Kids entertainment firm Genius Brands International wanted to get smarter, so it overhauled its executive ranks, rebuilt its board and changed its business model.

The Beverly Hills firm behind the “Baby Genius” program for toddlers has also raised some capital. Last month, Genius sold $6 million of preferred shares to Wolverine Asset Management of Chicago and other investors.

Genius Chief Executive Andy Heyward, who joined the company when it merged with his firm, A Squared Entertainment, said the money will go toward boosting marketing for Genius’ kids shows and hiring more executives. That’s all happening as Heyward shifts the company to a business model more reliant on generating revenue from digital distribution rather than manufacturing and shipping CDs and DVDs.

“We wanted to bring in cash to execute the new business model,” Heyward said.

Genius creates kids franchises with an educational component. Its shows include superhero cartoon “Stan Lee’s Mighty 7” and “Secret Millionaires Club,” which stars an animated version of Warren Buffett. (Heyward, a creator of the 1980s hit cartoon “Inspector Gadget,” was introduced to Buffett about 20 years ago and now produces animated shorts shown at Berkshire Hathaway annual meetings.) He runs Genius with his wife, Amy Moynihan Heyward, who is president.

Genius was in financial trouble and approached the Heywards for a merger. They decided to go through with the deal in November after Genius had reduced some of its debt. The merged entity’s shares trade over the counter. In April, the company did a reverse stock split that gave shareholders one share for each 100 they held. Shares now trade for around $3.50.

Other moves have included hiring Matt Kornberg as controller and naming former ABC Broadcast Group President Tony Thomopoulos to the board. Other board members include former Gov. Gray Davis and Lynne Segall, publisher of Hollywood Reporter and Billboard.

Genius reported a loss of $7.2 million last year on revenue of $2.6 million. Heyward said he expects future results to improve thanks to new distribution deals he’s reached with Netflix, Wal-Mart and others. The company has also moved away from what he saw as an over-reliance on selling low-margin CDs and DVDs on Groupon.

Heyward also said the company is looking to sell off infrastructure that was costly to maintain, such as a warehouse in Minnesota.

The Rights Stuff

Three L.A. entrepreneurs who last worked together on a site that lets filmmakers submit movies to movie festivals have teamed up again to tackle another “pain point” in the entertainment industry.

Earlier this month, David Straus, Joe Neulight and Fred Kramer announced they are heading up Critical Mass Studios, a new Mid-Wilshire venture that makes software to help manage rights and contracts for movie and TV studios as well as publishers in the literary and music industries.

They had previously worked together to build the film festival submission site WithoutaBox, which was sold to Amazon.com Inc.’s Imdb in 2008 for an undisclosed price.

Now, they have launched Critical Mass by acquiring RightsLine, an L.A. software-as-a-service company that manages and tracks deals for media companies.

For example, the software can tell a studio executive which distribution rights are up for renegotiation and when. The service tracks royalty payments, too. RightsLine makes money from licensing its software. It tracks about 65,000 contracts for clients such as NBCUniversal and MGM.

Now, the goal is to offer more features. For example, if a studio needs to encode a TV show to be compatible with a streaming service, new features will refer that rights holder to a postproduction company that could accomplish that task, Straus said. He said the goal is to make the whole process more efficient and up-to-date.

“One of the pain points is that (rights holders) are using legacy systems – on Excel or in file cabinets, or systems that they built internally,” Straus said. “They invest a lot of money but the tech that was state of the art four years ago isn’t so much anymore.”

Comings and Goings

Abrams Artists Agency has hired theatrical agents Jay Schachter and Evan Miller as senior agent Joe Rice departs the firm. … Film distributor Cinedigm of Century City has promoted Erick Opeka to executive vice president of digital networks and Suzanna Lee to director of business development and strategy of digital networks. … The company’s digital networks division also hired Shawn Sheikh as senior product manager, Geoffrey DeHaven as operations manager and Jake Rubin as brand manager. … Film distributor RLJ Entertainment has hired Mike Pears as executive vice president of content sales in the Woodland Hills office.

Staff reporter Jonathan Polakoff can be reached at jpolakoff@labusinessjournal.com 323) 549-5225, ext. 226.

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