Disney Channel Celebrates 20 Years in the Business
Sun April 20, 2003 03:31 PM ET
By Dylan Callaghan
LOS ANGELES (Hollywood Reporter) - It took a 12-year-old girl to transform Disney Channel -- the mighty Walt Disney Co.'s long-struggling maiden cable TV enterprise -- into the powerhouse it has become today.
The girl, as nearly every junior high schooler now knows, is a character named Lizzie McGuire. In January 2001, her eponymous TV series began to chronicle the crushes and crises of a typical seventh-grader. Shortly after its bow, "Lizzie McGuire" became a monster hit with the burgeoning 9- to 14-year-old tween market. This programming jackpot finally vindicated a Disney Channel reinvention strategy begun in the mid-1990s -- a game plan aimed at making the channel a truly relevant entertainment source for a modern generation of kids that Disney hadn't reached before.
"Over the past 10 years, Disney Channel has gone from practically being ignored on the playground circuit to actually setting the agenda for kids' lives," says Gary Marsh, executive vp original programming and production, who has been with the network since 1988.
Marsh agrees that "Lizzie" was exactly what the network desperately needed, but he also insists that the channel's overall strategy -- spearheaded by Anne Sweeney, president of ABC Cable Networks Group and Disney Channel Worldwide, and Disney Channel president Rich Ross -- is what put the network on the path to its current success.
Referring to shows such as "The Famous Jett Jackson," which premiered in 1998, and the hit tween sitcom "Even Stevens," which launched in 2000, Marsh says those earlier shows, as well as newer series such as the animated action-comedy "Kim Possible" and the live-action sitcom "That's So Raven" (which, according to Nielsen Media Research figures, is already outstripping expectations, tying "Lizzie" with kids ages 6-11 and averaging a 4.8 rating since its debut in January), have helped do more than score a one-off hit: They've redefined the credibility of the network.
Targeting the tween market is just one aspect of the network's programming strategy. Just as important to the channel are a pair of younger demographics: 6-11 and 2- to 5-year-old preschoolers. The latter group is offered, among others, "The Wiggles," "Stanley" and "Rolie Polie Olie" in the Playhouse Disney block of programming.
Original movies make up the third significant facet of the Disney Channel programming assault. Last year's debut film "Cadet Kelly" scored the highest marks for any 2002 cable telecast with ages 6-14. The network found similar success last year with "Gotta Kick It Up" and "The Scream Team."
But this cable Cinderella story came from inauspicious beginnings. With slightly more than 700,000 subscribers during its first year, the newly hatched network was little more than a storefront where viewers could pay to view mostly classic Disney movie fare. Even a decade after its April 1983 launch, things had not improved much. Nickelodeon, which had a four-year jump on Disney in entering the cable market, was leaving other kids' programmers in the dust with fresh, soon-to-be franchises such as "The Ren and Stimpy Show" and "Rugrats." With a basic-cable, commercial-supported approach, Nick had already penetrated a staggering 60 million households in 1993 compared to the tepid 4 million homes carrying Disney Channel, which was still primarily a premium, commercial-free service. Although Disney Channel's then-president, John Cooke, saw the writing on the wall and implemented a switch from premium to basic-cable status, the network was still casting about for an overall strategy to make the switch work.
At the time, no one would have guessed that Disney Channel would go on to give Nick a run for its money in many dayparts and beat Cartoon Network overall with an arsenal of wildly popular shows -- shows that were not only true to Disney but considered genuinely cool across America.
But, thanks in large part to Sweeney and Ross -- both brought onboard in 1996 -- the network has done just that. Today, its aggressive affiliate sales campaign has ballooned subscriptions to a critical mass level of 81 million -- more than 20 times the 1993 figure.
"They've done a pretty remarkable job of making the switch to basic cable," Kagan World Media senior analyst Derek Baine says.
According to Baine, Disney Channel has more than tripled its revenue from $240 million in 1993 to $736 million in 2002, all while remaining the only commercial-free basic cable network for children. With $411 million in cash flow, it has also managed to maintain a sky-high cash-flow margin of 56%, well beyond most outlets that run in the 30% range.
