kids through focus groups, polls, online chats, and the like, Laybourne took a lousy little children's network and transformed it into the industry's powerhouse. You may never have watched an episode of Rugrats or Doug, but among kids these shows have the fan base of a Friends or a Seinfeld. In any given week, Nickelodeon has at least ten of the top 20 shows on basic cable. The network, which ran at a loss when Laybourne assumed control, saw a positive cash flow estimated at $164 million last year. To be sure, part of this is due to a lucky coincidence--Laybourne took over the network just as cable was moving from a novelty to a standard feature in many American homes, a period when many cable networks soared from the red into the black. But few cable networks have emerged to dominate a field as Nickelodeon has children's television, and for this the credit belongs largely to Laybourne.

When she arrived at Nickelodeon in 1980 as a program manager, the network had been on the air for a year, and it was a horrible little commercial-free cable station that no self-respecting kid would admit to watching. How bad was it? Staffers referred to it as the "green vegetable network" because kids liked it about as much as spinach. It actually broadcast a show called Comic Strip, in which a camera focused on a comic book while someone read all the characters' parts. The first time the network got a peek at a Nielsen report, only two of its shows even registered in the ratings. The rest of its lineup received hash marks--technically, no one was watching at all.

Laybourne, a former schoolteacher and producer of children's television from New Jersey, had none of the polish of a seasoned network exec--those who worked with her early on still remember her coming to work in Indian-print dresses and sandals. But when the network's parent, MTV Networks, decided to overhaul Nick and take it commercial in 1983, they picked her for the job.

Laybourne's first step was to research children's attitudes; what she found was that kids saw the network as "babyish," a mortal insult. Laybourne saw that children viewed the network as an adult talking down to them, not as a peer. The network didn't have the money to commission new shows, so the idea was to change the package the shows came in. Laybourne worked with the consultants who had shaped MTV's image, Fred Seibert and Alan Goodman; the main problem, Seibert says, was that "we kept saying we were fun, and we weren't." They changed the network logo from an irritating bouncing silver ball into the familiar orange splat that remains to this day. They changed the network's theme from something "kidlike" into doo-wop music. Most important, in making decisions about everything from programming to ad copy, they would ask, "Where's the 'us vs. them'?"--"us vs. them" being Nick shorthand for kids vs. adults.

Did kids like being treated as intelligent beings? Did they ever. In 1984, when Laybourne began her overhaul, Nick was second to last among cable networks in the ratings; by 1985 it was tied for second place. That same year the network turned its first profit. The jokes about the "green vegetable network" stopped.

As it grew, Nickelodeon at last had the money to buy original programming, and it came to be known as a place to break the rules that had governed children's television--don't make a girl the hero; don't make a show without a presold property, like a toy or a movie; don't make live-action programs. As a result, Nick built a stable of shows that never would have made it onto the networks: Double Dare, a game show in which kids raced through food and slime; Doug, about a 10-year-old who copes with issues that actually matter to a 10-year-old (best friends, teachers, bullies); and Rugrats, a loopy little animated show about life as seen through the eyes of toddlers. But in creating a friendly personality for itself, Nick ended up establishing its own set of rules: no violence, no edge, no superheroes. Which, of course, left the door wide open.


The Big Three broadcast networks have a problem with children's television: A rule of thumb in the television business holds that you cannot put a children's show on right before a news show ("We hope you've enjoyed Mighty Mouse. And now, famine, strife, and pestilence!"). Because the Big Three all have evening news broadcasts, they don't even try to reach children in the after-school market, when so many are watching, lest Bozo lead into Bosnia. So for a generation, kids coming home from school and flipping on the TV were served by independent local stations, which typically broadcast syndicated shows and reruns of things like Lost in Space and Gilligan's Island.

Then came Fox. Rupert Murdoch's fourth network, remember, started out as a chain of such independent stations when it began broadcasting in 1986--and it had no national news program in the evenings. Those two characteristics gave Fox an opportunity to develop a niche in kids' TV on weekday afternoons. In 1990, Fox put a producer named Margaret Loesch in charge of its new kids' initiative, and three years later she came up with a menace to civilization.

Mighty Morphin Power Rangers was her baby. She spotted the show and understood that its funny monsters and action would appeal to children. It was the perfect foil to Nick's gentle, soulful lineup. And yet the Power Rangers almost didn't see the light of day.

The series first caught Loesch's eye in 1985, when she was president and COO of Marvel Comics' TV production company. Stan Lee, Spider-Man's creator, had brought Loesch an episode from a 20-year-old live-action series produced in Japan. Loesch thought the show was funny and offbeat, and decided to try to adapt the show for American audiences. "It reminded me of the Godzilla movies my brother and I liked as kids," she says. After spending $25,000 to produce a pilot, with voices dubbed into English, Loesch and Lee pitched the idea to ABC, CBS, and NBC. "We were resoundingly rejected," she admits. "One network executive asked, 'How could you bring us this piece of garbage? You, who were responsible for making Muppet Babies.' " Loesch shelved the idea, but she remained confident that kids would love it.

