News Blog

Walt Disney's music label is expanding the Web presence of popular shows, such as Hannah Montana

(Credit: Walt Disney Records)

LOS ANGELES--Only the mouse appears to thrive in a music sector pulverized by digital technology.

As the top four recording companies continue to see CD sales shrink and as they scurry to find profitable business models in the digital age, Walt Disney Records has grown 40 percent from last year according to Matt Fitz-Henry, the label's director of New Media.

Fitz-Henry, who spoke at a panel session at the iHollywood Conference on Monday, said that it's no secret how the company has found success in such a gloomy environment.

"What everybody in the music business is now talking about is the 360-deal," Fitz-Henry said. "The Disney company has been doing that for 50 years."

A 360 deal is the practice of promoting an artist across different entertainment genres and platforms, including the Web.

For example, Walt Disney Records oversees much of the work of Miley Ray Cyrus, of Hannah Montana fame.

Besides the TV show, Cyrus has released CDs, draws huge crowds of screaming young girls to her concerts and is scheduled to appear in Hannah Montana: The Movie. According to a story in Adweek, one of her two Web sites drew more than 280,000 unique visitors in April.

Another important ingredient is partnering with acts that appeal to children or tween-agers, a group that isn't likely to pirate the content. Some of the other properties on the label include franchises such as High School Musical and Camp Rock featuring the The Jonas Brothers.

According to Nielsen Soundscan, High School Musical 2 was the seventh largest selling digital album of 2007.

"The Internet is not only an important piece of our business, it's relevance continues to expand," Fitz-Henry said. Disney is focusing now on promoting acts in mobile by creating widgets that include audio, video, tour dates, Webisodes and photos.

TiVo is gearing up to dish out Disney movie rentals, as the digital video recorder company expands its lineup of movies from major studios.

Under an agreement with Disney-ABC and CinemaNow, TiVo subscribers can download the movies for 24-hour rental. TiVo expects to offer the Disney rentals later this year to its broadband-connected TiVo Series2 and Series3 subscribers. Price for the service was not disclosed.

The Disney movies will add to TiVo's more than 30,000 titles from Amazon Unbox, Music Choice, and other content providers.

TiVo's efforts come as Blockbuster is reportedly looking at set-top boxes for consumers to stream movies directly to their TV. DirecTV is reportedly cooking something up, as well.

BURLINGAME, Calif.--Here's a figure you want to remember: 80 percent retention rate.

Approximately 80 percent of people who watched videos on the Web site of broadcaster ABC (through the company's player) could remember the sponsor/advertiser of the program, said Brad Davis, senior vice president of online media sales and marketing for the Walt Disney Internet Group, during a presentation at the Digital Living Room conference taking place here. The study was commissioned by Walt Disney Internet Group and ABC. (Walt Disney is the parent company of ABC.)

As a result of the recall issue, the cost per impression for online video could begin to surpass the cost per impression for network TV, he said. (Cost per impression, or CPM, is a metric for measuring the cost of ads.) Todd Krieger, senior vice president at Denuo of the Publicis Groupe, concurred, adding that in some instances Internet advertising rates per CPM might already be comparable.

The figures are good news for publishers and Web companies that have had to stand back and watch Google zoom to glory through search ads. Search still accounts for at least half of the advertising spend on the Internet, but clearly there are opportunities for other models.

And for premium content, sponsorship--similar to how General Electric and Chevrolet advertised in the 1950s--seems to be the way to go. Sponsorships are the favored ad vehicles for ABC. Sponsors get three commercials in a one-hour program as well as signage on the interface.

Last year, Hewlett-Packard served as a sponsor in a series of Hannah Montana concerts streamed online. In the HP ads, Montana (the daughter of Billy Ray Cyrus--there's a guy you never expected to see again) took a picture of her fans in the front row. Viewers, mostly 7- to 11-year-old girls, could then go to a sponsored site to see pictures from recent concerts or even print pictures with HP's photo service.

A few years ago, Cadillac scored with a sponsorship deal, said Krieger. The car company offered free downloads to people who played Gotham Racing III. The download consisted of three new Cadillacs that could be used in the game.

