LICENSING: Licensing arm signals Disney's recuperation - The US media empire has turned itself around with licensing deals after a year of disappointments

The past 12 months will go down as Mickey Mouse's annus horribilis. The media empire for which he is the icon has suffered a multitude of blows.

Disney's main US broadcasting network, ABC, has been hit by the advertising recession; its theme park business has been mauled by Americans' post-9/11 fear of flying; and its film studios have failed to pull in a clutch of Oscars. The result is a share price languishing at an eight-year low - $25.40 when P&I went to press - and growing pressure on chairman and chief executive Michael Eisner to turn things round or move on.

Disney's consumer products division is showing more resilience, however.

Incorporating licensing interests, stores, interactive and publishing products, it makes up about 10 per cent of the corporation's £17billion annual sales. In the nine months to 30 June, the profitability of this division was stable year on year, compared with 40-50 per cent drops in its other businesses.

Licensing offsets console decline

Success in the licensing area in particular has helped offset a sharp decline in demand for PC- and console-based games. This contrasts with three years ago, when consumer products were floundering, leading to a closure of many Disney Stores and job cuts.

The turnaround has been ascribed to the appointment of Andy Mooney as president of Disney Consumer Products Worldwide at the end of 1999. A 20-year veteran of Nike, Mooney inherited product agreements with hundreds of companies. But believing that it was easier to maintain quality standards with fewer licensees, he began a radical overhaul, establishing longer-term partnerships with a few global brands.

"His strategy has been to narrow our relationships to a number of key brands, says Stephen Knight, senior vice-president for marketing and brand management at Disney International. "We work with these partners on the creative side to ensure a more direct relationship with customers through these licensed products."

Mooney calls this approach "active rather than "passive licensing.

On the toys side he struck a major deal with Hasbro, while clothing sales have been concentrated in successful big-brand stores such as K-Mart in the US and Marks & Spencer, Tesco and Carrefour in Europe.

But it's the area of "hardlines (food and drink, stationery) that has seen most innovation. Agreements that are understood to be at least 15-year deals have been developed with Kellogg's and Coca-Cola.

The result is new products springing from Disney's core properties such as Kellogg's Winnie-the-Pooh Hunny Bs and Coke's recently rolled out Winnie-the-Pooh Roo Juice. In the US, Kellogg's has developed Mickey's Magic cereals, which change colour on contact with milk.

Despite initial excitement, there is some concern that sales potential may be limited, however.

"Competitors have lowered prices and it (Disney) is finding it tough to charge a premium and leverage the Disney-themed brand profitably in the long term, says a US leisure analyst.

Don Pettit, chief executive of brand identity firm Sterling Group, adds: "By extending the characters into so many channels, Disney may be taking these icons and devaluing them by its omnipresence."

But Disney's film studios are now turning out powerful new properties to maintain the interest of kids. Following the success of Monsters, Inc. earlier this year, new animation Lilo & Stitch is proving a huge hit.

And with Treasure Planet opening in the UK next year, Knight is confident this is one side of Disney that will continue to raise a smile.


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