Marketing

THE MAGIC’S BACK

3/23/2007 8:08 PM Eastern

The brown-haired actress sits in a director’s chair, casually dressed in jeans. She is, however, sporting a million-dollar smile on the set of her popular scripted series.

She takes a sip of water and contemplates the fact that she is one of the most recognizable celebrities in the world. The question: Did she ever believe she would become the star of the best-performing show on the year’s No. 1-rated primetime cable network?

“No way,” the actress says in a husky Tennessee twang, clasping her hands together. “It was totally like a shock to me.”

What was a surprise to 14-year-old Miley Cyrus, who has the title role in Disney Channel’s original series Hannah Montana, pretty much sums up the magic carpet ride the Disney Channel has taken since last year.

Only a decade ago, the 90 million-subscriber network was a non-descript pay service known mostly for music concerts featuring the likes of teen boy band ’N Sync. Today, it is one of cable’s most successful purveyors of youthful entertainment on cable television, over broadband video and in digital music.

Disney’s New Kingdom: Tweens
In the last decade, viewership of Disney Channel has multiplied 14-fold with kids between the ages of 9 and 14.
Primetime Viewership (in thousands)
All Viewers Ages 9-14
1996 484 66
1997 960 185
1998 1,167 268
1999 1,307 345
2000 1,381 451
2001 1,623 609
2002 1,610 601
2003 1,996 722
2004 1,952 678
2005 2,122 737
2006 2,544 927
Growth (1996-2006) 5.3X 14.0X
Source: Nielsen Media Research

TRUE CONTRIBUTION

With its formula of providing family friendly, musically-charged series and movies, the network now competes for the lion’s share of basic-cable viewers. Its rivals are aimed primarily at older audiences, such as USA Network and TNT. In fact, for the first time in its 23-year history, Disney Channel in 2006 finished first in the yearly primetime household ratings race, tying USA Network with a 2.2 rating.

Disney is also basic cable’s No. 1 network in primetime among kids 9 to 14 for the last six years and among kids 6 to 11 since 2002.

And Disney Channel’s marketing strategy of offering music videos, show episodes and talent interviews via Web site disneychannel.com and Apple Inc.’s iTunes online store has brought the network previously unimagined success beyond cable.

Which means that now “Disney Channel is a true contributor” to The Walt Disney Co.’s entertainment enterprise, said Disney Media Networks co-chairman Anne Sweeney.

How big a contributor? Kagan Research estimates that the commercial-free network itself generated $916 million of Walt Disney’s overall revenue of $34.3 billion in 2006. That’s 12% more than the $812 million the channel generated in 2005 — although it’s a still a few football fields shy of the $5 billion in revenue sports juggernaut ESPN delivered to Walt Disney last year.

More importantly, the Disney Channel brand — which, since its inception in 1983, has been linked to Mickey Mouse, Cinderella and other animated Disney characters made famous generations ago — is all of a sudden cool and hip to a new generation of young Americans.

“I always thought we could become a major player in the kids cable universe,” said Disney Channel Worldwide president Rich Ross. “But we could not have imagined that we’d ever be at the frontline of the zeitgeist of America.”

Here’s how Disney made its run at the zeitgeist over the past 15 months.

BREAKTHROUGH YEAR

Viewership had been growing consistently over the past three years on the backs of such live-action series as Lizzie McGuire, Even Stevens and That’s So Raven; animated shows such as Kim Possible and The Proud Family; and original films Cadet Kelly and The Cheetah Girls.

But it wasn’t until the January 2006 debut of original movie High School Musical and the March premiere of Hannah Montana that Disney Channel found its new magic.

With an ensemble cast of relatively unknown teenage actors, High School Musical became this generation’s West Side Story. The musical about the dream of a basketball star and a pretty science geek singing together in their high school play became a cultural phenomenon.

The movie’s premiere drew 7.2 million viewers, then a record for any made-for-Disney Channel film. That, though, has since been surpassed by three subsequent Disney Channel films: the August 2006 Cheetah Girls 2 (8.1 million), the October 2006 Return to Halloweentown (7.8 million) and the January 2007 Jump In! (8.2 million).