Roughly 70,000 people downloaded the Cadillacs. "There was a vast increase in test drives," Krieger said.

Walt Disney is eyeing acquisitions, but AOL is not one of them, according to the Associated Press.

Disney Chief Executive Robert Iger, speaking at a media conference on Wednesday, said the company is interested in purchasing other companies, but not Time Warner's AOL.

Time Warner Chief Executive Jeff Bewkes has said his company would consider selling off or spinning out AOL.

Regarding reports that Yahoo is looking to partner with another company to thwart a takeover bid from Microsoft, Iger said: "We watch these things from afar."

(Credit: Walt Disney Co.)

We asked Chris Heatherly, vice president of technology and innovation, Disney Consumer Products, The Walt Disney Co., to answer a set of questions--and he took the time to dive a little deeper.

How do you define "innovation"?
My favorite quote about innovation is one where Steve Jobs was asked how they systematize innovation at Apple and he said "We don't. We hire good people." I think a lot of talk about innovation amounts to a lot of dancing about architecture. People get caught up in trying to have an innovative "process" instead of having their values where they should be--making great product. To borrow from James Carville, "It's the product, stupid!" Who cares what your process is? It's what you put out there that matters.

If you want to make great products, you have to have high standards and absolutely insist on those standards. There's a great story about Pixar and the making of Toy Story 2. They completed most of the movie and then decided they didn't like how it was coming out. So they scraped it and started from scratch. How many companies have the guts to do that? Not many.

But I haven't answered your question. I think innovation is understanding people and what they need and giving them the most perfect solution you can to their problem even if they might not know they have it yet. It's giving people something new that they haven't seen before or making them re-experience something familiar in a totally new and better way. Everyone talks about Apple. The reason we all worship Apple is that there is no detail too small for them to sweat out. They don't stop at trying to make a great product. Look at the packaging. They work to reduce materials, to improve communications, to reduce shipping costs, to have better environmentally friendly materials, to create a great out-of-box experience, and on and on. Once you live and breathe these principles, you can't compartmentalize. You have to make everything as great as it can be. It becomes a way of life.

I think too many people confuse innovation and technology. I have seen a lot of designers try to make a mediocre concept innovative by putting Bluetooth or some other whiz-bang technology du jour in it. That's not innovation. It's cheating. Innovation is about solving problems for people. As I write this, I am at the New York Toy Fair. I am always so impressed and humbled by the incredible cleverness and simple innovation in small things that toy designers and inventors do every day. I think the technology business could learn a lot from these guys. The toy business has to work with very cheap stuff so they can't fall back on expensive technology. They really have to make the magic trick out of Popsicle sticks and rubber bands, if you take my meaning.

Yesterday, I saw a company that makes bubbles that you can't spill. Brilliant! I bet a lot of people have looked at bubbles and said "How can you innovate bubbles? There's nothing you can do. They're just bubbles." But this guy did and now he has a huge business because it turns out that parents don't buy as many bubbles for their kids as they might because they are afraid they will spill them and make a mess. To me, that's real innovation. A simple, clever idea well executed that makes things better for people.

What are the most important areas of innovation in your organization (product, process, IP, marketing, etc.)?

To be a creative company, you have to have a creative core, whatever that means for your company. For Disney, that's people like storytellers, animators, and Imagineers. For a company like Apple, it's designers and engineers. The people at the core of what you do have to be the heart that pumps innovation through the vessels of the organization. You can't live without your heart. But the other parts of the organization have just as important a role in innovation. Take technology, for example. Pixar is very clear that it is about telling stories and that everyone who is there is there for that purpose. Technology plays a really important role for them. They like to say that "art challenges technology and technology inspires art." They don't look at technology as being a second-class citizen to their artists. It's a respected peer. There are lots of other parts of the organization that have to be part of an innovative mission.

Here's one people don't put in a sentence with innovation very often--legal. Look at Google. They are constantly doing things with search and indexing and now with YouTube that challenge the legal status quo. If they had a legal team whose only role was to keep the company from getting sued, they would never do those things. If you want to be innovative, everyone has to be on board for the mission. Everyone has a role to play.

