BK pursuing new entertainment ally

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Disney-McDonald's deal has rival looking toward DreamWorks SKG

Burger King Corp., under pressure to respond to the embarrassment of a pending, unprecedented marketing alliance between Walt Disney Co. and McDonald's Corp., is exploring similar pacts with Disney rivals including upstart DreamWorks SKG.

Disney has enjoyed a lucrative four-year relationship with Burger King, but intends to abandon the No. 2 fast-food chain to cut a 10-year, global deal committing McDonald's to up to 17 Disney-related promotions worth about $100 million a year.

The McDonald's/Disney matchup will send huge aftershocks through the entertainment and fast-food industries, and could even impact the restaurants' ad agencies and soft-drink suppliers.

"This is going to set off a major chain reaction," said an executive at one rival studio. "We'll be seeing the fallout for years to come."

The deal, reportedly to be finalized within two weeks, cuts across just about every Disney division, from movies to theme parks to ESPN.

Burger King can either respond by entering into an exclusive agreement of its own or by cherry-picking among studios that won't be able to--or won't want to--work with McDonald's.

Burger King has already talked with DreamWorks. The Steven Spielberg/Jeffrey Katzenberg/David Geffen startup has been snatching up properties and animators from Disney and elsewhere so it, too, can create the kind of event films that tie-in partners desire.

Neither DreamWorks nor Burger King would comment on their talks. But one Burger King franchisee said the fast-food chain, anticipating for months that it might lose its Disney connections, "has pretty exciting promotional plans in the works. ... It's not as if they've been sitting back and waiting to get hit."

DreamWorks has inked Hasbro and Microsoft Corp. to long-term promotional deals and is now looking to do the same in the apparel, fast-food, retail and soft drink categories.

UNIVERSAL INTERESTED

Burger King also is a target of MCA's Universal Studios, currently trying to hone a brand image and re-engineer itself to allow for Disneyesque synergies among divisions.

Most of Hollywood, in fact, seems to be wooing Burger King and No. 3 restaurant marketer PepsiCo, as studios move toward building long-term marketing partnerships. But Burger King might not want to align itself too closely with one studio.

20th Century Fox and Warner Bros. are encroaching on Disney's turf, building animation divisions committed to producing family-targeted features. Fox has "Anastasia" arriving this fall, while Warner has "The Quest for Camelot" in development.

While it's not yet known whether McDonald's relationship with Disney lets the fast-food leader work with other studios, it may be a moot point.

"Why would any of us want to wrap our brands up with another brand so closely linked to a competitor?" asked a rival studio executive. "McDonald's has made its bed; now, for better or worse, it will have to lie in it."

The "Star Wars" franchise may be one exception. Insiders said McDonald's has been aggressively pursuing Lucasfilm to be involved in the three new films, the first of which could arrive in 1999. It's believed Disney will allow McDonald's to pursue those properties regardless of which studio distributes the films, although Disney is a leading candidate.

FRANCHISEE PRESSURE?

Some in Hollywood believe McDonald's was pressured into cutting a big deal with Disney by franchisees, who were worried by Burger King's Disney-related growth and success. Its tie-in with "The Lion King" pushed 50 million kids' meals; even the less popular "Pocahantas" hiked same-store sales 8%.

The chain's last major Disney promotion will be a $40 million tie-in with "The Hunchback of Notre Dame" this fall.

Disney and McDonald's were partners from 1987 to 1991, but clashes over creative control, rights fees and home video promotions paved the way for Burger King to take over in 1992. But while fear may have driven McDonald's back to Disney, the potential deal is an undeniably perfect match of family brands.

"There are few entities that possess the brand values and culture, as well as the ability to reach the broadest possible audience, as Disney and McDonald's. It's like the kid with chocolate and the kid with peanut butter coming together," said Howard Handler, VP-marketing at NFL Properties, a marketing partner of both Disney and McDonald's.

Disney will benefit from McDonald's massive media budget and highly efficient media planning, as well as its global reach. McDonald's gets exclusive access to family-friendly tie-in properties of consistent quality.

UNEVEN RESULTS

Burger King's marketing sans Disney has been wildly inconsistent. In fact, executives close to the marketer say the company has been growing increasingly concerned that its success with Disney has come at the cost of building and defining its own brand.

Still, some Burger King executives are insisting the relationship with agency Ammirati Puris Lintas, New York, is strong and denied rumors the agency will be blamed for not helping it keep the Disney tie-ins.

Hollywood executives also speculated Burger King may switch soft drink suppliers, from Coca-Cola Co. to Pepsi, since one report indicated Coca-Cola might be backing the McDonald's/Disney deal. Coca-Cola vehemently denies any involvement. But, said another Burger King franchisee: "Deal with Pepsi? Forget it."

A Burger King official said the company "has a long-term commitment to Coke and we intend to honor that."

Noting that PepsiCo restaurants Taco Bell, Pizza Hut and KFC Corp. are prime competitors, the franchisee said: "I'd rather serve Yoo Hoo."

BURNETT COULD BENEFIT

One beneficiary of the McDonald's deal could be Leo Burnett USA, Chicago. The agency handles McDonald's media and kids marketing, Disney's theme parks and Coca-Cola's Fruitopia.

Burnett has stumbled recently with McDonald's, losing the Arch Deluxe launch to Fallon McElligott, Minneapolis, and being hurt by the client's move of $150 million in advertising from network to spot TV. Now, Burnett could be in a great spot to participate in promotions involving the trio.

Copyright April 1996 Crain Communications Inc.

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