So, sure, Titanic has reaped more than half a billion dollars at the box office for Paramount Studios and its mothership, Viacom Inc., transforming the most expensive movie in history into the highest grossing. And that's before Titanic reaches the shelves of Viacom's 4,300 Blockbuster Video stores in 20 countries (supposedly there's a Blockbuster within a 10-minute drive of every major neighborhood in the United States).

Still, if you want to understand where this $13 billion media conglomerate is pinning its hopes for the future, it helps to be at the edge of New York's financial district, sitting on the floor at the All-Day Nursery preschool where Jonathan and Alexa, both 4, are surrounded by three researchers. A video camera draws a bead on the preschoolers to record their responses for later analysis, while a pair of 20something research assistants pull out clipboards to take notes. They're here to road test a forthcoming episode of Blue's Clues, television's most popular show with 2- to 5-year-olds.

Since its September 1996 debut on Viacom's Nickelodeon cable network, Blue's Clues has soared in the ratings to regularly whip mainstays like PBS's Sesame Street, Barney and Mr. Rogers. The show has been universally lauded by parents and educators as a breakthrough in preschool programming. It's interactive! Barely verbal children shout and point excitedly at the screen to help the rubber-faced host Steve - Boyertown's own Steven Burns - find three blue paw-print clues that Blue has deposited around the show's storybook scenery. The kids react like 13-year-old girls who have sighted Leonardo DiCaprio. Research shows that the brain of a 4-year-old is twice as active as the brain of, say, you - and independent research on Blue's Clues has shown that children who watch are more likely than usual to seek multiple solutions to challenges.

Alice Wilder, a Columbia-trained child development specialist and Blue's Clues' chief researcher, sits cross-legged before the preschoolers and shows them a sequence of crayon-drawn illustrations, storyboards for an episode that won't air until 1999 or 2000. The children are trying to identify a drawing of a building that's supposed to be a bank but is marked only with a dollar sign, which they don't recognize.

"It looks like a Japanese thing," Jonathan says.

"I think it's music," Alexa says.

"Maybe it's the post office," Jonathan offers. Wilder points to another building on the page. Maybe this one here, with the mailbox in front, is the post office, she suggests. Jonathan is unfazed. "Maybe there are two post offices," he says. And the research assistants scribble furiously.

It's no surprise that Blue's Clues is popular with these kids and millions like them. It's engaging, it's smart and the show's colorful characters - Blue, Gingerbread Boy, Tickety Tock and even Steve - are cuter than a guy in a dinosaur suit. But the show is more than popular: It exemplifies the two practices that have helped Nickelodeon explode into prominence - not merely as the most-watched children's television programmer, not merely as the leader in advertising revenue among cable channels (having just passed ESPN), but as one of the hottest emerging consumer brands in the world. What Nick does so successfully is combine obsessive research (knowing its audience) with relentless brand-building (seizing its audience).

Nickelodeon's explorations into kids' culture - their values, habits, fears, favorite products - make Margaret Mead's fieldwork for Coming of Age in Samoa seem lackadaisical. Each episode of Blue's Clues, for example, is tested for preschooler responses at four different stages during production - unprecedented in the annals of childrens' programming. Then the shows' producers actually incorporate the findings into episodes. In hundreds of organized research sessions a year, kids of all ages tell it all to Nick, on subjects ranging from specific shows and promotions to what they wear and read and buy, and what their parents let them - or don't let them - do.

When, in the early days, children said they wanted a show featuring crazy sports, Nick created Guts - kids slam-dunking baskets while bouncing from bungee cords. In another "ideation" session, kids requested a show that was scary - but not so creepy that it would frighten their "little brothers." This evolved into Are You Afraid of the Dark? When panelists previewing early Clarissa Explains It All episodes said the father character didn't talk like a real one, Nick not only rewrote scripts, but replaced the actor. "It's amazing what they'll tell us, without even thinking that we might tell their parents," whispers Bruce Friend, Nickelodeon's vice president for research, shaking his head behind a two-way mirror at a session where a roomful of 9-year-old boys are boasting that they watch Comedy Central's foul-mouthed cartoon South Park.