Seven years later, after Loesch had joined Fox, a prominent children's show producer named Haim Saban coincidentally pitched an idea to her based on the same Japanese series. He, too, had shopped it around and been shot down by other networks--including Nickelodeon. Loesch, of course, jumped on the show and developed a pilot for Fox.

One week before the Power Rangers program was scheduled to air, it was very nearly killed. A changing of the guard left Loesch with a new boss, Lucie Salhany. Salhany looked at a videotape of the new show and was alarmed. She sent a fax to Loesch, who was on vacation in Santa Barbara, urging that Power Rangers be shelved. "Maybe I'm too old," Salhany wrote, "but this will be a disaster." Loesch faxed back, "You're right--you're too old. Kids will like it, and I've got a backup if they don't. Please let me go ahead." Loesch says, "To Lucie's credit, she let me try it."

The Rangers' appeal may be utterly lost on adults, but of course the show touched a nerve in pintsize America. The Rangers became a phenomenon on a scale never before seen in kids' television; in 1995 Power Rangers merchandise sold an astonishing $1 billion in the U.S. alone, according to Brandweek, a marketing trade publication. Loesch puts that figure at $2 billion worldwide. And the show became the biggest gun in an arsenal best known for violent, action-packed programming.

While the other networks were putting their three hours of kids' TV on Saturday mornings, Fox eventually loaded its schedule with 19 hours of kids' shows over six days a week. It was a strategy so skillfully implemented that today Fox is the No. 2 network for kids, right behind Nickelodeon, and No. 1 among the over-the-air networks. Last season Fox had six of the top ten kids' shows, and from 1990 to 1995 ad revenues from its kids' programming have rocketed some 530%.

Perhaps the clearest sign of Fox's success is that it has spawned an imitator. The upstart WB network (owned by Time Warner, FORTUNE's parent), which has already launched a strong Saturday morning strip, is planning a weekday-afternoon lineup to compete with Fox in 1997. WB CEO Jamie Kellner notes with glee that even the merged Disney/ABC, which might have been expected to be the 400-pound gorilla in children's television, is hamstrung in this market. "I doubt that you're ever going to see one of Disney's ducks or mice leading into Peter Jennings," he says.


With all this new programming, you might think there wouldn't be a place in the market for a 35-year-old, crudely animated cartoon about stone-age suburbanites. But when a 5-year-old tunes in The Flintstones, he has no idea it's a rerun--and he's probably never seen The Honeymooners, so he doesn't know what he's missing.

Thus Turner's Cartoon Network has been able to challenge Nickelodeon, in markets where they compete, with little more than reruns of Warner Bros. cartoons and Hanna-Barbera classics like Scooby Doo and The Jetsons done up in snazzy packaging. Since its launch in 1992, the Cartoon Network has become one of the fastest-growing basic cable networks, reaching some 80 million homes in more than 80 countries. "We sell the cartoon spirit, its zaniness," says Betty Cohen, the network's president. "That way we appeal to the kid in everyone, even the adult market, which is crazy for cartoons."

She's not kidding. One of the Cartoon Network's top-rated shows, for example, is Scooby Doo, the 27-year-old series about a dog and four teenagers tooling around in their groovy RV and solving crimes. Of Scooby's viewers, 68% are kids 2 to 11; the adult component is 25%. That's right: 25%. Adults. Watching a show about a crime-solving Great Dane. Why?

"From 1969 to 1991, Scooby was never out of production," explains Fred Seibert, Hanna-Barbera's president. "You have 22 years of audiences with fresh Scooby Doo episodes in their minds. All those people are now at the age where they have enough time, enough memory, and enough money to capture the parts of their lives they enjoyed the most." Worldwide, more than 35% of the network's audience is adults, something that isn't lost on advertisers: Besides such kids' staples as Nestle and Procter & Gamble, Max Factor is buying time on the Cartoon Network.

The Cartoon Network doesn't yet have the reach of Nickelodeon--at this stage Nick is on nearly every cable system, which puts it into 70% of America's homes, as opposed to the Cartoon Network's 31%. On the other hand, the Cartoon Network occasionally has higher ratings in markets where the two compete directly, and it is the only other network devoted to children's programming full-time. Furthermore, it's picking up cable systems at a rapid clip: So far this year it has added 325. As the Cartoon Network expands its reach, Nick may be facing the most serious challenge yet to its supremacy in the kids' kingdom.


