Disney’s Internet Unit Buys 60% of Online Retailer Toysmart.com
Seeking to expand its electronic commerce business, Walt Disney Co.’s Buena Vista Internet Group will announce today that it has bought a majority interest in online educational toy retailer Toysmart.com for $45 million.
Disney will initially integrate privately held Toysmart.com with its Family.com Web site, which already draws the kinds of parents that the Waltham, Mass.-based toy seller targets, said Chuck Davis, president of electronic commerce for Buena Vista Internet Group in North Hollywood. In the long term, Disney could use Toysmart.com’s e-commerce infrastructure to spawn new online stores, he said.
Analysts said the deal includes $20 million in cash and $25 million worth of marketing on Disney Web sites, as well as in theme parks, movie theaters and other venues. Disney could contribute even more marketing resources if early cross-marketing efforts pay off, Davis said.
Disney will control three of Toysmart.com’s five board seats and own roughly 60% of the company, Davis said.
Analysts said Toysmart.com’s focus on higher-quality educational toys, books and software meshes well with Disney’s family-oriented focus. Disney’s online audience of “fairly affluent and well-educated” shoppers are likely to be interested in Toysmart.com’s offerings, said Ken Cassar, a digital commerce analyst with Jupiter Communications in New York.
Toysmart.com currently sells about 20,000 items, though Chief Executive David Lord said he plans to boost that number to 75,000 by November. That’s still fewer than industry leader EToys’ inventory of more than 100,000 items.
Cassar said the market for the kind of educational toys Toysmart.com sells is worth between $5 billion and $8 billion.
Toysmart.com wouldn’t reveal its sales figures, but Lord said the company has served 2 million customers since April 1998.
Davis said Disney will not compete directly with EToys, the Santa Monica-based e-commerce phenom. Disney also decided against pursuing a partnership with EToys even though it is headed by Disney’s former vice president of strategic planning, Toby Lenk.
Carrie Ardito, a research associate with Forrester Research in Cambridge, Mass., said a deal with Toysmart.com was a better value since EToys has a market value of $5.4 billion. Besides, she said, “the competition is pretty fierce in general toy sales, and I’m not sure Disney was quite ready to move into that.”
Separately, Disney said it will explore a joint venture with Advance Publications to publish content from both companies’ magazines online.
Disney owns Los Angeles magazine, ESPN, Discover and others. Advance’s Conde Nast Publications produces such titles as Vanity Fair and Vogue.
On Tuesday, Disney shares closed at $29.81, down 19 cents, on the New York Stock Exchange, while EToys shares rose 19 cents to close at $47.06 in Nasdaq trading.
