Disney Starts Thinking Small

The honeymoon period with new Disney (NYSE: DIS) CEO Bob Iger continues. He has successfully repaired frayed relationships and kept the company humming along nicely. Everybody’s watching ABC and ESPN. Attendance at the company’s flagship theme parks is climbing, despite higher fuel prices.

The consensus is pretty bullish on Disney these days. None of the 25 analysts tracking the company have a negative stance on the company. Even around Fooldom, my attempts to get a Disney segment scheduled for Dueling Fools have come up empty, for lack of a public bear on the company.

So what’s next for this resurgent entertainment empire? Is it going to Disneyland? Nope — it’s going back to basics, with a new television show and a travel promotion that both have toddlers in Disney’s marketing crosshairs.

Mickey Mouse dons kid gloves
If you don’t think that Disney needs to woo younger audiences, given its rich kid-friendly legacy, put yourself in the kiddie shoes of a five-year-old. The Disney animated releases that have hit the multiplex in their brief lives have been duds compared to offerings from Pixar (Nasdaq: PIXR) and DreamWorks Animation (NYSE: DWA). Disney Channel may win them over with Bear in the Big Blue House or The Wiggles, but Viacom’s (NYSE: VIA) Nickelodeon is also putting up a good fight for tiny ones’ attention with the likes of Dora, SpongeBob, Blue, and the Backyardigans.

This weekend, Disney will introduce a new show starring Mickey Mouse that is geared to preschoolers. Mickey Mouse Clubhouse may sound like the classic Mouseketeer-fueled Mickey Mouse Club, whose various incarnations launched the careers of Annette Funicello, Britney Spears, Justin Timberlake, and Christina Aguilera. But here, a computer-rendered Mickey is the star, and the content’s designed to appeal to toddlers.

On the tube, in the parks
Disney’s Magical Beginnings is the brainchild of the company’s theme park division. The promotion offers families with children five and younger marked-down vacation packages in the off-season.

The discounted travel packages will be available in mid-August and run through the end of September. August used to be peak travel season at Disney’s Florida parks, until the school calendar began to skew earlier in order to give students time to prepare for statewide standardized tests. Many area schools now get out in late May and return from summer break in early August.

October will bring a steady flow of convention business and Halloween events, but with a late-summer void to fill, it makes perfect sense for Disney to target young families that have flexible travel schedules until their kids hit kindergarten.

M-I-C … see the opportunity
Magical Beginnings and Mickey Mouse Clubhouse may not be an orchestrated one-two punch, but the emphasis is unmistakable. Acquiring Pixar will go a long way toward cleaning up Disney’s tarnished reputation in theatrical animation, but Disney needs to lure toddlers, too, to make sure that the new generation of kids feels as strongly as the last that Disney is the quintessential family brand.

Disney has done a great job lately of marketing itself to older kids. It’s been able to hit the young teen market with aplomb, thanks to the success of Disney’s Virtual Magic Kingdom free online game and the television and soundtrack success of its High School Musical movie. Even its new Expedition Everest ride — which didn’t make the connection with me — smartly targeted teens with an aggressive interactive marketing campaign.

It’s refreshing to see Disney go after this jaded market and succeed. Winning over the more naive knee-highs can only be easier.


Maybe. The efforts haven’t all been organic. Five years ago, Disney acquired the Baby Einstein chain. It has more recently gobbled up the Muppets franchise and handed the keys to its Disney Store chain to the more toddler-friendly minds at The Children’s Place (Nasdaq: PLCE).

Disney squandered years of favorable first impressions with its cheap, low-quality direct-to-video sequels and its assumption that its hold on the preschool set was safe. Magical Beginnings and Mickey Mouse Clubhouse are just two more steps toward winning back its youngest potential fans.

Disney is a big company. Last year, it generated nearly $2.5 billion in free cash flow on a gargantuan $31.9 billion in revenue. Disney’s realization that it needs to return to the small-fry set in order to get bigger may be just as important as Iger’s other sharp moves.

K-E-Y …

Why? Because Disney has to stay No. 1 in families’ hearts to keep its title as the premier family entertainment company.

Pixar and DreamWorks Animation have been recommended to Motley Fool Stock Advisor newsletter subscribers. For even more highly animated picks from Tom and David Gardner, sign up for a free 30-day guest pass.

Longtime Fool contributor Rick Munarriz is a kid at heart, but he doesn’t mind borrowing the perspective of his two young sons from time to time. Of course, he owns shares in Disney, and in Pixar. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow’s ultimate growth stocks a day early.



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