Disney Hopes to Revive Magic by Selling More Stuff

In an effort to re-energize its gold-plated brand, Walt Disney Co. is launching a product blitz that will put Mickey Mouse and the gang on toothbrushes, cereal boxes, juice cartons and even bottles of plain water.

Though two recent studies show the Disney brand remains strong, operating income for the company’s Consumer Products division has fallen by $438 million over the last three years, a nearly 50% decline.

Corporate executives are rethinking ways to leverage the Disney name, which Chief Executive Michael Eisner last week called the company’s “greatest single asset.” In an e-mail to employees, Eisner wrote, “It is the strongest brand in the entertainment industry and helps make it possible to launch entire new businesses based on the popularity and trustworthiness of Disney.”

Industry analysts say the age of the company’s core audience continues to drop as young children face more entertainment options, from PBS’ Teletubbies to Nickelodeon’s Rugrats to the Japanese animated cartoon Sailor Moon.

Most boys older than 5 no longer regard Mickey Mouse as cool, according to Disney officials who declined to be identified and industry analysts. They also said girls are more captivated by Nickelodeon’s Wild Thornberrys and pop singer Britney Spears than Minnie Mouse in pumps and a navel-covering polka-dotted dress.

Disney’s “challenge is to innovate the brand and make it more relevant,” said Kevin Lane Keller, a Dartmouth College marketing professor. “You are always going to have to win the kids. Otherwise, not only do you lose them now, you’re going to lose them in the future when they become parents.”

So Disney is testing new strategies. The company will roll out a brand campaign--headlined by “Magic Happens” television commercials that will air widely in September--that shifts the focus of consumer products away from its traditional dependence on animated films.

Marketing the Disney brand across the globe is the engine that drives the company’s divisions, including theme parks, feature films, cable networks, retail stores and consumer products.

The company aims to boost consumer product revenue while “keeping Disney pure,” said Matt Ryan, Disney senior vice president for corporate brand management. “How do you be conservative, how do you be Disney, and at the same time not fall into the trap of doing what you’ve done before?”

Andy Mooney, president of Disney’s Consumer Products division, said in an interview, “We want to move away from being a promotional brand to being a 365-day-a-year brand. . . . It’s a change in business approach, a change in the mind-set for the Disney company.”

Mooney, a former Nike Inc. executive, said Disney’s consumer division can grow “if we have great products and focus on our core consumer.”

Disney’s blitz of new products includes a deal announced last month with Gillette Co. to create toothbrushes with Mickey Mouse and Buzz Lightyear by early next year.

This fall, Disney and Coca-Cola Co.’s Minute Maid division will begin pushing vitamin-fortified punch and juice under the names “Pooh’s 100 Acre Wood Apple-Berry,” and “Mickey’s X-treme Coolers.”

Disney also is targeting the toddler set on television. To compete with Nickelodeon’s Noggin educational network, Disney plans to launch a 24-hour commercial-free children’s television network early next year aimed at 2-to-5-year-olds.

And by early 2003, Disney will rely on its characters to convince kids that drinking water can be fun. “You’d be surprised what you can do,” Mooney said of the water mission. “In the packaging, you can really make a difference.”

Striking a Balance

Disney must find a way to sell more stuff without tarnishing the magic of Mickey and the gang. “Disney-related toothbrushes sounds as if they’re trying to stretch their equity a little further than the edge of where it naturally fits,” said Stephen A. Greyser, a Harvard Business School marketing professor.

Margaret King, director of Cultural Studies and Analysis, a Philadelphia company that tracks consumer choices and buying patterns, said, “The value of the merchandise used to be that it was scarce. [Disney] has devalued the brand by making it too available.”

It’s a sensitive subject that has triggered much debate among Disney executives, who insist they are being careful not to misuse the characters or work them overtime.

They scuttled plans for a line of hip urban clothes, because the look just wasn’t “Disney.” They nixed a Mickey Mouse toilet seat that was in production, car mats licensed in Thailand and a toilet freshener in Korea.

They also rejected any thought of plastering Disney characters on egg cartons. “That’s just gratuitous exposure and we don’t need to do that,” Ryan said. “Disney is very much an oasis. At the end of the day, there is a risk to going too far out on a limb. We don’t want to violate that trust that we have with people.”

