From the Orlando Sentinel 6/14/04
As movie hits remain elusive, Disney-themed Happy Meals are hardly selling like hotcakes
When it comes to its relationship with Walt Disney Co., McDonald's Corp. is hardly lovin' it.
The world's largest fast-food chain wants to revamp its super-sized movie, home-video and theme-park promotion deal with Disney. Discontent with the pact is bubbling up to headquarters in Oak Brook, Ill., from powerful franchisees, who own most of the 30,000-plus McDonald's restaurants worldwide.
One of the beefs is that Disney isn't churning out animated blockbusters as it once did. Hit movies for kids drive successful fast-food promotions, enticing children to drag their parents into restaurants for the toys and other items that so often accompany cheeseburgers and fries.
When the Disney-McDonald's marketing deal was sealed in 1996, Disney was fresh off making winners such as The Lion King and Aladdin. Since then, it has been hits and misses for franchisees, who must purchase movie-related Happy Meal toys and pay for local advertising.
Although Lilo and Stitch and Pirates of the Caribbean were successful, franchisees also were saddled with promoting the outright duds Treasure Planet and Atlantis: The Lost Empire. Another gripe: Much of McDonald's promotional schedule each year is spoken for by Disney, with half of the Happy Meals tied to Disney themes.
"The biggest complaint I hear is that the alliance doesn't give them any flexibility," said ________ Adams, a consultant to 500 McDonald's franchisees. "They get locked into whatever Disney decides to lock them into." He noted that franchisees must promote not only major new releases, but rereleases of classic films as well as direct-to-video films such as this year's Lion King 1½.
Said one franchisee, who asked not to be identified because of concerns about angering both companies: "It's a better deal for Disney than it is for McDonald's. We'd like to get the cream of the crop. There's been some good stuff out there that's gone to our competitors."
Burger King franchisees, for example, have the pleasure of helping plug DreamWorks SKG's new smash Shrek 2.
McDonald's spokesman Walt Riker said the company expects to continue its "productive relationship" with Disney. "It would be inappropriate to speculate on what might unfold," he added, "but nobody should jump to conclusions."
The terms of the McDonald's-Disney pact -- which expires in January 2007 -- call for McDonald's to pay about $100 million in royalties to Disney and to conduct about a dozen promotions a year for Disney films, videos, TV properties and theme parks. McDonald's agreed to sponsor the Dinoland section of Orlando's Animal Kingdom theme park; Disney promised to allow McDonald's to open restaurants at Disney parks.
McDonald's Chief Executive Charlie Bell last month told reporters after the company's annual meeting in Orlando that the agreement contained "some things we both like about it and some things we both don't like about it." Chief Marketing Officer Larry Light added that "a 10-year partnership is a very long time for us."
For his part, Disney President Bob Iger recently called the relationship "mutually beneficial" and said both sides had an interest in preserving their ties. But he said also that "for both of us the world has changed, so any new relationship would reflect that."
The thinking at Disney is that it might no longer be wise to restrict its promotions to a single fast-food chain, according to a person close to the company. McDonald's is testing the waters for nonexclusive marketing arrangements with other studios and entertainment companies, several rival studios executives said.
And McDonald's is changing its marketing strategy. Seeking to rejuvenate its brand, the chain is pushing healthier meals and aiming for teenagers and young adults, as evidenced by its hip-hop-themed "I'm Lovin' It" ad campaign. McDonald's recently announced it was joining Japan's Sony Corp. to give away free music downloads.
"What this is about is really escape from Kiddie Land," said Greenwich, Conn., marketing strategist Jack Trout. "These guys are trying to broaden their bases away from the 5- to 6-year-old crowd. . . . Their strategy doesn't line up with Disney's."
The strains in the relationship with McDonald's come at an inopportune time for Disney Chief Executive Michael Eisner, who is under fire from critics. He has been butting heads with Bob and Harvey Weinstein, head of Disney's specialty film unit Miramax, over financial and creative issues. And he has been blamed by some for letting a lucrative partnership with Pixar Animation Studios deteriorate. Pixar, which produced for Disney such hits as Toy Story and Finding Nemo, ended talks to renew its contract with Disney.
With the McDonald's partnership, Disney can use the extraordinary reach of the chain to promote and advertise movies both in stores and through ads funded by the fast-food company. That's especially valuable to a studio at a time when the costs to make and sell films are soaring.