One key to such healthy numbers is the king-sized subscription fees the channel charges carriers -- in the 75 cents per subscriber range -- well over the industry average of about 25 cents and the rates commanded by chief competitors Cartoon Network (13 cents) and Nickelodeon (33 cents).
"They're providing more value to their cable customers by not being ad-supported," says Baine, explaining part of the network's ability to command such large fees. "Disney's always had the programming power and the brand power. The only question was how many eyeballs could they get, and would they be able to get in that many homes?" he says.
Disney Channel senior vp affiliate sales Ben Pyne credits the winning subscription growth to customer response. "Cable operators not only noted a real competitive edge but also saw their subscriber base grow at a faster rate than competitors that had not yet launched Disney Channel on basic," he says.
According to Baine, the current level of success wasn't such a sure thing back in the early 1990s. "There certainly was a lot of skepticism: The prediction was that there was going to be more backlash response to the high sub fees," he says, adding that it's ultimately the popularity of Disney Channel's new programming blocks that has supported subscription success. "If you don't have programming, and you go ask a cable operator for carriage renewal at a higher sub rate, the cable operator isn't going to go for it."
According to Ross, penetration has no value without ratings. "It's not how many people you reach, it's how many people you get to watch," he says, crediting Sweeney for "really putting the pedal to the metal" on growing households as well as ratings. The numbers speak for themselves: At the end of February, Disney Channel was No. 1 in primetime for nine consecutive months among kids ages 9-14. Also that month, Disney Channel overtook Cartoon Network in overall daytime viewers with a 1.1 rating, nearly a 20% boost from last year.
With its strong revenue and expansive popularity, Disney Channel has surged in importance within the larger Disney empire. Recognizing a natural when it sees it, Disney's feature film division hopped on the "Lizzie" juggernaut. In May, it will release a feature film based on the show, starring Hilary Duff as its beloved 15-year-old heroine. It's the first feature film Disney has released based on a live-action TV show since the 1950s.
Movies are hardly the end of the story. With the massive breadth of its multidivisional corporation at its disposal, Disney has released two "Lizzie" novels, a clutch of episode novelizations through its book division and two albums through its music label -- not to mention dolls, clothing lines and 50 million packages of Disney-themed Oscar Mayer Lunchables. Preschool shows have also joined in: A straight-to-video "Rolie Polie Olie" movie was released last summer, in addition to repurposed video episodes, books, clothing and plush toys, as well as two Playhouse Disney compilation records.
"A major initiative of Disney Consumer Products is to work more closely with Disney Channel to develop merchandise for some of its popular programming," says Bob Iger, president and chief operating officer of the Walt Disney Co. "One of the important benefits of this strategy is that successful TV shows are sustainable properties that last for years and therefore offer long life cycles for associated merchandise."
Behind all of the merchandising and subscription penetration is a winning programming strategy that Ross describes as "a hammock."
"The master plan was to create a hammock with those two pillars," he says, referring to 2- to 5-year-olds on one side and 9- to 14-year-olds on the other. "We wanted kids (to grow up) being fans of the Disney Channel from the 2-5 group into the 6-9 group, which is the 'hammock' between the two pillars."
Says John Wagner, media director and lead kids negotiator for media buyer Starcom Worldwide: "Anne and Rich have really focused on the programming blocks -- making toddlers and tweens a priority -- and then going out there to get the programming that works. It's reflected in the numbers.
"You take what you know is a clear programming strategy and critical mass, and that's how you make a successful cable network," adds Wagner, who helped negotiate a seven-figure, PBS-style sponsorship deal between McDonald's and Playhouse Disney. An added benefit, he says, is that hot ratings among those age groups have given Disney a "testing ground for programming they might want to bring onto network, where you need to go big from the get-go or go home."
Ross says Disney Channel is not slowing down. According to Nielsen/EDI, the channel's average household rating in 2003 is 0.8, up from 0.6 in 2002. Meanwhile, the indomitable Nickelodeon boasts a 1.3 average household rating, up slightly from 1.2 last year.
"Obviously, I think the goal was to get Disney in the No. 1 slot and make it a 24-7 destination brand," he says, "but we've had success by focusing on what we do, not what others are doing."