Overall, Musical has drawn 43 million viewers in the U.S. and over 100 million worldwide.

The soundtrack was also a blockbuster, selling 3.7 million units in 2006 in the U.S., according to Nielsen SoundScan.

Hannah Montana proved to be an even bigger cultural breakthrough. The series, about an ordinary tween-aged girl who doubles as a teen-idol rock star, has averaged 2.6 million viewers since debuting in March 2006.

The October release of the soundtrack album was the first from a television show ever to debut at No. 1 on the Billboard album chart. The Hannah Montana album has since sold more than 2 million units.

That became the fuel for a merchandising bonanza. Sales of Hannah Montana-branded throw pillows, T-shirts and diaries helped the network generate $72 million in overall merchandising revenue in 2006, according to Kagan Research. That was nearly four times the network’s $19 million take in 2005.

This year also has been magical. The Jan. 12 premiere of rope-skipping movie Jump In! drew an astounding 8.2 million viewers, setting a Disney Channel original-movie viewership record for the third time in a year. That same night, the network’s debut of Cory In the House — a spinoff of the network’s popular That’s So Raven — became the net’s most-watched original series premiere ever with 7.6 million viewers.

“The Disney Channel has figured out a formula for creating TV shows and made for TV films that really appeals to young viewers,” said Eric Deggans, TV critic for the St. Petersburg Times. “It’s a very profitable and successful media machine that speaks directly to tweens through TV, film and music.”

LONG JOURNEY TO THE TOP

A decade ago, Disney Channel was averaging 484,000 viewers in primetime, compared to Nickelodeon’s 1.6 million viewers.

Disney was attempting a difficult transition from an average $10-per-month premium channel to a basic service when it tapped Sweeney, the former FX CEO, to turn its fortunes around.

“When I got to Disney, we had 10 million basic homes and 4 million [premium subscribers], but the problem was that the programming model was still a pay TV model,” she said.

Translation: the network’s programming message was targeted to adults and not kids. So instead of original programming aimed at pre-teens, the network mostly featured preschool programming, acquired movies and concerts with the likes of former “Mouseketeers” Britney Spears and Christina Aguilera — acts that kids could watch but were more appealing to adults.

“As a pay service, you’re really programming to some degree to the billpayer … you’re making sure there’s perceived value for the mom and dad that’s paying for the service,” said Disney Channel Worldwide entertainment president Gary Marsh.

“As we evolved into a basic service the focus for the audience changed. By necessity we became a kid-driven, family-inclusive service rather than an adult driven, family-friendly service,” Marsh added.

That meant developing new, original programming. Sweeney, Marsh and Ross — who was heading up original programming — set out to create new series and movies that would appeal to young viewers.

But not just any young viewer: Ross said the network needed to find a niche that wasn’t being served by kids TV champ Nickelodeon. So it decided to target tweens: kids aged between 9 and 14.

“To fight tooth-and-nail [with Nickelodeon] for 9 and 10 years olds would be very tough,” he said. “If we [did] this right, we believed that preschoolers would grow into this channel, tweens and younger siblings would watch the channel and we would have a fully fleshed out audience.”

What did tweens want to watch? Nickelodeon and Cartoon Network were successful reaching kids 6 to 10 by developing cute, nonthreatening animated content such as Rugrats and The Powerpuff Girls. MTV owned the teenager with irreverent shows such as Beavis and Butt-head, full of potty jokes and adult language.

Marsh said the network had to create content that was more emotionally stimulating than traditional animated kids fare, but not too mature or sexually-oriented.

Each show had to feature characters that represent real kids who live in the real world; generate humor organically and not artificially, through “body-part humor”; and help kids navigate their lives.

Further, each storyline of every original movie and series has to be optimistic, hopeful and represent an age-appropriate journey.

