Revenue Building: Disney adds ads to kids' cable net

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To eke out new revenue, struggling Walt Disney Co. is selling sponsorships on the Disney Channel, for 19 years an ad-free oasis of kids' cable. The shift is bound to affect the already depressed TV kids advertising market.

Disney Channel's charter advertiser is McDonald's Corp., the fast-food franchise that has a multimillion-dollar, 10-year corporate alliance with the network's parent company. Media executives estimate McDonald's will spend an incremental $2 million to $3 million a year on the buy.

Ultimately, Disney stands to make a lot more than that by opening the door to marketers. Cable executives believe the Disney Channel, a top 20 cable network, has been an untapped asset for years. Viacom kids' network Nickelodeon, similar in reach to Disney Channel, pulled in $886 million in ad revenue in 2000, according to Taylor Nelson Sofres' CMR.

For its investment, McDonald's will get "sponsorship" messages of three to four PBS-like 15-second spots on the Disney Channel pre-school "Playhouse Disney" programming block starting today. Playhouse Disney, which targets kids age 2-5, airs 6 a.m. to 2 p.m. Monday to Friday and 6 a.m. to noon on Saturday and Sunday.

Anne Sweeney, president of ABC Cable Networks Group and Disney Channel Worldwide, said the channel is talking with other marketers about sponsorship plans in other dayparts.

Some don't see the value. "I wouldn't buy it," said Shelly Hirsch, CEO of Summit Media Group, a New York-based kids media buyer, who was approached by the channel. "To sell product, [sponsorship] doesn't work. You need demonstration to lure the prospective buyers."

Ms. Sweeney said Disney Channel's distribution contracts with cable and satellite companies allow the network to take on sponsorship messages. "We have a new opportunity," she said. "[But] we have no plans to move to the 30-second spot model."

The cable channel, available in 79 million households, has been ad-free throughout its history, first as a premium channel and in the last nine years as a basic cable channel.

no guarantee

McDonald's messages will show children playing in the background while a sponsorship message says: "Where learning is powered by imagination-McDonald's is proud to be a sponsor of Playhouse Disney."'

The McDonald's multiyear deal is an "extension" of the corporate deal, according to Ms. Sweeney. She declined to discuss specifics, but did say McDonald's is not getting a rating guarantee.

Walt Disney Co. has posted poor financial results over the past several periods. First-quarter net income plunged 55% vs. the same period a year ago. Its recent stock price of $23.71 is well off its low-$40s peak hit in early 2000.

Disney Channel now adds to Disney's growing roster of kids' and family advertising/sponsor-supported cable channels-ABC Family, an 81 million subscriber cable network (recently acquired from News Corp.), and Toon Disney, a 30 million subscriber cable network.

Initially, Disney will add to the glut of a depressed TV kids marketplace. Last year the kids' TV upfront market witnessed a 5% reduction in total advertising dollars to around $760 million.

Market conditions may improve this year. There is less commercial inventory for next season, thanks to Fox Kids Network eliminating its Monday to Friday programming, and General Electric Co.'s NBC trimming its mainstream kids programming commercial inventory through a deal with The Discovery Channel. "It's hit bottom," said Mr. Hirsch. "Now people are pulling back supply and demand is pretty flat."

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