But one of the keys to innovation is having management that expects and drives innovation. You can have the best designers in the world and the worst management and nothing good will come of it. You have to have leaders who believe and have guts and support innovative work. You have to have leaders who hire the best talent and weed out the people who have the wrong values and intentions, but who at the same time are extremely tolerant of good people making mistakes or failing sometimes. If you manage quarter by quarter or have no tolerance for failure, you won't ever have innovation, no matter how creative your people are. You have to be willing to lose.

What would you consider your most successful innovation? How did you "find" it?
I'm very critical and I always think we can do better than we have done in the past. My favorite stuff--no matter when you ask me--is in the future and stuff I normally can't talk about it publicly.

My recent favorite innovation is a new technology called Clickables that we are launching in connection to our new Disney Fairies virtual world. It's a way for kids to take their online world experience into the real world. The core of it is a magical bracelet. By simply clicking their bracelets together, girls become friends in the online environment. And it's safer too because if you had to physically click with your friend that means they were in physical proximity to you, you saw them, and you know who they are. They aren't some random person online. Also, it allows kids to download virtual objects from their inventory and trade with their friends, which is another complicated thing we made simple. Most online worlds don't let you trade because it's hard to authenticate. We made that simple and seamless.

(Credit: Gearlog)

How did we find the idea? We knew that online worlds were going to be a big deal and so we got about 50 of our smartest people together from different divisions and of different job types--marketing people, technology people, designers, even finance people and lawyers--and we had a big brainstorm. We have a great process for brainstorms that's led by our head of creative Len Mazzocco. He's like the Michael Jordan of brainstorming. We came up with probably a few hundred ideas but narrowed it down to 75 really good ones from the two days. Then we narrowed it down to our top 10 and top 5 and in there was the nugget of the Clickables concept. Then we decided that this was such an important area that we would create a dedicated team around it, called our Toymorrow team that would be a little SWAT team focused on technology in the toy space. We moved really aggressively to find partners who shared our vision and had applicable technology. Speed is of the essence in these things. Len always says that "God gives everyone the same ideas at the same time." If you don't move fast, someone else will have your idea and do it before you can get it to market.

My other favorite recent product is a digital camera we made for preschoolers called Disney Pix Jr. I love it because it is so simple and so rugged and just does what it says it will do. I threw one myself down a flight of concrete stairs 20 times and couldn't break it. And the interface is so simple. We even got rid of the on button! And we have a fun feature on it called PhotoFriends that lets you pose with a Disney character in your picture. Kids are having a lot of fun with that. But for me, that is a great product because it meets the need and does what it says it's going to do. It doesn't read your mind or have Wi-Fi or cure cancer or any of that. It's just a great camera for kids. It is what it's supposed to be. Not a lot of products, especially technology products, can say that.

Which innovation "failure" did you learn the most from, and why?
That's easy. The Disney Dream Desk PC. We had all the right ideas in the beginning. We wanted to make an inexpensive computer without all the doodads in a small form factor about twice the size of the Mac Mini (you couldn't make it smaller back then because the processor was so hot) with a creative software suite a la iLife but for kids and with robust parental controls. I am proud of the way the software and Internet filtering came out. But the PC grew from this small inexpensive thing to this almost full-sized PC that was not as kid-like as we wanted and was much more expensive than we originally planned.

If we had kept with our original idea, we would have had the OLPC four years before Negroponte. That was the hardest project of my life, and I can't say I didn't fight hard. But our partner didn't share our vision. They thought it was imperative that it have all the slots and expansion and all the stuff parents probably don't really care about when they buy a kid a PC but that geeks care about a great deal. I thought we could change them, that we would convince them. But I felt compelled to launch, and I wound up compromising in some areas I didn't want to. I learned from that. Your partners need to share your vision or you will never get the result you want. I believe it's Louis Armstrong that said "There's some people, if they don't listen, you can't tell them." You have to stick to principles. If the people you work with don't want to do the project right, it's not worth doing.

