How To Build A Disney Franchise

 

Louis Hau

Forbes.com
February 5, 2008
 

Ever wonder how the Walt Disney Co. goes about building its hit movies and TV shows into huge, multi-platform franchises?

Disney President and Chief Executive Bob Iger is here to help.

During a conference call Tuesday to discuss the company's first fiscal quarter earnings report, Iger provided a peak at some of the calculations that go on behind the scenes to choose which hits will work as franchises and which won't.

Once a TV show or cinematic release scores strong ratings or box office returns, the company gauges "whether we believe that success is leverageable across all of our businesses and in multiple territories and then to what extent we really believe [that] by in investing in that franchise, it can continue to create value over a long period of time," Iger said.

The ones that the company is most excited about? That's easy: Hannah Montana, High School Musical, Pirates Of The Caribbean and Baby Einstein.

But the recent Disney (nyse: DIS - news - people ) franchise that Iger believes has the greatest long-term viability may come as a bit of a surprise: the 2006 movie Cars. The film did well at the box office but was widely viewed as a creative step down from previous Pixar features like Toy Story and The Incredibles.

So why does Disney think Cars has staying power?

"We're selling more merchandise now than in the year that the film was released,'' Iger said."We've clearly struck a nerve."

As a result, Disney will be investing more in the Cars franchise. An online virtual world is in the works and it's "a relatively good bet that ultimately they'll be a sequel," he said.

Cars is also getting Disney's ultimate vote of confidence in a new franchise: the construction of a theme park attraction. "Cars Land" is scheduled to open at Disney's California Adventure park (next door to Disneyland) in 2012. A smaller Cars-themed attraction opened last year at Disneyland Resort Paris and "I'm fairly certain you'll see more creativity and investment in terms of physical attractions at our parks [related to] that franchise,'' Iger said.

Will last year's Pixar hit Ratatouille get the franchise treatment as well? Although the movie was recently nominated for five Academy Awards, "that wouldn't be one we would consider a true franchise in terms of its leverageability across multiple businesses or its ability to drive huge value over a long period of time,'' Iger said.

Once Disney begins investing in a new franchise, it begins using the power of its brand name "in many, many places,'' he said, adding that, "we're finding that those many places are many more than we used to see."

A prime example? Disney's recent foray into video games. More kids, particularly girls, are getting into gaming and "that plays right into our strategy," Iger said, noting that its brisk business in producing music for its hit Disney Channel shows is finding new opportunities in video games as well.

"When you think of High School Musical and Hannah Montana, you suddenly can envision a franchise that is living in more places than just, say, the syndicated world of the past," he said.

During the three months that ended Dec. 29, Disney reported net income of $1.25 billion, or 63 cents a share, down 27% from $1.7 billion, or 79 cents a share, during the same period a year earlier when the company's results included gains from the sales of its stakes in E! Entertainment and Us Weekly magazine and other items. Revenue in the quarter rose 9% to $10.45 billion.

Disney's financial results in the quarter easily exceeded Wall Street expectations, thanks to robust attendance at its theme parks in the U.S., France and Hong Kong. Contributions from franchises like Hannah Montana and the sequel to High School Musical boosted the performance of its media networks, studio entertainment and consumer products divisions.

Iger was asked during the conference call how he expected the timing of the TV broadcast networks' annual upfront presentations to be affected if the Hollywood writers' strike were to be resolved this week.

Advertisers "are probably going to demand some kind of [upfront] process in the spring, basically under normal time circumstances,'' he said, adding, "I see us participating fairly aggressively in that process."

Iger added that "how we present the schedule and what schedule is presented is still up for discussion." He also suggested that he'd like to see changes in how the upfronts are handled.

"Personally, I think the manner that the upfront or the schedule is presented with the bells and whistles on a big stage and a fair amount of hors d'oeuvres feels like a bit of an anachronism to me,'' he said. "But those decisions will be ultimately made by [ABC] in what they feel is right in terms of the best approach of marketing their schedule to advertisers and the press."