The aim of the research is to convert juvenile brainwaves into TV airwaves as faithfully as possible. And Nickelodeon seems to have found the right frequency. The research process has helped the network produce one gem after another: Rugrats, which depicts the bemusement of toddlers in a ridiculous adult world; Doug, conveying the animated angst of a thoughtful preteen; Clarissa Explains It All, the world of a bright and funny girl; Ren & Stimpy, a visually arresting cartoon gross-out; Hey Arnold!, more animated angst of a thoughtful preteen. And Kenan & Kel, Pete & Pete, Angry Beavers, All That! and Kablam! Nick knows what appeals to its audience - sympathetic, familiar characters, hip design, authority-tweaking attitude - well enough to lock in its viewers, confidently enough to go, on occasion, right up to the edge of parental acceptance without ever crossing that line. But besides helping Nick create shows that work, the intimate knowledge of its audience has allowed the network to define itself masterfully and develop an intensely loyal following as a brand - as trustworthy a name to its viewers as Betty Crocker was to Mom's mom.

Now, when I refer to Nickelodeon as a brand, I don't really mean the more than 2,000 licensed Nickelodeon products: the Rugrats bedroom sets and leisure wear, the Rugrats Oral-B toothpaste, the Rugrats Kraft Macaroni and Cheese. Neither am I referring to the three Nickelodeon retail stores that have opened so far to sell Nick merchandise (100 more stores are planned), nor the theme-park attractions around the world, such as U Pick Nick at Dollywood and the Nickelodeon TV Machine at Sega World in Australia. Because merchandising is nothing new. Sesame Street has so many licensed products, the Count would lose count, and Warner Bros. has Looney Tunes stores wherever more expensive T-shirts are sold, and Disney is theme parks - but not any of that gives kids the feeling of ownership and membership they get from Nick. By the Nickelodeon brand, I mean more than just a program lineup and a bunch of characters on T-shirts. What Nickelodeon has been able to accomplish by probing children's heads is to become a sensibility, a world, a subversive and empowering club. The name Nickelodeon promises kids something - about the next show or contest or off-air Nick project - that Disney and PBS and other TV programmers don't come close to approaching. Small wonder that last year Nickelodeon was inducted into the Marketing Hall of Fame, billed as "the highest honor a brand can receive." Nick was enshrined with Kodak, which began its marketing efforts in 1885.

Even Nick's promotions tap into a child's wildest fantasies. Example: It's late 1996, and Nick is expanding its kids' programming into the 8 p.m. weekday slot - a risky move into prime time as an alternative to little shows like Friends and Home Improvement. At the same time, the Nintendo 64 video-game system is being rolled out. A deal is struck - and plugged throughout Nick's day in a way that no other programmer could; every day 1.3 million children, ages 2 to 11, watch Nick. Kids are instructed to go to a Blockbuster Video store - official headquarters for Nintendo 64 - to retrieve a special red cellophane decoder card. During the new 8 p.m. show, The Secret World of Alex Mack, Nick picks a special time to hold up the decoder to the screen and see if you have won the contest! Prizes include Nintendo systems and a trip to Nickelodeon Studios in Orlando with a walk-on role on Alex Mack.

Hello! I'm a 9-year-old! Pinch me!

Hello! I'm head of marketing for Nintendo! Pinch me!

"You start your media planning [ad buying] asking, 'What are we going to do with Nickelodeon?' and then you fill in with the rest of your budget around that," says Nintendo vice president George Harrison, one of the world's largest buyers of children's advertising. "More and more, Nick is like CNN for children. It's just the thing they turn to."

For a moment I wondered why Harrison's last statement sounded like something I'd heard before. Then I realized: Everybody I talked to about Nickelodeon was saying the same thing. "When we ask parents what shows they let their kids watch, they just say 'Nickelodeon,' " says Amy Jordan of the University of Pennsylvania's Annenberg Public Policy Center, whose annual report cards rating children's shows are a bible for watchdogs, regulators and educators. Nickelodeon, Jordan says, is perceived by parents as a safe haven. That, by the way, is the part of the Nick "brand" message. Among children ages 6 to 11 and their parents, Nick has a stunning 99 percent brand awareness.

