Disney to Launch Online News Site, Buy Starwave Stake
In its latest foray onto the World Wide Web, Walt Disney Co. said Thursday that it is launching ABCNews.com, a 24-hour online news service, and is acquiring a major equity stake in Starwave, a Seattle-based Web design company that is its joint-venture partner in the service and in the popular ESPNet-SportsZone Web site.
“We have the leading online family service and the leading online sports service, and we want to do the same for news,” said Jake Winebaum, president of Disney Online.
Disney’s long-anticipated move into the crowded online news business comes in the same week the company announced plans for an online service for children called Daily Blast.
Analysts said that although some of Disney’s efforts have been uninspired--Daily Blast has gotten a lukewarm reception--Disney could yet emerge as a leader online.
“They will succeed because they will be concerted and constant and focused,” said Emily Green, an analyst at Cambridge, Mass.-based Forrester Research. “They are hip to the potential of this medium and they will keep at it.”
Indeed, Disney announced distribution agreements with America Online and Netscape that could give ABCNews.com an important edge in competing against such online news services as MSNBC, a joint venture of Microsoft, NBC and CNN.
Netscape will prominently feature headlines from ABCNews.com on its Web site and will offer a quick way for the 4 million customers who visit its site daily to connect to the ABC site. In exchange, ABC will use Netscape software.
America Online will carry ABCNews.com--which will be unveiled later this spring--on its own online service alongside Reuters and the New York Times. That will give AOL’s 8 million members easy access to ABC.
Starwave, a money-losing Web design company founded by billionaire Paul Allen, could emerge as a strategic component of Disney’s online strategy.
“We couldn’t do this without Starwave,” said Jeff Grainick, the ABC News executive in charge of ABCNews.com. “They are technology experts; that is not our business.”
Insiders say Disney paid about $80 million for a one-third stake in Starwave. In an unusual arrangement, Allen will give Disney majority control of Starwave’s board even as he remains the majority shareholder.
Disney has an option to buy the rest of Starwave at any time in the next five years. After the fifth year, Allen has an option to sell his remaining stake to Disney at “fair-market value.”
Disney shares rose 25 cents to close at $72.625 on the NYSE.
“We’ve formed two long-term joint ventures with two key brands,” Disney Online’s Winebaum said. “To not have operating control [over Starwave] could be problematic down the line.”
In a complex new arrangement, 180 of Starwave’s 300 employees will become staff members of the two news and sports joint ventures and will report directly to Tom Phillips, president of the two ventures. Phillips will be based in New York. Mike Slade will remain chief executive of Starwave, overseeing its push into such new areas as entertainment information.
Winebaum said he expects that much of Starwave’s Web experience, including its technology for letting customers calculate sports statistics based on information offered at its sports site, will be directly transferable to ABCNews.com.
For example, if gas prices go up, ABCNews.com might offer customers the opportunity to type in the model of their car and the number of miles they drive it annually to quickly calculate how much the gas hikes will cost them, Winebaum said.
“This ability to match the computer and data is completely untapped,” he said.
Jeff Grainick, head of ABCNews.com, said the service’s news operation will be closely integrated with ABC’s broadcast operation, unlike MSNBC.
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