Cable-Loving Disney Pumps Up the Output

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With its cable holdings giving strong support to operating results, The Walt Disney Co. is looking to fortify its position in cable by ramping up its investment in animated-TV series and appears to be eyeing a broader, more permanent rollout for a new 24-hour digital news service.

During a conference call with analysts, president and chief operating officer Robert Iger said last week that Disney would allocate $100 million over the next four years behind original animated series that would run across a variety of networks.

Disney also said it hoped to expand ABC News Now, which bowed last year as a broadband platform, to other cable operators seeking retransmission consent. ABC News Now launched as a 24-hour digital service during the Democratic National Convention in Boston last month.

Counting last Tuesday’s addition of Adelphia Communications Corp.’s Southern California system to a roster that already included select systems owned by Comcast Corp. and Time Warner Cable, the service is now in front of some 6.5 million digital-cable homes.

While Disney hasn’t made a final decision about whether ABC News Now will run past Election Day, as originally planned, it seems to be leaning in that direction.

More definitive is Disney’s decision to up the ante in the animated TV arena, via its Walt Disney Television Animation unit. Headed by Barry Blumberg — who reports to Anne Sweeney, co-chairman of Disney Media Networks and president of Disney-ABC Television — the outfit will celebrate its 20th anniversary this fall.

Iger said Disney will earmark some $100 million over the next four years to develop 15 original animated series for Disney Channel, Toon Disney, Playhouse Disney and the boys-targeted Jetix blocks, which air on ABC Family in the United States and on the former Fox Kids Europe channels abroad.

BUILDING FRANCHISES

The mandate behind the outlay seemed clear: Continue to build more franchises that can be leveraged across the company’s different platforms, as programming migrates across the various cable networks, as well as ABC’s kids block on Saturday mornings.

“We determined a few years ago that a great way to launch new characters and new character franchises beyond the typical, which was theatrical animation, was TV,” Iger said on the call. “We’ve watched our competitors do that quite well, notably Nickelodeon. We thought we were somewhat underinvested in the area of original animated programming for the Disney Channel.”

Disney Channel’s July lineup comprised 46% live-action fare, with animation accounting for the balance.

While live-action series like Lizzie McGuire, Even Stevens and She’s So Raven have driven many of the headlines and Nielsen numbers for Disney Channel in recent years, several animated shows have made their mark.

According to Nielsen, Lilo & Stich: The Series, which emanated from the 2002 theatrical, reached 62.8 million unique total viewers/persons 2-plus, on either Disney Channel or ABC, in the second quarter. That translated to more than 23.3 million kids 2 to 11, 14.7 million kids 6 to 11, and over 12.6 million tweens aged 9 to 14.

For its part, Kim Possible on Disney Channel generated a 3.3 rating among kids 6 to 11, a 3.4 among girls 6 to 11, a 2.3 among tweens 9 to 14 and a 2.4 among tween girls in the second quarter.

Nielsen value aside, Disney ABC Cable Networks Group spokeswoman Patti McTeague said Kim Possible has spawned multiple videos, DVDs and a soundtrack. And those visiting Disney theme parks have seen her replica on foot.

TV AND PARK STARS

Kim Possible and Stanley [a preschool series] are stars in the theme parks,” she said, noting that other animated Disney Channel shows, like The Proud Family have also extended their reach beyond the tube with a “very strong line of T-shirts.”

McTeague said Disney Channel has over a dozen animated projects in various stages of development, and 12 more of the live-action variety.

Coming out of the animated chute Aug. 21 at 8 p.m. on Disney Channel is Brandy & Mr. Whiskers, in which a mismatched pooch and bunny must learn to coexist after being stranded in the Amazon rain forest.

Also on tap for Disney Channel: a pair of Mickey Mouse-oriented shows aimed at the “Playhouse Disney” set; American Dragon: Jake Long, about an Asian-American living in New York City, which is set to bow in January 2005, and Katbot and Maggie, which are scheduled to premiere later next year.

Acquiring Fox Family Channel and converting it to ABC Family in 2001 has also trained the company on going after a genre to which it hadn’t paid that much attention in the past: action-adventure animation.

“There is a lot of value in the boys group,” said McTeague, noting that Walt Disney Television Animation has eight projects in development there, notably Super Robot Monkey Team Hyperforce Go!, which will bear the Jetix imprimatur when airing on ABC Family and Toon Disney, starting in mid-September.

“It brings us into the anime milieu while retaining the company’s core values,” said McTeague.

NEW NEWS NET

Dubbed a digital broadcast network “experiment” to provide coverage of the political convention and the presidential election, ABC News Now is being offered by Comcast, Time Warner and Adelphia Communications Corp. through their digital carriage pacts with ABC’s owned-and-operated TV stations and some affiliates, which also include network HDTV programming.

The 24-hour service features exclusive news coverage from such well-known personalities as Peter Jennings, as well as segments from shows like Primetime Live and 20/20.

Bernard Gershon, senior vice president and general manager of ABC News Digital Media Group, said the ABC News Now digital feed is set to conclude in November with the presidential elections, but the network is “hopeful” that the digital service will have a long-term cable future.

“I definitely see ABC News Now as the first multiplatform news channel that can be delivered to digital cable and wireless and anything else that comes along,” Gershon said.

IGER SEES POTENTIAL

The service received an endorsement from Iger, who said during the earnings call that ABC News Now could morph into a full-fledged digital service.

“We believe we can grow that nicely, particularly as we conclude deals with some of the large cable operators that include digital retransmission consent,” he added. “If we are essentially making the product available in the clear as a digital broadcast entity, the cable entity is obligated to carry that product on their digital platform.”

Representatives from Comcast and Time Warner would not comment on the prospects of a more widely-distributed ABC News Now service. Neither MSO would reveal how many subscribers currently get the service, but did confirm that it is being offered through their deals with ABC for its high-definition signals.

MISFIRED IN ’90s

The ABC News Now service is not the Alphabet Network’s first attempt to break into the cable-news arena. In the mid-1990s, the company looked at launching a service to rival Cable News Network and a then-young Fox News Channel, but eventually decided that the market would not sustain another news entry.

Just last year, CNN entertained the idea of merging the news service with ABC News, but eventually backed out of talks.

ABC News Now again presents the network with an opportunity to potentially compete with CNN and Fox in the cable news wars.

CNN and Fox News representatives could not be reached for comment at presstime.

Along with the 6.5 million digital subscribers, Gershon said the service is available to 65% of the country through ABC affiliates and another 40 million online subscribers through AOL and Comcast’s broadband service. Gershon said the initial feedback from broadcast affiliates and cable operators for the service was positive, although it’s unclear exactly how many viewers are actually watching the network.

He said that during the Democratic National Convention last month, AOL users accessed ABC News Now about 1 million times. Additionally, one million on-demand clips were accessed during that period.

STRONG QUARTER

Disney reported strong fiscal third-quarter operating results, fueled mainly by gains at its cable networks.

Revenue for the third quarter ended June 30 was $7.5 billion, up 17%, and operating income was $1.2 billion, a 14% increase over the prior year.

In the media-network segment (which includes the ABC Televison Network and cable networks like ESPN and ABC Family), revenue rose 8% to $2.9 billion and operating income rose 15% to $673 million. That gain, however, was all due to the cable networks, which reported revenue increases of 10% to $1.63 billion and operating income of $529 million, up 31%.

Mike Farrell contributed to this report.

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