"We're now positioned to make Nickelodeon the preeminent kids' brand of the next century," Nick president Herb Scannell has said. So wait - what makes a cute little show like Blue's Clues part of this master plan? Well, Blue's is the current darling at Nick, the top revenue producer within Viacom's MTV Networks division, the fastest-growing part of the whole $13 billion corporation (luxury-liner tragedies included). But that's not even the point. Blue's is part of a 9 a.m.-to-2 p.m. block of programs for preschoolers, Nick Jr., which includes Maurice Sendak's Little Bear, The Busy World of Richard Scarry and The Wubbulous World of Dr. Seuss. Despite the wonderful world of collaborators, Nick Jr. doesn't exist to make money for the company at all. By design, well-targeted preschool shows draw lower ratings than shows aimed at wider audiences. Nick Jr.'s hours carry half the advertising minutes of Nick's other programming. And, with all its R&D costs, Blue's Clues runs about $250,000 per episode to make - more than traditional educational programming. Why, then, does the cute blue doggy get Viacom shareholders excited? Here's your clue: Because 99 percent brand awareness in children ages 6 to 11 may be great. But not everyone is 6 yet. Those 2- to 5-year-olds need to get with the program, too.

"We recognize that if we start getting kids to watch us at this age, we have them for life," said then-Nickelodeon head Geraldine Laybourne in 1994, when she launched Nick Jr. "That's exactly why we're doing it."

Is all this so bad? Or is it extraordinary that a megacorporation is financing smart, engaging, nonviolent kids' TV by making it - gulp - profitable? Nick appears to have found the elusive equilibrium between better-than-it-has-to-be children's television and gleeful commerce, each enabling the other in a free-market symbiosis that might make Newt Gingrich get up and shout and point at the screen. Sure, some parents may be uneasy about shows they actually want children to watch being wrapped up in irresistible packaging and merchandising schemes whose concepts have - heaven help us all - sprung from kids' own psyches. The two worlds have never collided like this before. Still, if complaints about the presence of commercials are parents' severest criticism, they should count their blessings. Rugrats viewers may be able to memorize ads for Beast Wars fighting action figures, but at least they're not getting the entire Beast Wars cartoon show (which is on Saturday mornings at 9:30 on UPN, Channel 57).


To meet Nick's executives and creators, you get the impression that all the talk about branding and ratings is a cover, a ruse to keep the accountants happy so everyone can continue having fun asking kids what's cool and creating goofy, innovative shows. Nick's headquarters above Manhattan's Times Square are decorated in deep purple, lime green and electric orange, accented by oversize furniture and alphabet blocks and rubber balls. Hallways are paneled with chalkboard or decked out with statues of Rugrats molded in Floam, Nickelodeon's hipper version of Play-Doh. Nick's executives routinely requisition extra shelving for their pop-culture memorabilia. Like everyone else in the shop, Nick president Herb Scannell, 40, grew up reveling in TV culture. As a kid he collected TV Guides. His office is a sea of kitsch: an autographed photo of NBA great Walt Frazier, a Kablam! lunch box, an old board game based on his favorite series, The White Shadow.

When I suggest to Scannell that one network's new preschool series looked to be The Banana Splits of the '90s, his instant recognition of that trippy early-1970s program nearly caused him to spit out the bite of lunch he'd taken, repressing laughter.

"People who work at Nickelodeon like kids' television," he says. "They're not gigging to get someplace else. This is a good place to make kids' television."

Many adults know Nickelodeon only through its Nick at Nite programming, whose brilliant rescue of classic reruns from the netherworld of UHF was largely Scannell's work. But the network actually began in the ancient era of cable, in 1977 as part of Qube, a weird interactive-cable experiment in Columbus, Ohio. Two years later, Warner-Amex - a joint-venture of Warner Communications and American Express (then trying to get into media) - acquired Nick and packaged it as a commercial-free, all-kids cable network. And then they did something really strange. To run the network, they recruited a television legend named Cy Schneider.

