Klasky Csupo forsakes 'Rugrats' roots to realize big screen dreams.

Tommy Pickles, the star of "Rugrats," is fond of saying "A baby's gotta do what a baby's gotta do."

The same could be said of Klasky Csupo Inc., the animation studio behind the hit cartoon series on the kids cable network Nickelodeon. Rugrats spawned three Paramount features, which earned nearly $200 million at the box office.

But now, the company is facing some stark realities and is doing what it's got to do. The company has slashed its staff and sold its Sunset Boulevard studio.

The adult-angled "SpongeBob Squarepants" has supplanted "The Rugrats" as Nickelodeon's anchor, and none of other five Klasky Csupo shows once on the network remain in production. Its decade-old deal at Viacom Inc. ends in August.

Arlene Klasky and Gabor Csupo founded the firm as a married couple in 1981. The now-divorced partners--the creative minds behind the Nickelodeon hits "As Told By Ginger," "Rocket Power" and "Wild Thornberrys"--remain friends. Their plan is to turn their company into an independent feature film studio.

"We're changing our model and are excited for the new things on the horizon," Klasky said. "We're very excited because up until now, we have been exclusive to children's projects, and we are now going out into the world to show our wares."

The transformation won't be easy, particularly in the volatile world of Hollywood film production. With more than 20 feature projects in development, however, they aren't starting from scratch. And with the company's track record of success, they can't be counted out.

Tighter times

The studio has gone from a one-time high of 500 employees to about 80, a downsizing that Klasky said was necessary to enable the company to move forward.

"We have had so much amazing talent come through the door that you wouldn't believe it, but the landscape of animation has changed so much that we really had to change along with it," Klasky said. "Now we want to be a lean animation machine. From an economic standpoint, we had to change with the times, become a little more practical."

The new approach was necessitated by a change in the overall animation marketplace.

To cut costs, many outfits, including Nickelodeon, developed their own animation studios or outsourced work overseas. That made talent-heavy operations such as Klasky Csupo an expensive option.

This month the company sold its Sunset Boulevard home to the owners of the Los Angeles Film School and the Los Angeles Recording School, which bought the 100,000-square-foot building for $40 million, or about $400 per foot. Klasky Csupo will lease back the top two floors of the building and keep its operation there. The firm that runs the two schools, Full Sail Real World Education, plans to house them in the building.

Another era may be drawing to an end, too. The studio has had a long-term deal with Viacom's subsidiaries for about a decade. Nickelodeon has exclusive rights to children's series, while MTV and Paramount have first-look deals for adult primetime series and feature work, respectively.

Viacom re-upped Klasky Csupo's contract three years ago, but as of now there have been no clear indicators that the deal will be extended. It could be changed into a non-exclusive pact or done away with, so the firm is preparing for life on its own.

"The deal has spoiled us a little bit because we didn't have to shop things around," said Brandon Scott, Klasky Csupo's vice president of creative affairs. "Now this is a whole different kind of work for us."

Paramount's acquisition of DreamWorks SKG, which has its own animation unit, further clouds the future of Klasky Csupo's deal. The $1.6 billion merger has resulted in layoffs of about 240 people, half at Paramount and half at DreamWorks and it's clear the company's cost-cutters are looking for redundancies. Some of the Viacom executives who were part of Klasky Csupo's success could be on the way out as well.

"We're less worried about TV because DreamWorks has no experience there, but the deal will still impact television," Scott said. "Who knows what will happen?"

Klasky Csupo hasn't forsaken its cartoon roots. The studio still has 16 television pilots, which were begun about two years ago, in production for Nickelodeon.

The roughly six and one-half hours of pilots involve a variety of subjects and lengths, ranging from 4 to 11 minutes. They require more work because of the diverse nature of the offerings, Klasky said.

The studio is trying to get away from what had become its signature style -intentionally simple renderings with an eastern European feel, born largely of Csupo's training in his native Hungary.

"Klasky used to have a very distinct look," Scott said. "That Was awesome for us and gave us name recognition, but it also hurt us in the long term, because people thought it was all we were capable of, and that's not true."

Screen dreams

Michael McGahey was hired last October to drive the film side of the studio as senior vice president. He came to the studio from Deep River Productions, home of relatively modest but profitable films including "Big Momma's House 2" and "The Laws of Attraction."

"These are very creative people with an amazing product, who have made tons of money for Viacom," McGahey said. "We now have to focus on the business side and do something commercial."

The primary mission now, McGahey said, is to get films made, The strategy is to move into live action slowly, by working with more computer-generated animation, an area where the studio has experience, then moving into live action work. The studio has several projects awaiting a green light, including "The Way the Dead Love," a co-production with Warner Independent Pictures. "If all the stars align we will be in production shortly," McGahey said.

Also in the works is a big-budget multimedia picture with Raven Symone, star of the Disney series "That's So Raven," attached.

Since the studio made its name on animated children's shows, finding backing for the projects will be a challenge. But Klasky said that she's confident that the breadth of the studio's abilities will enable it to succeed. If the current project of her partner Csupo is a success, it could give the company a boost.

He's on location in New Zealand directing "Bridge to Terabitha." The film is an adaptation of Katherine Paterson's bestseller and is a co-production between Walden Media and Walt Disney Co., planned for release in early 2007.

The project is Csupo's first foray into live action, combined with computer-generated animation for the picture. If the film is successful, it will bring the company the added value of having a director-for-hire on board and could heighten the company's cachet among creatives.

"That now makes us a director-driven studio, which can be a valuable thing," McGahey said. He seems to be enjoying the challenge of selling the industry on the new Klasky Csupo.

"It's like the Wild West in moviemaking right now. Nobody knows what is going to happen," McGahey said.