"For them to lose McDonald's would be a huge loss," said Peter Sealey, adjunct professor of marketing at the University of California, Berkeley. "When McDonald's promotes a film, it exceeds the studio's budget."
The Disney-tilting deal was forged at a time when McDonald's had few cards to play. The companies had worked together in the 1980s, but relations soured over disagreements involving some film promotion. Burger King was more than eager to step in, and its Lion King promotion for Disney remains the industry's high-water mark. After that, McDonald's executives promised franchisees they would get Disney back.
"There was truly a mission to bring these two companies back together because they both embraced the same family audience," said Brad Ball, a former head of U.S. marketing for McDonald's who now runs his own film-production and marketing firm.
The arrangement at first was successful. Some of the top selling Happy Meals featured Disney themes, including Inspector Gadget, 101 Dalmatians and Winnie the Pooh. So were Disney-released Pixar films such as Toy Story 2.
But much has changed for both companies. Pixar's Finding Nemo, DreamWorks' Shrek and 20th Century Fox's Ice Age proved that Disney doesn't own the blockbuster animation market.
McDonald's chief rival, Burger King, has struggled.
"The reality is this deal was done in 1996 at a time when McDonald's was on their knees and Disney was running real strong," said consultant Adams said. "It's an entirely different negotiating environment."
Still, few people familiar with the relationship think McDonald's will break with Disney altogether: More likely, it will seek a less-restrictive deal allowing it to venture beyond the Magic Kingdom.
"Nobody wants to snub Disney," Adams said, "but there's no reason to keep an exclusive arrangement."
Under a longtime marketing alliance, about half of the Happy Meals sold at McDonald's are tied to the promotion of a Disney film, video, TV property or theme park. Below are some of the Happy Meal movie tie-ins that have been successful and others that have not fared well for McDonald's franchisees.
HITS
101 Dalmatians (1996)
Toy Story 2* (1999)
Finding Nemo* (2003)
Pirates of the Caribbean (2003)
MISSES
The Emperor's New Groove (2000)
Atlantis: The Lost Empire (2001)
Treasure Planet (2002)
*Produced with Pixar Animation Studios
As movie hits remain elusive, Disney-themed Happy Meals are hardly selling like hotcakes
When it comes to its relationship with Walt Disney Co., McDonald's Corp. is hardly lovin' it.
The world's largest fast-food chain wants to revamp its super-sized movie, home-video and theme-park promotion deal with Disney. Discontent with the pact is bubbling up to headquarters in Oak Brook, Ill., from powerful franchisees, who own most of the 30,000-plus McDonald's restaurants worldwide.
One of the beefs is that Disney isn't churning out animated blockbusters as it once did. Hit movies for kids drive successful fast-food promotions, enticing children to drag their parents into restaurants for the toys and other items that so often accompany cheeseburgers and fries.
When the Disney-McDonald's marketing deal was sealed in 1996, Disney was fresh off making winners such as The Lion King and Aladdin. Since then, it has been hits and misses for franchisees, who must purchase movie-related Happy Meal toys and pay for local advertising.
Although Lilo and Stitch and Pirates of the Caribbean were successful, franchisees also were saddled with promoting the outright duds Treasure Planet and Atlantis: The Lost Empire. Another gripe: Much of McDonald's promotional schedule each year is spoken for by Disney, with half of the Happy Meals tied to Disney themes.
"The biggest complaint I hear is that the alliance doesn't give them any flexibility," said ________ Adams, a consultant to 500 McDonald's franchisees. "They get locked into whatever Disney decides to lock them into." He noted that franchisees must promote not only major new releases, but rereleases of classic films as well as direct-to-video films such as this year's Lion King 1½.
Said one franchisee, who asked not to be identified because of concerns about angering both companies: "It's a better deal for Disney than it is for McDonald's. We'd like to get the cream of the crop. There's been some good stuff out there that's gone to our competitors."
Burger King franchisees, for example, have the pleasure of helping plug DreamWorks SKG's new smash Shrek 2.
McDonald's spokesman Walt Riker said the company expects to continue its "productive relationship" with Disney. "It would be inappropriate to speculate on what might unfold," he added, "but nobody should jump to conclusions."
