Brand new opportunities arrive in Sesame Street

Bert and Ernie, the muppets best known for their rubber duck routine on the children's television programme Sesame Street, are to become trendy record and movie stars as part of the show's drive to cash in on its strong market position.

The pair are among a number of Sesame Street characters who will undergo radical changes as part of a licensing and merchandising deal to be announced early next month. It is part of an effort to boost the image of the American children's educational programme, which has been running for 27 years and is currently shown on Channel 4.

The plans are thought to include tie-ins with fashion retailers, a new line of dolls and children's toys, as well as pop records that feature the voices of the best-known muppet characters. A new feature film is also expected.

The move to freshen up the Sesame Street image comes against a backdrop of furious deal-making in the children's entertainment industry. Earlier this year, Trocadero acquired the rights to Enid Blyton's Noddy and Famous Five characters for pounds 14m, and this month Thomas the Tank Engine announced he was arriving at the London Stock Exchange with a price tag of pounds 25m.

Executives at the Children's Television Workshop, the charitable foundation that owns Sesame Street, are believed to have become concerned at the relative lack of brand exploitation for a show that is televised six days a week in prime pre-school children's time slots.

"No one has been looking after the Sesame Street brand in this country for over a year, and it shows," said Angela Farrugia, managing director of the Licensing Company, the firm that has been charged with bringing Bert, Ernie, Big Bird and Cookie Monster to a new audience.

"We still want to educate children, but we also want to reach adults who used to watch it as kids. It will be fashion meets Sesame Street," she added.

Ms Farrugia was responsible for relaunching the Mr Men children's cartoon characters as cult figures, including cross-promotions with fashion retailer Miss Selfridge such as the "Little Miss Naughty" T-shirt, while she was working for CPL, another merchandising company.

She and her partner, Melvin Thomas, struck out on their own in June to found the Licensing Company, with backing from Time Warner and United News and Media. They now also handle merchandising for rugby union's Courage League.

Sesame Street's move to aggressive marketing will be mirrored in its home market of America, where children's icons such as Barney the dinosaur have made huge inroads into the merchandising market. Last year Barney, who hosts a show designed for three-to-six year-olds on American public television, grossed over $1bn (pounds 645m).