The Mouse That Roared

Interesting article on how Walt Disney is dragging its marketing and licencing deals for merchandising into the modern age from the New York Times (August 30, 2004). Despite Disney being a cultural bohemeth, it is amazing how reactive approach they had taken previously.

It also makes you wonder wthether this new commercial reality will prevail in bringing Pixar back into the Disney fold?

A Nike Veteran Adds Some Swoosh to Disney’s Tired Mouse

By LAURA M. HOLSON

OLLYWOOD, Calif. Aug. 29 – “Never underestimate the power of a free T-shirt,” Andrew P. Mooney, the chairman of the Walt Disney Company’s consumer products division, joked as bikini-clad sunbathers dove into a pool at The Standard hotel here last week.

Mr. Mooney was quoting Philip H. Knight, the charismatic founder of Nike, with whom Mr. Mooney worked for 20 years. But he was referring specifically to a promotion he spearheaded in 2001, hoping to get celebrities like Jennifer Garner and Sarah Jessica Parker to wear Mickey Mouse T-shirts and give the character a more contemporary appeal.

It was a hit. Retail sales of the retro T-shirts have doubled annually since their introduction, and Dolce & Gabbana has designed a $1,400 sequined Minnie Mouse T-shirt, to be in stores this fall.

Mr. Mooney shook his head and laughed. “Who would have thought?” he said.

It was the kind of “out of the ordinary” thinking that Disney needed, he said, to revive its consumer products division, which had been eroding since its peak in 1997.

The consumer products division provides only a small part of Disney’s overall revenue, about 9 percent. But toys, costumes and backpacks have a life far beyond the movie theater. And Mr. Mooney hopes to turn Mickey and company into the Martha Stewart of bed, books and apparel for children, trading as much on Disney’s reputation for quality (a draw for parents) as on its characters’ appeal.

In effect, analysts said, he is trying to do for Disney’s consumer products business what Mr. Knight did for Nike: turn the Disney name into a lifestyle brand.

Since 1999, when Mr. Mooney joined Disney, the publishing group has inaugurated its first original comic book series – W.I.T.C.H., a collection of stories about teenage girls with supernatural powers. The series sells well worldwide, and is being developed as a television show for Disney’s cable networks. Mr. Mooney and his team made being a princess both hip and profitable: the Disney Princess line of costumes and accessories will earn $2 billion this year in retail sales and spawned a series of princess-related events at Disney’s theme parks.

“For the first time there seems like there is a coherent plan,” said Tom Wolzien, a media analyst at Sanford C. Bernstein & Company. “We’ll see how it works, but so far the results under his tenure are good.”

Not every new idea is a hit, of course. A few years ago, Disney tried to market, under the Always Fresh label, women’s nightshirts and T-shirts, including one depicting a suggestively posed Snow White and the phrase, “Attracts Strange Little Men.” Reminded of the unsuccessful venture, Mr. Mooney groaned. “We were young,” he said, adding, “You have to undergo a degree of chance if you want to succeed.”

And Mr. Mooney admits he has a long way to go to turn around the division. In its heyday in 1997, the consumer products division had $893 million in operating income and more than 4,200 licensees who sold products related largely to Winnie the Pooh and Mickey Mouse, as well as the company’s popular animated movies, like “Snow White” and “The Lion King.” The company had 749 Disney Stores worldwide.

But when the retail market declined, so did profits. Disney Stores had expanded into second- and third-tier malls, and those stores quickly showed losses as the economy sputtered. The quality of Disney-branded products was suffering as well; the Disney name could be found on almost anything. By 2000, operating income had dwindled to $386 million and even Mickey Mouse’s popularity was showing wear.

Mr. Mooney, 49, had his work cut out for him. First, he halved the number of licensees. Then he began actively pursuing companies Disney wanted to work with, rather than waiting for them to call, as his predecessors had done. He also began selling Disney’s underperforming stores and seeking high-end retailers like Fred Segal in Los Angeles to sell specialty products. Most important, he strengthened Disney’s relationship with large retailers; the division opened a sales office in Bentonville, Ark., where Wal-Mart, the country’s biggest and most influential mass retailer, is based.

