Children's Kidstar Radio Announces It Will Close -- Media Firm Says It's In Financial Trouble, Will Go Off Air Here And In 5 Other Cities

KidStar, the innovative Seattle-based children's media company that owns KKDZ-AM (1250) and broadcasts on five radio stations elsewhere, is in financial trouble and is shutting down for a reorganization.

Although KidStar Interactive Media is not filing for bankruptcy, about 50 people were laid off Wednesday at KidStar's offices and studios on First Avenue downtown, said marketing director Julie Lewitt Diamond.

"It's essentially been a situation of undercapitalization," Diamond said today. "We were on the brink of bringing in more capital through some agreements, but they were not completed as expected."

KidStar was launched in Seattle in 1993, backed by some 40 investors. The company was built around a radio network with cross-promotional ties to a monthly magazine, a touch-tone telephone-information service and a World Wide Web site. KidStar magazine, "the PhoneZone" and the Web site were extensions of the radio content, lending interactivity to the mix.

KidStar Radio also serves KDFC-AM in San Francisco, WNFT-AM in Boston, WDOZ-AM in Detroit, KMPQ-AM in Houston and KDDZ-AM in San Diego. Targeting the tough-to-track children's audience, the programming has been a mix of music, stories, news, sports, weather and education.

KKDZ here will go off the air on Feb. 22, Diamond said, and the KidStar broadcast in the other cities will cease as well in coming weeks.

"We will be broadcasting some messages on the radio - some

goodbyes and thank-yous," Diamond said. "Part of our goal in taking the signal down now is our choice not to operate an inferior product."

Following the layoff, the computer-automated broadcast has been playing only music, without the usual radio hosts. The PhoneZone and the Web site were in operation this morning, but their fate is uncertain. The magazine will not publish this month.

Diamond said the company will "look at alternatives to reaching the original overriding goal, which has been to serve the kids' market with quality programming."

By making KidStar a club children could join, the company was able to provide advertisers the kinds of demographic data they usually want. KidStar recently said it had on file the names of 170,000 youngsters in metro Seattle alone.

Among the sponsors of KidStar over the years were Washington Mutual, McDonald's, Bartell Drugs, Weyerhaeuser, Microsoft and Nordstrom. Parents, KidStar believed, would listen occasionally, too.

While it has been a commercially supported enterprise, KidStar was endorsed by the Washington PTA and has an advisory board of educators and promoters of children's arts.

The realities of capitalism, however, have been concerns all along. The company never turned a profit.

An infusion of cash came in 1995 - an undisclosed amount from toy giant Bandai America (maker of the Mighty Morphin Power Rangers); Nippon Telegraph & Telephone (NTT); CSK Venture Capital, an affiliate of CSK Corporation, the largest shareholder of video-game monolith Sega; Benesse, a Japanese educational publisher; and Vulcan Ventures, the investment organization for Microsoft co-founder Paul Allen.

The investment seemed to clear the way for a national rollout, but the launch of affiliates outside Seattle has been slow and fraught with delays.

Some in the children's radio industry have suggested that a network would have to be heard in about 50 percent of the country to attract enough advertising to turn a profit.

KidStar has faced competition for ad dollars from Minneapolis-based Children's Broadcasting, Corp., which owns Radio Aahs, heard in 26 markets serving about 40 percent of the country.

Another competitor is ABC's Radio Disney, which is in four markets nationally and awaits a broader rollout.

KidStar was conceived and founded by President Jodell Seagrave, who was a San Francisco radio executive volunteering in a children's hospital when she came up with the idea of radio just for children.

Seagrave could not be reached for comment yesterday.