Six analysts interviewed for this report say it’s still too early to predict a turnaround in the Consumer Products division. Despite strong sales of interactive games, Disney’s high-margin licensing business has yet to bear fruit.

Jill Krutick, an analyst with Salomon Smith Barney, said, “There’s no question they are throwing a lot of possibilities against the wall and some will stick and time will tell how effective the strategy will be.”

Disney is revamping its stores at the same time it forges partnerships with mass retailers such as Kmart Corp. and J.C. Penney Co. The company is also trimming the number of product licensees, enlisting its new retail partners to help control quality and reduce costs.

Disney plans to overhaul 22 stores by the end of the year, and 100 stores a year thereafter until the entire chain is remodeled. The company is adding a line of home furnishings and apparel for infants and toddlers.

“We probably should have updated the aesthetics of the stores sooner than we did,” Mooney said.

Disney is carving out floor space in Kmart and JCPenney stores to grab a bigger share of the $1-billion-a-year market for children’s character decorated clothing and $7-billion-a-year market of non-character licensed apparel.

“We believe that Disney as a brand is powerful enough to thrive in both markets,” Mooney said. “Disney as a brand is so strong it can survive without characters.”

Disney is returning to its roots for inspiration on its new lines. J.C. Penney has an exclusive contract to commercialize “It’s a Small World” beginning this fall--a Mooney idea. After spending two days scouring Disney’s vault of 127 characters, Mooney became enamored of the impish figures created for the 1964 World’s Fair.

Classic characters Bambi and Thumper also will make an encore performance on sleepers, blankets and towels for infants and stuffed toys for toddlers next year.

Worldwide Recognition

The Disney brand is “one of the most widely recognized and successful in the world,” said Janet Wasko, a communications studies professor at the University of Oregon. She was co-author of a study on perceptions of Disney, based on questionnaires from more than 1,000 students from around the world.

The study found a widespread appreciation for Disney and its wholesome family entertainment, though some respondents balked at the ubiquitous Disney name. “There’s so much merchandise everywhere, some people think they’ve overdone it,” Wasko said.

In another survey of top U.S. corporations by consulting firm Corporate Branding, Disney ranked third among America’s best-known brands, behind Microsoft Corp. and Coca-Cola Co.

Translating that name recognition into merchandise sales has grown more difficult. Last fall the company announced a four-year plan to shutter more than 150 stores, mostly in the U.S. and Canada. In 1987, Disney became the first studio to open its own retail chain, which the company dubbed its “brand ambassadors.” At its peak, Disney had about 750 stores.

The problem, analysts said, is that Disney opened too many stores and allowed the products and stores to become stale. Disney wasn’t alone. Warner Bros. pulled the plug on its mall stores in February.

Licensed merchandise, which includes deals with toy makers such as Mattel Inc., was a key driver of Disney’s growth during the 1980s and 1990s. That’s when a string of hit animation movies, such as “Beauty and the Beast” and “The Lion King,” sparked huge demand for toys, T-shirts and scores of other items.

Retailers are now more reluctant to gamble on movie merchandise. This year Mattel decided not to renew toy licensing rights for Disney’s newer films, prompting Disney to sign up with Mattel’s rival, Hasbro.

Hasbro has the rights to develop and market toys based on all upcoming Disney films. Mattel still has rights to the classic Disney characters, including Mickey Mouse and Winnie the Pooh.

Katherine Styponias, an analyst with Prudential Securities, predicts the Consumer Products division’s operating income will drop 15% in the quarter that ended June 30.

Disney also faces a bigger conundrum: The company no longer commands the children’s clothing and merchandise market--or children’s attention.

“Kids are outgrowing their stuff at younger and younger ages,” Styponias said. “Kids are different today and [Disney officials] haven’t upped the pace, and as a result their core audience is a lot smaller than it used to be. Nickelodeon has captured the hearts and minds of 2-to-11-year-olds, certainly as far as TV space is concerned.”

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Name Recognition

CEO Michael Eisner calls Disney’s name its “greatest asset.” To boost profits, the company is revamping stores, forging new partnerships with mass retailers and promoting characters across a host of products.

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Disney consumer products

Licensing: 75%

Publishing: 13%

Disney Interactive: 9%

Disney stores: 3%

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Operating income for Disney’s consumer products is falling.

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Source: Disney annual reports, Disney consumer products