Now, four years later, the consumer products division earned $388 million in operating income in the first three quarters of 2004, which already puts it ahead of 2003. Industry analysts predict that operating income could reach $511 million for the fiscal year. Further, Disney has signed a nonbinding letter of intent to sell its more than 300 stores in the United States to The Children’s Place retail chain.

“It’s kind of been ‘show me the money’ time,” Mr. Mooney said.

One of Mr. Mooney’s major initiatives is to expand into clothing and household goods like bed linens that will rely on the Disney reputation, but not Disney characters. Next spring, the company plans to introduce, under the Disney Denim brand, pants and jean jackets that have whimsical elements like pocket fabric inspired by cartoon strips.

Parents who do not want to dress their children in head-to-toe Mickey Mouse can mix and match, Mr. Mooney said. Retailers also receive a break, paying a royalty fee of 5 percent on Disney Denim instead of the 10 percent they usually pay to sell apparel with Disney characters. Mr. Mooney hopes to expand the offering into linens and other household products.

But lifestyle products with an untraditional flair are what seem to excite Mr. Mooney most. At Fred Segal in Los Angeles, Disney recently tested Snap watches, which have interchangeable faces and wristbands and are based on Disney characters but with a hipper, more urban appeal. In his interview at the hotel, Mr. Mooney held up a pink T-shirt from the Disney Cuties line for young girls and teenagers, introduced 15 months ago. The shirt was printed with a blue and white Eeyore outlined in thick black lines, more anime-style than conventional Disney animation.

“This is Japanese anime meets the library,” said Mr. Mooney, a grin sliding across his face. “We started in T-shirts and now we’re making pillows and cellphone cases. We are always looking for sustainable ideas that cross all lines of business.”

Mr. Mooney’s strategy is dependent on consumer spending, of course, and teenagers are among the most capricious shoppers. Revenues also come from merchandise based on animated movies created by Disney’s joint partner, Pixar Animation Studios, will end, too, if the relationship ends, as expected, in two years.

Mr. Mooney said the shelf life of trend-driven products was six months to two years, and could be tracked through four urban centers: first Tokyo, then London, New York City and Orange County, Calif. At Zakka shops in Tokyo, which sell pop culture items, Mr. Mooney said Winnie the Pooh was a hot seller among teens last year. Since then, Pooh has been replaced by Marie, the mischievous gray kitten from the animated film “The Aristocats,” and, more recently, Alice in Wonderland.

Disney’s most successful new product to date is the Disney Princess line of dresses, tiaras and dolls. The idea was quite simple: bring together the most popular female animated characters, like Snow White, Jasmine (from “Aladdin”) and Cinderella, and sell them as a group with their own costumes and accessories.

Now princess-themed breakfasts at the Disney resorts, which began in 2002, sell out months in advance. The success of the Disney Princess line inspired a new Disney Fairies line (led, of course, by Tinkerbell), which will include books and a direct-to-video movie. And, in Japan, 20,000 mothers and daughters this year paid $150 each to attend seminars where they learned to drink tea like, well, princesses.

“We’ve opened the creative sandbox,” Mr. Mooney said.

He said the consumer products business was growing faster outside the United States, and products were being introduced in Japan or Europe well before they hit American shores. That was the case with Disney’s new W.I.T.C.H. books, which chronicle the lives of five teenage girls who spend their days worrying about boys and friends and their nights fighting evil-doers. (The initials stand for their first names.)

The comic books were introduced in Italy in 2001 and now sell a million copies worldwide each month. The first W.I.T.C.H. book was introduced as a graphic novel in the United States in June this year. It has already sold 650,000 copies, Mr. Mooney said.

Next year, Disney plans to air a W.I.T.C.H. animated television show both in Europe and in the United States on the company’s cable stations. The company also recently released in Italy its first issue of another comic book, “Kylion,” the story of a group of space-traveling children who land on a strange planet and must survive there. While there are no plans yet to develop the property for television, Mr. Mooney said his team had been working with the television group to develop adaptable plot lines.