Nick will have to face that challenge without the guidance of the woman who made it No. 1 in the first place. In a move that stunned all but her closest friends, Laybourne left the network earlier this year for a position at the head of Disney's cable operations. This wasn't the usual shuffling of executives; as Jeff Dunn, who was named COO after Laybourne's departure, puts it, "Gerry Laybourne is to Nick what Henry Luce was to Time or Ray Kroc was to McDonald's. But they didn't leave. There aren't many times that that happens."

While Disney and Laybourne sound like a fearsome combination in cable, they may be playing against Laybourne's strengths with their programming strategy, which is aggressively family-friendly. Gerry Laybourne--the woman who oversaw a promotion that told kids to send their parents to their rooms if they watched Nick--designing stuff for the whole family?

Well, Laybourne seems to have undergone a conversion on the Road to Disneyland, embracing what one observer calls Disney's "controlled goodness." She now spins visions of programs that will appeal to kids and parents alike. "Kids are desperate to spend time with their parents," she says.

Laybourne's strategy could be applied in earnest as early as 1998, when she oversees the launch of a new basic cable network to compete with Nick and the Cartoon Network. But in the meantime it will be given a test run on The Disney Channel, which is, surprisingly, one of the weakest players in kids' TV. Laybourne and one of her former Nick lieutenants, Anne Sweeney, are working closely to revamp the network, which has more than 20 million subscribers but lacks a strong identity. It runs a mix of general entertainment like Dumbo's Circus and Pooh Corner--young kids' shows with incredibly poor production values--special concerts, and old movies like The Great Waldo Pepper, which features a sequence in which a seminude Susan Sarandon plunges to her death from a biplane. There's nothing particularly Disney about that lineup. What will a made-over Disney Channel look like? So far, few conclusions have been drawn, but the reunited team is absolutely clear on one point: "Family first is our position," says Sweeney.

But can programming for the whole family work? Disney executives cite the company's "bring-the-family" approach in theme parks and feature films as models for their TV business. But television may be fundamentally different. Kids can't fly off to their own vacation destinations or drive to see their own movies, so in these areas there is a niche for entertainment that appeals to whole families. But in television the rule is narrow-casting: kids' TV for kids, grownup TV for grownups. Think about it: Do your kids really want to snuggle with you when they watch TV? Do you really want to spend the night watching The Disney Channel? Or would you rather watch Seinfeld on your TV and send the kids off to the rec room to watch cartoons?

Disney's mission is made even more difficult by the fact that much of its TV fare--mainly shows based on established Disney characters like Goof Troop--skews young. Disney has shown signs of growing up--notably its syndicated hits Aladdin and Gargoyles--but by and large it is still peddling the cuddly, anthropomorphic fauna that seemed bland even in the Fifties. This puts it in the unenviable position of vying with Big Bird for younger viewers. Dean Valentine, who heads Disney's TV animation, admits, "There's been a lack of analyzing what we needed to do to stay in curve with the [kids' TV] market and stay true to ourselves." His chief mandate is to develop a broader definition of what Disney can mean to kids without sacrificing the "family" franchise.

So Disney has gone shopping, raising the prospect of a bidding war for talent. Not long after signing Jumbo, the producer of Doug, Disney paid a call on Klasky-Csupo, which produces Nick's other signature hit, Rugrats. Nick had to make a generous counteroffer to keep Klasky-Csupo in its camp.

Within Nickelodeon, the initial shock of Laybourne's departure has worn off, and a new team has taken over, led by new President Herb Scannell. Scannell is a bit more shy and unassuming than Laybourne, but he was her top programmer and is every bit as savvy about kids. Under Scannell, Nickelodeon is pushing its brand into movies and overseas markets, and taking on the Big Three with original programming for kids in prime time. "Kids are growing up in a video democracy" with many channels, he says. "For kids, the Big Three aren't incumbents."

As the market gets crowded, some players will undoubtedly be squeezed out, and all will probably see their share of a kid's attention decrease. At the end of the day, success will go to those who can pick hits--a skill in this market that can be utterly strange. Consider the puzzle that presented itself not long ago to Ellen Levy-Sarnoff, who is just beginning to build a children's lineup for the upstart UPN network. A producer came to her to pitch a show. The concept? "Gum Wads. They're wads of gum from under desks and chairs, and their enemy is one big gum wad made up of gum wads chewed by criminals." She passed, but not without wondering, if only for a moment, whether she was missing an allure obvious to a child. "You do think about it," she says.

Of course you do. How could you not? Somewhere out there, after all, is the unnamed studio executive who uttered the memorable words, "How could you bring us this piece of garbage?"--turning his back on the Mighty Morphin Power Millions.