After a decade of half-hearted attempts, the Magic Kingdom is successfully extending its powers into the rapidly emerging realm of interactive computing.
While other Hollywood studios are still having trouble turning their film properties into multimedia profits, Walt Disney Co. has swept in and dominated the fastest-growing segment of the market: the lucrative business for children's "edutainment" titles.
In December alone, Disney had the top three best-selling educational software titles, according to Reston, Va.-based researcher PC Data.
Aggressive marketing, a captive audience of families enthralled by Disney characters and a new generation of home computers that play to Disney's strengths in music and animation have all combined to make Disney a winner.
"Disney has cracked the code in a substantial way," says Dennis Cloutier, vice president of sales at Sierra Online, a Disney competitor in the multimedia business. "They have the distributors, the marketing muscle and the intellectual property, and they're willing to commit resources long-term."
Says Sally Edmark, who founded Edmark, one of the most respected producers of educational titles: "In the focus groups we've done, parents say kids love the Disney stuff."
But analysts and industry observers say Disney's next challenge is to learn more about the world of interactivity so it can improve the quality and originality of its titles.
"When someone says Disney, I don't know what the quality is going to be," says Warren Buckleitner, editor of the Ypsilanti, Mich., newsletter Children's Software Revue. "It could be fabulous, or it could be that they should have kept it on video."
While Disney is a creative leader when it comes to animation, in the computer market, "they are treating it as a merchandising venue rather than as an art form," says Ron Gilbert, co-founder of Humongous Entertainment, a widely respected children's CD-ROM producer.
Disney has yet to make major inroads into other major segments of the CD-ROM software business--notably the PC game business, where the technology is more important than characters in selling titles. While the edutainment market has doubled in the last two years to about $500 million, the CD-ROM and video game business is several times larger.
Still, Disney has startled the industry with its recent success in the educational arena, particularly in light of its weaknesses. In the early 1980s, Disney licensed its characters for video games but refused to invest its own money. The company finally created a separate software division in 1989 and worked with experienced game makers to put out two successful video games on cartridge, Aladdin and The Lion King. But in part because the software division was part of the consumer products division that sells Disney character merchandise, the company never built on its success.
It wasn't until 1994--when Disney Chairman Michael Eisner put his weight behind the CD-ROM business by creating Disney Interactive--that Disney seriously tackled the market. That Christmas, Disney came out with a big-budget CD-ROM based on "The Lion King" movie.
Unfortunately, there were glitches in the product. Angry parents who could not get the program to work or customer support on the phone flooded the company with complaints. Nevertheless, the product was a breakthrough for the industry, selling 500,000 titles in one year. Until The Lion King, "nobody thought we could break the 150,000 title barrier," says Gilbert of Humongous.
Disney overhauled its customer service operations and increased product testing to remove glitches. To prevent teary-eyed children and angry parents on Christmas morning, it started including wrapping in the CD-ROM boxes.
"We told people to open the product and test-drive it before wrapping it up and putting it under the tree," says Carolyn O'Keefe, a Disney Interactive marketing vice president. Disney also distributed booklets to help parents buy and install software.
To attract customers, Disney sent 6 million mailers to members of Burger King's Kids Club, offering free samples of its CD-ROM titles. The company was also among the first to use television advertising to sell CD-ROMs.
Most important, Disney fully leveraged the strength of its animated films. Each CD-ROM title is centered on a popular Disney film and is narrated by one of the main characters, typically using the same actor or actress for the voice. Children often identify closely the characters on the computer with the films they love, often talking to the characters on the screen.
Disney also uses the marketing power of its animated movies to help sell CD-ROMs. When 20 million copies of the animated movie "The Aristocats" are released next month, they will come with a trailer promoting the CD-ROM version of "Toy Story" that will be released at the same time. The "Toy Story" CD-ROM, which will be made by Pixar Studios, the high-tech company that produced the film, is also expected to be a major hit.