Schneider was as much a television pioneer as Edward R. Murrow. As an ad man for a tiny California toymaker, Mattel, Schneider cowrote history's first toy commercial, for Mattel's Burp Gun. It aired on The Mickey Mouse Club just before Thanksgiving 1955 and sold a million cap guns by Christmas. Schneider wrote the first Barbie commercials. As Mattel grew, so did his influence on kids' programming. Schneider became the biggest buyer of network time on Saturday morning and the largest underwriter of children's television. In 1959, his agency - still working for Mattel - helped ABC repackage some old Baby Huey cartoons into a show; to introduce them, he invented an animated host, unabashedly named Mattey Mattel. In 1962, Mattel allowed an original cartoon, Beany & Cecil, to be included on Mattey's Funday Funnies on the condition that the show's creator put a propeller on Beany's hat and grant Mattel the rights to sell the beanies - ultimately 2.5 million of them. What came next wasn't a huge leap: In 1969, Schneider launched Mattel's Hot Wheels, the first cartoon show based entirely on a preexisting toy.

Commercial television, even for children, is just another business, Schneider explained in his 1989 memoir, Children's Television: The Art, the Business, and How It Works. "It is a business that makes money by selling products. Television's first mission is not to inform, educate or enlighten. It isn't even to entertain. Its first mission is to entice viewers to watch the commercials." And yet, when Schneider was asked to make a success of a noncommercial, all-kids cable network, he took the challenge. He coined the word edutainment. At the time, PBS wasn't creating many children's shows; it certainly wasn't an all-kids network. So Schneider had a crazy idea: exploiting the underserved market for quality children's television.

"I wish I could say with some degree of honesty that it was Warner-Amex's or my own genuine desire to provide better, more inspiring children's programming because of a burning sense of social responsibility," he wrote. "I can't. . . . Nickelodeon, for all its lofty aims and subsequent broadcasting awards, was and is a product born of the demands of the marketplace."

Today, most of Nick's executives and employees don't remember Schneider, who left the network in the mid-1980s and died four years ago. Schneider's name evinces just a shrug from Herb Scannell. Certainly Nick's current brain trust repudiates Schneider's brashness. "TV is not about selling toys and getting ratings. It's about having an impact on the future," says Brown Johnson, who runs Nick Jr. Nevertheless, Schneider's book, filled with his wisdom on marketing cereal and toys to kids, reads like a manifesto on how Nick built its own brand image. It's as if Nick took the advice on how to sell cap guns and bubblegum to kids, and made the network the product instead. Behold the Schneiderisms:

"Diagnostic research with children is the only way you can determine not only what to say, but how to say it so it will be understood."

"Some types of products can be positioned as an adult put-on. Children love to make fun of adults and see adults look stupid."

"Once a major personality is established, it is important to keep him or her famous. The continuing success of a brand depends on it."

"No matter how you position a product, emphasize that special ingredient kids call fun."

"A basic rule in positioning a kids' product is to create a unique and distinct image of the product in the children's minds. If you do so, and stress the originality of your product, children will, if they like the product . . . practice intense brand loyalty and won't easily switch. "

In 1982, Nick was noncommercial, award-winning - and boring. Parents admired its collection of international animation and documentaries about famous people. To the few children who had cable, Nick was considered "the green vegetable network." And Nick was bleeding money. That year, Warner-Amex lost more than $30 million on its cable operations. Commercial television for kids, meanwhile, was just plain sad. Geraldine Laybourne had been in charge of acquisitions for Nickelodeon in the early 1980s - the network was then buying rather than making most of its programming - and she found it difficult to find anything worthwhile. "It's somewhat like dredging a quagmire," she said in 1983. "We are picking from an area that has historically spent the least amount of money."

When Laybourne ascended to the presidency of Nickelodeon in 1984, she made the controversial decision to take the network commercial to finance the development of higher quality shows. Laybourne is now seen as the patron saint of quality commercial television for children. She intensified Nick's research into young minds - as a result Nick redefined itself with an all new attitude, a kids-rule, us-versus-them, adults-only-when-necessary attitude. The 1980s boomed, cable spread, the good times began to roll. Viacom purchased MTV Networks in 1985 for $700 million. Nick's Double Dare - a quiz show on which if a kid didn't know an answer, he could opt for a physical challenge - became a hit, and Nick used $40 million of its revenues to develop original cartoons, with a notion of reviving the artform.