What lessons can you pass on to others from how your organization has changed to make itself more innovation driven?
Anyone who reads a newspaper knows that Disney has had some major changes in the past few years with a new CEO--Bob Iger--and the acquisition of Pixar. We are getting back to our roots. Focusing on quality, incredible storytelling, and the magic people expect of us. Bob's really focused on bringing the company together as a team and put quality and innovation at the forefront of the company's agenda. What he's done is create a great collaborative environment for innovation and the rest has taken care of itself. You can see the whole company flourishing right now.

In your opinion, what are the biggest barriers and challenges that stand in the way of organizations becoming more innovative?
The organizations are their own biggest barriers. A lot of things that big companies do that they think are conservative and prudent are actually very foolhardy and dangerous. It's said that cynicism is ignorance masquerading as wisdom. Business is very simple. You have to offer a product that is better than your competition and you have to keep your customers happy. A lot of big companies get caught up in other things. Managing a P&L is important, and money keeps the lights on. But if people don't like the product or service you are putting out there, it doesn't really matter how clever you were about saving costs here and there. When you're dead, it doesn't really matter why. You can't cut your way to glory. Look at Apple. In the last recession, everyone else laid people off and cut back on R&D. Apple said "We are going to innovate our way out of this." And look what happened for them. You can't stop innovating.

Beyond your organization, who do you admire for risk-taking innovation, and what do you think makes them successful?
Apple is too obvious, so I'll say Target. At a time when everyone was trying to follow Wal-Mart into the bargain bin, Target had a vision that everyone deserved nicely designed products. A lot of people thought they were talking over their audiences' heads or they were full of themselves. In fact, everyone else was underestimating the intelligence and taste of their guests, and Target saw something no one else did. But Target innovated in a lot less obvious ways too. Take queue lines. At a lot of big-box stores, you could spend 20 minutes waiting to check out. At Target, you will wait less than 5 minutes most of the time. If the register is stacked up more than 3 people deep, they will open another one. That's customer service. Today, Target is beating all of their competitors' comps and doing more business per door than anyone else. Not everything has worked for Target. Remember the short-lived Philippe Starck line? But they keep trying and more often than not, they succeed.

What innovation are you still waiting for?
I think the single most important innovation we all need is low-cost green energy. Energy is the United States' #1 trade issue, #1 security, #1 economic issue, and #1 environmental issue. Green energy will have a more transformative effect on the world than the Internet, it's that big. Outside of this, I am working a lot with robotics these days and I'm very excited about all this smart technology that will make its way into lots of products. I live in LA and we are (in)famous for our traffic. I would love us all to have robotic cars that could figure out traffic flow, so I never have to sit through a traffic jam again.

On the heels of moves by CBS and NBC, The Walt Disney Company is going to put some of its classic TV programming online, according to Bloomberg.

The shows will be accessible on Disney.com, either for free or for a subscription price, Disney Chief Executive Robert Iger told shareholders at the company's annual meeting Thursday.

"Providing physical goods on DVD is tougher and tougher these days because shelf space is limited," Iger said.

Not to mention that people are increasingly expecting to find TV programming online.

Disney offers some ad-supported ABC and the Disney Channel programs online and sells them through Apple's iTunes Store, as well.

To: Disney executives
From: Michelle Meyers, an aggravated mom
Re: Your Hannah Montana shenanigans

Cut it out.

Are you intentionally trying to drive us parents crazy with what seems like the latest ploy to squeeze profit out of your youngest and most passionate consumers?

I'm referring to the Hannah Montana 3D concert movie, which you promoted last week as an exclusive seven-day theater release. The film subsequently broke online sales records, sold out in many venues, and sent parents into a frenzy amid concerns they might not get tickets for their excited young tweens. Some had to settle for show times during school hours or well past their kids' bedtimes.

Wallpaper available for download on the Hannah Montana 3D movie site still says the film will be a one-week theater engagement.

(Credit: Disney)

Then, with all of the hassles of finding a decent show time fresh in my memory, I learned that you had extended the one-week run indefinitely "due to overwhelming demand," as the movie site reads.

