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Initially, Kermit was seen as a lizard-like creature. He subsequently made a number of television appearances before his status as a frog was established, which was shortly before Sesame Street began. His collar was added at the time to make him seem more froglike and to conceal the seam between his head and body.
The chief reason that Jim Henson chose Kermit as his main character was that Kermit, being lightweight, was easier to perform for long periods of time (in terms of personality, the Muppet Henson most closely identified himself with was Rowlf the Dog).
Kermit's song "The Rainbow Connection" was also a big hit from The Muppet Movie and, for some time, had become something of a signature song for The Jim Henson Company.