The terms of the McDonald's-Disney pact -- which expires in January 2007 -- call for McDonald's to pay about $100 million in royalties to Disney and to conduct about a dozen promotions a year for Disney films, videos, TV properties and theme parks. McDonald's agreed to sponsor the Dinoland section of Orlando's Animal Kingdom theme park; Disney promised to allow McDonald's to open restaurants at Disney parks.
McDonald's Chief Executive Charlie Bell last month told reporters after the company's annual meeting in Orlando that the agreement contained "some things we both like about it and some things we both don't like about it." Chief Marketing Officer Larry Light added that "a 10-year partnership is a very long time for us."
For his part, Disney President Bob Iger recently called the relationship "mutually beneficial" and said both sides had an interest in preserving their ties. But he said also that "for both of us the world has changed, so any new relationship would reflect that."
The thinking at Disney is that it might no longer be wise to restrict its promotions to a single fast-food chain, according to a person close to the company. McDonald's is testing the waters for nonexclusive marketing arrangements with other studios and entertainment companies, several rival studios executives said.
And McDonald's is changing its marketing strategy. Seeking to rejuvenate its brand, the chain is pushing healthier meals and aiming for teenagers and young adults, as evidenced by its hip-hop-themed "I'm Lovin' It" ad campaign. McDonald's recently announced it was joining Japan's Sony Corp. to give away free music downloads.
"What this is about is really escape from Kiddie Land," said Greenwich, Conn., marketing strategist Jack Trout. "These guys are trying to broaden their bases away from the 5- to 6-year-old crowd. . . . Their strategy doesn't line up with Disney's."
The strains in the relationship with McDonald's come at an inopportune time for Disney Chief Executive Michael Eisner, who is under fire from critics. He has been butting heads with Bob and Harvey Weinstein, head of Disney's specialty film unit Miramax, over financial and creative issues. And he has been blamed by some for letting a lucrative partnership with Pixar Animation Studios deteriorate. Pixar, which produced for Disney such hits as Toy Story and Finding Nemo, ended talks to renew its contract with Disney.
With the McDonald's partnership, Disney can use the extraordinary reach of the chain to promote and advertise movies both in stores and through ads funded by the fast-food company. That's especially valuable to a studio at a time when the costs to make and sell films are soaring.
"For them to lose McDonald's would be a huge loss," said Peter Sealey, adjunct professor of marketing at the University of California, Berkeley. "When McDonald's promotes a film, it exceeds the studio's budget."
The Disney-tilting deal was forged at a time when McDonald's had few cards to play. The companies had worked together in the 1980s, but relations soured over disagreements involving some film promotion. Burger King was more than eager to step in, and its Lion King promotion for Disney remains the industry's high-water mark. After that, McDonald's executives promised franchisees they would get Disney back.
"There was truly a mission to bring these two companies back together because they both embraced the same family audience," said Brad Ball, a former head of U.S. marketing for McDonald's who now runs his own film-production and marketing firm.
The arrangement at first was successful. Some of the top selling Happy Meals featured Disney themes, including Inspector Gadget, 101 Dalmatians and Winnie the Pooh. So were Disney-released Pixar films such as Toy Story 2.
But much has changed for both companies. Pixar's Finding Nemo, DreamWorks' Shrek and 20th Century Fox's Ice Age proved that Disney doesn't own the blockbuster animation market.
McDonald's chief rival, Burger King, has struggled.
"The reality is this deal was done in 1996 at a time when McDonald's was on their knees and Disney was running real strong," said consultant Adams said. "It's an entirely different negotiating environment."
Still, few people familiar with the relationship think McDonald's will break with Disney altogether: More likely, it will seek a less-restrictive deal allowing it to venture beyond the Magic Kingdom.
"Nobody wants to snub Disney," Adams said, "but there's no reason to keep an exclusive arrangement."
Under a longtime marketing alliance, about half of the Happy Meals sold at McDonald's are tied to the promotion of a Disney film, video, TV property or theme park. Below are some of the Happy Meal movie tie-ins that have been successful and others that have not fared well for McDonald's franchisees.
HITS
101 Dalmatians (1996)
Toy Story 2* (1999)
Finding Nemo* (2003)
Pirates of the Caribbean (2003)
MISSES
The Emperor's New Groove (2000)
Atlantis: The Lost Empire (2001)
Treasure Planet (2002)
*Produced with Pixar Animation Studios