“Disney wants to make sure that its brand is a place where parents know that they can put their kid in front of this and they’re going to be shown positive stories,” said Michael Poryes, creator of That’s So Raven and Hannah Montana.

Disney’s attention to such content earned the network a “seal of approval” from one of cable’s harshest critics: the Parents Television Council.

“It is apparent that Disney Channel’s commitment to quality programming extends to what I would call the whole child, meaning children of all ages, as reflected by age-appropriate programming for all its dayparts,” said PTC president Tim Winter.

ATTENTION TO DIGITAL

Paramount to Disney’s success was its desire to ride the digital revolution. Sweeney said the network last year recognized that it had to reach out to its quirky and busy tween audience beyond the boob tube to be successful. With tweens and teens spending hours each day surfing the Internet via broadband and listening to music via iPods and other portable media players, Disney knew it had to put its stars and products there to be successful.

Sweeney insisted that iTunes offer episodes from That’s So Raven and The Suite Life of Zack and Cody, along with ABC hits Desperate Housewives and Lost, as part of its revolutionary deal with Apple in October 2005.

“Once we started to realize who these tweens were and what they were doing, we adapted to change,” said Sweeney.

Not only has Disney embraced new media, it’s used its Disneychannel.com broadband site and iTunes as marketing candy to draw tweens to its network original movie and series premieres. Disney last summer began regularly airing complete episodes of That’s So Raven, Hannah Montana and Kim Possible on its Web site (disneychannel.com), for tweens to watch at their convenience.

In addition, the Web site features online games such as “The Pool Invasion” where users can shoot hoops with Zack and Cody by pressing certain buttons, as well as get opportunities to e-mail Raven-Symone and other Disney stars.

The result: Disney drew more than 13.8 million unique viewers per month and received more than 5.8 billion page views, up from 4.2 million uniques and 10.6 million page views in 2005, according to Disney.

Disney used its distribution deal with iTunes to get the early word out on High School Musical by offering the soundtrack via the online platform prior to the movie’s debut.

“Kids started to get the music, but the only place to get them was on iTunes,” Marsh said. “We drove a storm of kids to iTunes, and as a result, HSM was the number one album on iTunes for three weeks. That was a product of great music and lack of availability of the physical record.”

Marsh says Disney’s Internet marketing strategy hasn’t cannibalized its network audience — Hannah Montana fans are watching Miley Cyrus perform both on broadband and cable in sizable numbers.

“Everyone is looking at the windows to maximize exposure but not to overexpose,” Marsh said. “You want to give them something fresh, special and exclusive that’s built for that platform, while at the same time still keep the appetite strong for embracing that program on a subsequent platform.”

HOW HIGH IS UP?

While Hannah Montana might be queen of the Disney castle, Mickey Mouse and Donald Duck aren’t in the dungeon. The network last year introduced a new generation of kids to those veteran Disney characters through Mickey Mouse Clubhouse, a computer-generated animated series, televised during its morning “Disney Playhouse” pre-school block.

And kids are watching. “Pent-up demand,” as Ross puts it, helped Mickey Mouse Clubhouse propel Disney’s total viewers from 6 a.m. to 12 p.m. to a record 1.1 million in 2006. That trailed only the 1.9 million viewers watching Nickelodeon’s “Nick Jr.” toddler block.

The network will introduce classic Disney characters to today’s viewers with the fall debut of My Friends Tigger & Pooh, a computer-generated animation series featuring Winnie-the-Pooh and other fabled characters from Hundred Acre Wood.

For the main channel, Disney has several series in development, including Wizards, in which three siblings engage in typical family squabbles with one difference — they’re all wizards in training, but will only retain the powers until age 18.

On the movie side, the network will roll out sequels to its 1999 surfing movie Johnny Tsunami and its 2005 screamer Twitches.

And later this summer comes the mother of all sequels, High School Musical 2.

And just in case Disney needs a ratings boost, they could ask Miley Cyrus to get out of her chair. The feisty teenager says she’d like to star in a Disney movie, eventually.

Can you say cha-ching? Disney Channel now does.

September