Disney Channel Scores With Repackaged Hits

When Walt Disney Co. created a namesake cable channel, it was little more than a place to charge viewers to watch recycled Disney movies and old shows such as “Spin and Marty.” Nearly two decades later, the Disney Channel is going head to head with highly successful Nickelodeon--a ray of good news for a company that has staggered along in the broadcast industry.

Youngsters who once considered Disney passe are flocking back to the channel’s blend of original movies and series that have become hip among the pre- and early teens, giving the company another powerful marketing voice. The latest contributor to the cause: an upcoming animated series based on Disney’s hit movie “Lilo & Stitch,” which the channel promoted relentlessly.

The movie grossed more than $100 million, nearly beating Tom Cruise’s “Minority Report” as the No. 1 movie on its opening weekend last month. Disney hopes to extend that success to the small screen for years to come. The series is scheduled to premiere in the fall of 2003.

“Stitch is one of those unique characters,” said Disney Studios Chairman Dick Cook. “Having a television series just keeps him alive and allows him to flourish and become embedded in the fabric of our culture.”

Disney previously created series from such movies as “Aladdin” and “Lion King” that debuted on ABC’s “One Saturday Morning” cartoon block or sold in syndication to other outlets, such as CBS and UPN. But “Lilo” represents the first time Disney has developed a cartoon spinoff specifically for its flagship cable channel. Disney executives and entertainment analysts said that decision is testimony to the dramatic evolution of the Disney Channel.

“It has been a success story for them,” said Jordan Rohan, a media analyst with Wit SoundView. “The channel is one of the most efficient ways for the company to utilize its brand and, from a financial perspective, will soon get to the point where it generates more free cash flow than [Disney] theme parks.”

The move also reflects Disney’s aggressive efforts to compete against Viacom Inc.’s Nickelodeon and AOL Time Warner Inc.’s Cartoon Network, as kids programming increasingly shifts from network television to cable TV.

The channel has grown over the last six years from 14 million to more than 80 million households (excluding another 16 million internationally) and is emerging as an important driver of the Disney brand and a key contributor to the company’s bottom line. Though Disney’s ABC network continues to struggle from weak ratings and a fall off in advertising revenue, the Disney Channel’s operating income, derived from cable operator fees, has shown double-digit growth over the last five years. The channel’s worldwide operating income this year will rise an estimated 14% to $250 million, according to one analyst.

The catalyst for the channel’s growth was a decision a decade ago to transform the channel from a mostly premium, subscriber-fee cable service, such as HBO, to a much more widely distributed basic cable network.

As the channel expanded, so did its mission: It began to develop its own identity among pre- and early teens with live-action movies and original series, including “Lizzie McGuire” and “Even Stevens.” The channel also aired music videos promoting teen sensations like Britney Spears and Christina Aguilera.

Disney Channel further broadened its reach two years ago with programs targeting the toddler set, such as “Rolie Polie Olie.” Disney Channel, which had never been competitive in that age group, now is going head to head with Nickelodeon.

The Disney Channel has begun targeting 6- to 11-year-olds with the animated drama “Kim Possible,” which made its debut in June and is tied with Nickelodeon in that demographic, according to Nielsen Media Research. Disney hopes to replicate that success with its spinoff of “Lilo & Stitch.” The animated series, scheduled to air in the early evening hours, is in production and will premiere after the release of the video sequel.

In overall prime-time ratings, however, Disney Channel ranks seventh behind Lifetime, Nickelodeon and TNT.

Increasingly, Disney is drawing on other parts of its business to promote new shows on the Disney Channel. To help launch “Kim Possible,” for example, Buena Vista Home Entertainment included a trailer for the series in the video version of “Spy Kids.” Radio Disney, meanwhile, repeatedly played the theme song from the program.

Disney is using the channel not only to launch blitz advertising campaigns for its feature films--”Lilo” is only the most recent example--but also as breeding ground for new movies. The Disney studio is developing two feature movies based on the popular teen characters from “Lizzie McGuire” and “Even Stevens.” In addition, Disney’s Buena Vista Home Entertainment in August will release a film based on “Rolie Polie Olie.”

Such cross-pollination, in fact, is becoming increasingly common at other large media companies that are looking to spread their entertainment across multiple outlets. Viacom, for example, has developed two movies based on its successful “Rugrats” characters.

The growth of the Disney Channel had made it possible to launch a television series such as “Stitch,” said Anne Sweeney, president of ABC Cable Networks Group.

“Disney Channel has never been stronger and never been better positioned to extend a popular franchise like ‘Lilo & Stitch’ around the world. We’ve got the reach and the relationship with kids where they expect to find great television characters, from Lizzie McGuire and Kim Possible to Rolie Polie Olie and Stanley to--now--Stitch.”

“Lilo” tells the story of a destructive alien who crashed on Earth and is adopted by a lonely Hawaiian girl. The series, which involves virtually the entire cast of writers and actors from the movie, builds on existing characters and will introduce hundreds of new characters. It’s based on a concept that Stitch remains on Earth, living with Lilo and her sister.