HP-2020-000016 - [2025] EWHC 1451 (Ch)

Cabo placed great emphasis on its marketing campaign for Worldeez. In particular, it had a very successful online marketing campaign through the use of videos by Tiana, with a particularly popular helicopter video (see §158 above), as well as other videos which also attracted millions of views. In addition to the sponsored videos, there was also an unsponsored video in which Tiana selected Worldeez as her favourite collectible. Mr Larian candidly accepted that Cabo’s online marketing was impressive.

In addition to the Tiana videos, Worldeez produced an advertisement for use as a “pre-roll” on YouTube (i.e. shown before a user’s selected video), and a TV advertisement was produced by Diaframma to be shown on Nickelodeon. Cabo’s channel on Popjam attracted a large number of followers (apparently more than MGA’s Num Noms Popjam channel). There was also a wide range of further marketing materials including “mummy blogger” campaigns, marketing in children’s magazines, and coverage in the trade press.

Cabo’s marketing of Worldeez therefore covered a variety of media sources and there is no doubt that it was an impactful marketing campaign, at least initially. What is less clear is whether Cabo would, in the counterfactual case, have been able to invest sufficiently to maintain the momentum required for the product to achieve not merely initial consumer excitement, but ongoing commercial success translating to overall profitability.

Cabo’s total initial marketing budget, including both online and television marketing, was around £275,000. The Nickelodeon component of that, in the contract under negotiation in early 2017, was an agreement for airtime at a cost of £50,000 plus a profit share, and the cost of Diaframma producing the advert was £19,000. In the end, as explained above, the contract with Nickelodeon was not finalised and Cabo only paid the £50,000 minimum guarantee.

There was something of a debate as to whether the television slots offered by Nickelodeon (and in fact taken by Cabo) were particularly good slots. Mr Michaelson claimed that they were not “bad slots”; Mr Cohen said that they were “very good” slots. That evidence was, however, vague and subjective. A more objective measure of the quality of the slots could be ascertained by considering the “rating points” (referred to as TVRs) given to each of the slots by Nickelodeon. Mr Harper explained that TVRs are a measure of the number of consumers in the target audience who will see the advert, expressed as a percentage of the total audience, multiplied by the number of times the advert was viewed by them. A rating of 100 TVRs would therefore enable the advert to reach approximately 50% of the target audience twice (50% reach x 2 = 100 TVRs). On that basis, Mr Harper calculated that an advertising burst of 150–200 TVRs (which he said would normally be spread across several weeks) would be needed to reach the majority of the target audience on several occasions. The first burst of advertising for Worldeez on Nickelodeon in July to September 2017, however, only provided 111.5 TVRs, and the subsequent advertising in October and November 2017 provided 24.8 and 36 TVRs respectively. Mr Harper’s assessment was that this was a relatively low weight television campaign.

Ms Munt accepted that the number of TVRs was “quite low” but considered that it was also necessary to consider the quality of the advert (which she thought was very high) and the timing of the television slots. Quality of an advert is obviously a relevant factor in the impact of a marketing campaign. The point about timing of slots, however, missed the point which was that the timing of an advert is one of the factors used to calculate that advert’s TVRs, rather than a factor which might counterbalance a low TVR rating.

The weight to be attributed to Cabo’s television marketing as opposed to online marketing was also disputed. Cabo submitted that its relatively low television budget was sufficient in the context of its focus on an online campaign. It relied on Ms Munt’s opinion that by 2017 the focus of marketing was starting to shift from television to online marketing. She considered that overall Cabo ran a high weight marketing campaign, based mainly on its online marketing which she considered to have been impressive and effective.

Cabo’s submission was not, however, consistent with the contemporaneous advice which it had received from its marketing agents Weird Lime. In April 2017 they had said that the typical spend by major brands for television marketing alone (i.e. excluding online influencers) to launch their collectibles was between £300,000 and £3m depending on the brand. Subsequently in early May 2017, when the Nickelodeon contract was being negotiated, Weird Lime advised Cabo that “TVR is low … for a launch campaign” and that Cabo should increase the funding for the launch weeks by “at least £50,000” given the direct competition from other collectibles such as Shopkins and Hatchimals Colleggtibles. Mr Michaelson forwarded that to Mr Sivner and Mr Lazarus to ask if they were happy to increase the spend. The response from Mr Sivner was that Cabo should instead ask for “more tv for less money”. Whether or not Cabo made that request, it is clear that Cabo did not ever increase the Nickelodeon budget.

As to the overall marketing budget, there was broad agreement between Ms Munt and Mr Harper that a toy supplier could have delivered a solid UK launch campaign for £200–300,000. The question was what budget would have been required to maintain substantial ongoing sales of the levels sought by Cabo. Mr Harper’s evidence was that Cabo would have needed to increase its marketing budget to achieve greater commercial success than it did. He would have expected a total budget of at least £500-600,000 if Worldeez was going to achieve the sales of £2–3m which Cabo had projected for its first six months. Ms Munt considered that that level of marketing budget would have been exceptional. She also pointed out that the quality of the marketing campaign was as important as the overall spend; and it was common ground that the marketing of different brands of collectible toys varied widely depending on whether their focus was on television or online marketing (and Mr Harper acknowledged that his expertise did not extend to the latter). Cabo also relied on the evidence of Mr Mowbray, to the effect that Zuru’s marketing spend was typically around 6–7% of revenue.

Taking as a whole, while generalisations are difficult, the evidence indicates that Cabo’s television marketing budget was low for the launch of a successful new collectible toy. While that may have been to some extent compensated by Cabo’s impactful initial online marketing campaign, Worldeez was competing in a crowded market, at a time when (as Mr Harper confirmed) television was still the main advertising medium for children, albeit that the shift from television to online marketing had by then begun. The evidence indicates that Cabo’s overall marketing budget of around £275,000 was reasonable for a solid launch campaign. The problem was, however, that Cabo needed more than that: it needed very high levels of sales from the outset merely to break even during 2017 (see further below), and even higher sales to achieve the revenues that it had projected for that period. Mr Harper was, in my judgment, right to take the view that this would have required a far higher overall marketing budget than Cabo had available to it.