Reuters/Hollywood Reporter
Sun April 20, 2003 03:31 PM ET
By Dylan Callaghan
LOS ANGELES (Hollywood Reporter) - It took a 12-year-old girl to transform Disney Channel -- the mighty Walt Disney Co.'s long-struggling maiden cable TV enterprise -- into the powerhouse it has become today.
The girl, as nearly every junior high schooler now knows, is a character named Lizzie McGuire. In January 2001, her eponymous TV series began to chronicle the crushes and crises of a typical seventh-grader. Shortly after its bow, "Lizzie McGuire" became a monster hit with the burgeoning 9- to 14-year-old tween market. This programming jackpot finally vindicated a Disney Channel reinvention strategy begun in the mid-1990s -- a game plan aimed at making the channel a truly relevant entertainment source for a modern generation of kids that Disney hadn't reached before.
"Over the past 10 years, Disney Channel has gone from practically being ignored on the playground circuit to actually setting the agenda for kids' lives," says Gary Marsh, executive vp original programming and production, who has been with the network since 1988.
Marsh agrees that "Lizzie" was exactly what the network desperately needed, but he also insists that the channel's overall strategy -- spearheaded by Anne Sweeney, president of ABC Cable Networks Group and Disney Channel Worldwide, and Disney Channel president Rich Ross -- is what put the network on the path to its current success.
Referring to shows such as "The Famous Jett Jackson," which premiered in 1998, and the hit tween sitcom "Even Stevens," which launched in 2000, Marsh says those earlier shows, as well as newer series such as the animated action-comedy "Kim Possible" and the live-action sitcom "That's So Raven" (which, according to Nielsen Media Research figures, is already outstripping expectations, tying "Lizzie" with kids ages 6-11 and averaging a 4.8 rating since its debut in January), have helped do more than score a one-off hit: They've redefined the credibility of the network.
Targeting the tween market is just one aspect of the network's programming strategy. Just as important to the channel are a pair of younger demographics: 6-11 and 2- to 5-year-old preschoolers. The latter group is offered, among others, "The Wiggles," "Stanley" and "Rolie Polie Olie" in the Playhouse Disney block of programming.
Original movies make up the third significant facet of the Disney Channel programming assault. Last year's debut film "Cadet Kelly" scored the highest marks for any 2002 cable telecast with ages 6-14. The network found similar success last year with "Gotta Kick It Up" and "The Scream Team."
But this cable Cinderella story came from inauspicious beginnings. With slightly more than 700,000 subscribers during its first year, the newly hatched network was little more than a storefront where viewers could pay to view mostly classic Disney movie fare. Even a decade after its April 1983 launch, things had not improved much. Nickelodeon, which had a four-year jump on Disney in entering the cable market, was leaving other kids' programmers in the dust with fresh, soon-to-be franchises such as "The Ren and Stimpy Show" and "Rugrats." With a basic-cable, commercial-supported approach, Nick had already penetrated a staggering 60 million households in 1993 compared to the tepid 4 million homes carrying Disney Channel, which was still primarily a premium, commercial-free service. Although Disney Channel's then-president, John Cooke, saw the writing on the wall and implemented a switch from premium to basic-cable status, the network was still casting about for an overall strategy to make the switch work.
At the time, no one would have guessed that Disney Channel would go on to give Nick a run for its money in many dayparts and beat Cartoon Network overall with an arsenal of wildly popular shows -- shows that were not only true to Disney but considered genuinely cool across America.
But, thanks in large part to Sweeney and Ross -- both brought onboard in 1996 -- the network has done just that. Today, its aggressive affiliate sales campaign has ballooned subscriptions to a critical mass level of 81 million -- more than 20 times the 1993 figure.
"They've done a pretty remarkable job of making the switch to basic cable," Kagan World Media senior analyst Derek Baine says.
According to Baine, Disney Channel has more than tripled its revenue from $240 million in 1993 to $736 million in 2002, all while remaining the only commercial-free basic cable network for children. With $411 million in cash flow, it has also managed to maintain a sky-high cash-flow margin of 56%, well beyond most outlets that run in the 30% range.