"We watched the cartoons that were out there and asked, 'What's wrong with this picture?'" Scannell recalls. `` 'Where are the original characters? What happened to diversity of design? What happened to sound? What happened to the fantastic?' " Nick's first three Nicktoons, Ren & Stimpy, Rugrats and Doug, were breakthroughs. To kids who had been raised on He-Man and The Smurfs - and to parents who had grown up with artlessly drawn cartoons like Scooby Doo and The Flintstones - they were eye candy. Nick moved on to break more rules of children's television. Conventional wisdom had long held that you couldn't make a girl the star of a show - because girls will watch a boys' show, but not vice versa. Scannell spearheaded the creation of Clarissa Explains It All, starring Melissa Joan Hart.

"Why can't a girl be on television who's smart, confident and has a point of view and isn't either a nerd or an appendage to a guy?" he asked. Clarissa was a hit among boys and girls. Alex Mack and The Mystery Files of Shelby Woo followed, both with girls in title roles, but neither of them, you know, girlie.

Nickelodeon's next move, raiding Saturday morning and the traditional heartland of children's television viewing, was almost manifest destiny. To grease its path, Nick was able to employ what watchers of Microsoft call the power of increasing returns - using dominance in one part of a market as a bridge to dominance in others. Nick teased its Saturday-morning lineup during the 80 weekday hours when it had children's attention. It worked. Even airing repeats on Saturdays, Nick started beating the networks.

Then, seeing another zone where the nets had abandoned children, Nick invaded weekday prime time - first expanding its kid shows until 8:30 p.m., where it now controls the majority of viewers under age 12. In September, Nick's children's programming will go until 9. Scannell is leading the charge of the Nick brand abroad. Nick shows are seen on stations in 80 countries, with dedicated Nickelodeon channels in the United Kingdom, Australia, Latin America, Scandinavia, Germany and Turkey. While cartoons are among the easiest types of programming to dub into different languages, Nick also helps foreign affiliates create shows that reflect localized tastes, such as Germany's All That, Alles Klar! The brilliant, Spy-like Nickelodeon magazine, with a circulation of almost 800,000 and more paying readers than Forbes or Fortune, is among the fastest growing magazines in the country (though Sesame Street Magazine and Disney Adventures both have about a million readers). Nick has innovative sites on America Online and the World Wide Web, online chats with kids being another formal part of Nick's research. You may have caught the Rugrats - A Live Adventure that recently buzzed through Camden on its national tour, its larger-than-life Tommy and Chuckie mascots on stage in an effort, as one publicist explained, "to redefine children's theater in the same way Nick has redefined children's television." (For instance, at no time during the show did the Rugrats skate on ice.)

And Paramount's next titanic blockbuster, Rugrats: The Movie, hits theaters Thanksgiving weekend, backed by a $75 million marketing campaign that includes Rugrats windup toys at Burger King and generous on-air promotion, which began early in the summer. It's Nick's third film, following Harriet the Spy and Good Burger, both of which featured personalities spun out of the Nickelodeon TV universe.

What's next? Nick has invested $350 million in developing more original animation, including a $10 million cartoon studio in Los Angeles that features a nine-hole miniature-golf course and a design inspired by Willy Wonka and the Chocolate Factory. Naturally, Nickelodeon's prosperity has given the rest of the children's television world a hard spanking. The channel's success, and the envy it has roused, has arguably done more to improve the overall state of children's programming than the government regulation that has come down the pike in recent years. Disney, which once owned children's television, has had a cable channel for 15 years - and spent most of the time watching Nick steal the show. Two years ago, Disney hired Laybourne away from Nickelodeon to improve children's programming for the Disney Channel and the ABC network, which Disney acquired in 1995. Laybourne hired Anne Sweeney, who spent 12 years at Nickelodeon, to run the Disney Channel. (Laybourne departed Disney in late May, halfway through her contract, to start her own production company.) Disney bought Jumbo Pictures, the company that created the Nickelodeon hit Doug, to make new episodes of Doug for ABC and other new shows for cable. Disney/ABC signed Melissa Joan Hart, Nick's Clarissa, to star in Sabrina, the Teenage Witch, a moderately better-than-average teen comedy that anchors ABC's new Friday-night lineup. Detecting any patterns here?

