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Kids' Channel a Star In Disney Firmament

When Disney Channel Entertainment President Rich Ross got a call from the White House recently asking if teen-aged pop star Raven would come and sing the National Anthem, it was, in his words, "One of those moments when you know it is all working very well."

And it is. While ABC rebuilds, ABC Family sputters, and ESPN draws operator complaints the Disney Channel is red-hot. It currently reigns as the top-rated channel in key tween demos, ages 6-11 and 9-14, surpassing powerhouses Nickelodeon and Cartoon Network. In prime time, Disney routinely ranks in the top 5 among all cable networks in household ratings. That means kids and their parents are tuning in.

Raven, star of That's So Raven and of an upcoming Disney theatrical film, All American Girl, is one of the reasons for the channel's success, along with Disney series like Lizzie McGuire and Kim Possible. They are also very big business for Disney Channel, its 21 international channels and all of The Walt Disney Co.

Success and Disney aren't synonymous anymore. With the theme park business on the slide and ABC in yet-another rebuilding mode, the Disney Channel surge is a welcome bright spot in an otherwise bleak Magic Kingdom sky.

The network has become an important asset, "for creating characters or creating personalities Disney can leverage in other areas of the company," said Fulcrum Global Partners media analyst Richard Greenfield.

They represent the channel's future too. "Our recent growth is the result of our successful distribution strategy," said Disney Channel Worldwide President and ABC Cable Networks chief Anne Sweeney, "But our future growth will be based on programming and ability to launch franchises across the company."

"Our goal was to go from No. 3 last summer to No. 1," Ross said. "And the proposition was that we're a kids and a family network."

Disney Channel shows run on ABC on Saturday mornings and also in ABC Family's kids block.

But Disney Channel can't cash in its success for ad dollars. When the channel morphed from a pay service to a basic channel in the early 1990s, Disney promised to remain commercial-free. For that, cable and satellite operators pay handsomely. The channel commands between 80 cents and $1.20 per subscriber, according to a report by Morgan Stanley analyst Richard Bilotti. Only Disney's ESPN and Turner's TNT have sub fees in the same range. Since 1996, Disney has grown from a mix of 14 million basic and premium subscribers to a basic cable service with 83 million subscribers.

Disney does accept self-titled "PBS-style sponsorships," that includes a deal with McDonald's. The channel also runs plenty of spots for Disney properties, like theme parks and Lizzie McGuire star Hilary Duff's new music video.

But not everyone sees the distinction between sponsorships and commercials. Millennium Digital Media Senior Vice President of Programming Peter Smith said, "Disney kind of weakened its argument for its high license fees when started accepting advertising, regardless of how they position it."

Of course, viewers don't seem troubled by these finer points. "They have created a lot of great shows that resonate with the different demos," said Horizon Media research chief Brad Adgate.

Disney mixes live action like Raven or Lizzie McGuire
—particularly popular with tweens—with animated shows like Kim Possible,
a cheerleader by day and crime fighter by night, and preschool shows like Rolie Polie Olie.

Like Cartoon and Nickelodeon have learned, Disney knows one hit is not enough. Kids are fickle viewers and there is always something new out there. Channels need to have a lot more in the pipeline.

Disney's biggest test of that came earlier this year. After The Lizzie McGuire Movie, which grossed more than $42 million, the company couldn't reach a new deal for Duff to continue the show.

Faced with losing its biggest star, another network would have been desperate. But Disney already had success with That's So Raven, which often draws even more viewers than Lizzie. And Lizzie isn't going away yet. Disney still has a handful of fresh episodes to dole out next year and the show performs very well in repeats.

The channel's next live action show Phil of the Future, about a teen from the future who gets caught in the present due to a time travel glitch, is set to debut in early 2004. Phil, played by 17-year-old Ricky Ullman, is intended to attract more boy viewers, one of Disney's few deficiencies. Also for 2004, there are four new animated series, including one based on Disney's Lilo & Stich movie.

Disney also is trying to grow its the morning preschool block, Playhouse Disney. "We're still looking for Lizzie-like hit for preschool, like Nick has with Dora the Explorer and Blue's Clues," Ross said. New series JoJo's Circus, debuting Sept. 29, could be that hit.

Any one of these shows could inspire consumer products or feature films. Kim Possible spawned a clothing line at Wal-Mart and Disney Channel's first McDonald's Happy Meal. Some critics question if Disney Channel risks over-exposing its characters.

But Disney chief Sweeney is nonplussed. "The treatment of every show is different," she said. "The unique talent of the individuals, creative execution and the property itself, that will determine how we exploit [a property] across the company."

Original movies are also fueling the channel. The most recent, Cheetah Girls, a musical starring Raven, nabbed a stellar 4.6 household rating for its August debut. The demographic ratings were even better, an 8.2 rating for kids ages 6-11 and an 8.6 among kids ages 9-14, according to Nielsen Media Research.

Disney's best-ever original movie was Cadet Kelly, which scored a robust 5.6 household rating, a 17.8 rating with kids 6-11 and an 18.6 with tweens 9-14.

The Even Stevens Movie last June also hit big-a 3.5 household rating and an 11.9 rating for kids 6-11 years old.

Perhaps more important, though, was that the movie was based on Disney Channel's Even Stevens series, which by then was airing in repeats.

"Even Stevens ran out of episodes, but it is still a strong driver for us," said Ross. The movie proved once again that some of the channel's star characters have a very long afterlife, as do many characters—animated and not—that appeal to young viewers.

Ross said the movies, combined with Disney's live action and animation, help give the channel an edge in the hyper-competitive kids market. "You hope you have the variety which our competitors don't," he said.