One key to such healthy numbers is the king-sized subscription fees the channel charges carriers -- in the 75 cents per subscriber range -- well over the industry average of about 25 cents and the rates commanded by chief competitors Cartoon Network (13 cents) and Nickelodeon (33 cents).
"They're providing more value to their cable customers by not being ad-supported," says Baine, explaining part of the network's ability to command such large fees. "Disney's always had the programming power and the brand power. The only question was how many eyeballs could they get, and would they be able to get in that many homes?" he says.
Disney Channel senior vp affiliate sales Ben Pyne credits the winning subscription growth to customer response. "Cable operators not only noted a real competitive edge but also saw their subscriber base grow at a faster rate than competitors that had not yet launched Disney Channel on basic," he says.
According to Baine, the current level of success wasn't such a sure thing back in the early 1990s. "There certainly was a lot of skepticism: The prediction was that there was going to be more backlash response to the high sub fees," he says, adding that it's ultimately the popularity of Disney Channel's new programming blocks that has supported subscription success. "If you don't have programming, and you go ask a cable operator for carriage renewal at a higher sub rate, the cable operator isn't going to go for it."
According to Ross, penetration has no value without ratings. "It's not how many people you reach, it's how many people you get to watch," he says, crediting Sweeney for "really putting the pedal to the metal" on growing households as well as ratings. The numbers speak for themselves: At the end of February, Disney Channel was No. 1 in primetime for nine consecutive months among kids ages 9-14. Also that month, Disney Channel overtook Cartoon Network in overall daytime viewers with a 1.1 rating, nearly a 20% boost from last year.
With its strong revenue and expansive popularity, Disney Channel has surged in importance within the larger Disney empire. Recognizing a natural when it sees it, Disney's feature film division hopped on the "Lizzie" juggernaut. In May, it will release a feature film based on the show, starring Hilary Duff as its beloved 15-year-old heroine. It's the first feature film Disney has released based on a live-action TV show since the 1950s.
Movies are hardly the end of the story. With the massive breadth of its multidivisional corporation at its disposal, Disney has released two "Lizzie" novels, a clutch of episode novelizations through its book division and two albums through its music label -- not to mention dolls, clothing lines and 50 million packages of Disney-themed Oscar Mayer Lunchables. Preschool shows have also joined in: A straight-to-video "Rolie Polie Olie" movie was released last summer, in addition to repurposed video episodes, books, clothing and plush toys, as well as two Playhouse Disney compilation records.
"A major initiative of Disney Consumer Products is to work more closely with Disney Channel to develop merchandise for some of its popular programming," says Bob Iger, president and chief operating officer of the Walt Disney Co. "One of the important benefits of this strategy is that successful TV shows are sustainable properties that last for years and therefore offer long life cycles for associated merchandise."
Behind all of the merchandising and subscription penetration is a winning programming strategy that Ross describes as "a hammock."
"The master plan was to create a hammock with those two pillars," he says, referring to 2- to 5-year-olds on one side and 9- to 14-year-olds on the other. "We wanted kids (to grow up) being fans of the Disney Channel from the 2-5 group into the 6-9 group, which is the 'hammock' between the two pillars."
Says John Wagner, media director and lead kids negotiator for media buyer Starcom Worldwide: "Anne and Rich have really focused on the programming blocks -- making toddlers and tweens a priority -- and then going out there to get the programming that works. It's reflected in the numbers.
"You take what you know is a clear programming strategy and critical mass, and that's how you make a successful cable network," adds Wagner, who helped negotiate a seven-figure, PBS-style sponsorship deal between McDonald's and Playhouse Disney. An added benefit, he says, is that hot ratings among those age groups have given Disney a "testing ground for programming they might want to bring onto network, where you need to go big from the get-go or go home."
Ross says Disney Channel is not slowing down. According to Nielsen/EDI, the channel's average household rating in 2003 is 0.8, up from 0.6 in 2002. Meanwhile, the indomitable Nickelodeon boasts a 1.3 average household rating, up slightly from 1.2 last year.
"Obviously, I think the goal was to get Disney in the No. 1 slot and make it a 24-7 destination brand," he says, "but we've had success by focusing on what we do, not what others are doing."
Reuters/Hollywood Reporter