The broadcast networks not only have Nick making them ashamed of their children's programming, they have also been scolded by an act of Congress. In 1990, Congress passed the Children's Television Act, requiring broadcasters (but not cable channels) to air programming specifically serving the educational and informational needs of children. But 1992 studies by the Center for Media Education and others found that most stations had made virtually no changes to their programming in response to the CTA; they had just become more creative in describing their shows. One station proclaimed The Jetsons educational because it "teaches children about life in the 23d century." Another station listed among its kids' programming morning broadcasts of The Jerry Springer Show and Donahue, on topics such as "parents who allow their children to have sex at home." The Children's Television Act was bolstered in 1996 to require all stations to air three hours a week of "educational/informational" programming and to label such shows on the screen. (The best thing to come out of that legislation is ABC's hilarious Science Court.)

And there's poor PBS - hamstrung by its budget, bashed by its detractors when shows become too popular or there's a hint of corporate sponsorship. The Republicans who want to cut PBS funding have long pointed to Nick as proof that you don't need government subsidies. While Nickelodeon merrily puts special 3-D cartoon-viewing Noggle Goggles in specially marked cereal boxes, nobody cuts PBS any slack. When Arthur, aardvark star of the eponymous PBS cartoon, became involved in licensing deals, a storm of controversy erupted about what the New York Times called "the intensifying commercialization of American children's TV." In the age of Nick, PBS has needed to redefine itself. To give its daytime children's programming a hip new image, the network created a special brand for kids, PTV. PBS is readying an updated version of Zoom, the kids-only show from the 1970s - just to remind everyone where the idea of an adult-free ensemble cast originated. You have probably already tried to comprehend Teletubbies, which premiered on PBS in April, four colorful, "technological babies," who live "over the hills and far away" (the first explicit reference to a Led Zeppelin song in the history of preschool programming). Teletubbies was intended as PBS's most forceful retort yet to Nick's threat to capture "viewers-for-life" at age 2. After all, it is "the first show specifically designed for children as young as 1," according to PBS literature introducing the show. Take that, Blue. (What's next? Entertainment by ultrasound?)

But Nick isn't worried. Brown Johnson, the executive in charge of Nick Jr., says the British creators of Teletubbies offered the show to her before the PBS deal was announced. She declined. "I looked at it and I said, 'Oh. I don't know. Looks a little weird.' We'll see if I made one of the biggest mistakes of my professional career. I don't think so."

Of course, PBS still has Sesame Street. But now Nick does, too. In April, Sesame Street creator Children's Television Workshop announced a deal with Nickelodeon to codevelop an all-new children's educational channel, Noggin, which will begin in January 1999 and show repeats of Blue's Clues and Sesame Street. Steve from Blue's Clues joined Oscar the Grouch on stage to mark the news.

Meanwhile, at the Manhattan flagship store of FAO Schwarz last month, an exclusive party gathered to celebrate another coup. The first Blue's Clues merchandise was about to reach tony toy stores. (Even these licensed products underwent more than a year of research and testing before Nick gave them approval.) Scannell stood with John Eyler, FAO Schwarz's chief executive, next to Blue's stuffed animals, Blue's board games, and Blue's place settings (ideal for use when eating Mott's Blue's Clues blue apple sauce).

"We've been looking forward to this day for a long time," Eyler announced. "For over a year we have been hearing requests from parents and from children, 'Do you have anything from Blue? We want Blue.' Just to tell you how much we love Blue, until a few days ago, where I'm standing, it was Godzilla. He had to be moved out for Blue. But we think this is a very special property." Then Eyler, Scannell and the assembled raised their blue-tinted martinis and toasted the little cartoon dog's success among the newest generation of loyal and, they hoped, lifelong Nickelodeon viewers.