I know I sound like one of those early iPhone customers who got peeved when Apple dropped the price of device. But your latest move is akin to Lucasfilm putting out a new Star Wars movie for what was supposed to be a one-week run only to change its mind after that week. The passion for Hannah Montana among some young girls is on par with that of science fiction enthusiasts for the Star Wars series.

Perhaps some consumers will be happy about the theater extension. But the whole thing leaves me feeling taken for a fool. Under normal circumstances, the savvy--or even cynical--consumer in me would have been skeptical of the one-week run, and maybe even refused to play into the madness it appears your company created just to boost sales. But hey, when it comes to your kids, parents don't always think straight--but of course you know that.

In fact, we have a long tradition of behaving irrationally when it comes to these sort of things, whether it was Cabbage Patch Dolls, Beanie Babies, or some sort of gender-stereotyping Barbie Doll from the 1960s.

When I asked one of your representatives last week why the film was just running in theaters for a week, my gut told me the real answer was to fuel DVD sales. But I listened, and even quoted the woman as she recited the half-hearted party line, that the one-week run is meant to be more like a concert event.

Now, of course, I wonder if she knew all along the theater release would be extended.

Your press release about the extended "engagement" boasts of the "film's record breaking opening weekend performance as the nation's No. 1 film with an astounding three-day tally of $29 million."

Gee, I wonder why it did so well? Could the advertised limited one-week run have something to do with it?

Mark Zoradi, your president of the motion pictures group, went on to say "Audience reaction for the Disney Digital 3-D presentation of Hannah Montana and Miley Cyrus: Best of Both Worlds Concert has been so overwhelming that we've decided to extend the film's theatrical run. The extra playing time will give more fans a chance to see their favorite performer in an exciting new way that brings the concert experience to life on the big screen. It will also accommodate those fans who want come and enjoy the experience again."

Here I must facetiously thank Zoradi for putting consumers' interests first.

When people ask me about why all the mania over Hannah Montana, I explain that not only is the TV show entertaining and the soundtrack, well, catchy anyway--the craze is palatable to parents because Miley Cyrus (who plays Hannah) is relatively down to earth and together. She's sort of the anti-Britney of pop stars.

Then, however, I'm reminded like I was Wednesday, of the company behind her popularity, behind the Hannah Montana clothing line my daughter's been modeling, and behind the DVD that has taught her all of Hannah's dance moves.

I should know better. And yet I'm still left feeling grossed out...and annoyed.

LAS VEGAS--Studios know how to make money in the traditional way--in the theater, via broadcast television. But the Internet still has them slightly flummoxed.

True, most of the major film and television studios are embracing the Web. But the exact formula for distributing their content while still making money remains somewhat up in the air.

Here at CES during a panel sponsored by Hollywood trade pub Variety, the heads of digitial distribution for Disney/ABC, Fox, Paramount Pictures, and Warner Bros. discussed what is and isn't working for them.

All present were adamant that there is no one good way to make money online yet. "We're using every model because consumers will ultimately decide how they want to consume (content)," said Tom Lesinski, president of Paramount Pictures Digital Entertainment. For Paramount, that means downloads of its films via iTunes, Xbox Live, Netflix Watch it Now, and the Vudu set-top box.

The head of Fox Entertainment's digital media group, Dan Fawcett, said the best way is to give content to people the way they're used to. "People online want things for free. They can get it for free on piracy sites," he said. "They are inclined to watch it with a reasonable amount of advertising, but downloading a movie that takes a couple of hours just to own it doesn't seem to be a very compelling consumer experience."

This, of course, gave Fawcett the opportunity to plug Hulu.com, the online video partnership between Fox and NBC Universal where some of the two companies' most popular shows are viewable for free with some ads.

Paramount's Lesinski agreed that studios have to "give (content) to people anyway they want," he said.

Digital content heads of major Hollywood studios at CES.

(Credit: Erica Ogg/CNET News.com)

And so did everyone else: a constant familiar refrain from all of them was "letting consumers consume content when and how they want." But isn't the way they want it instant and free?

Other tidbits: All of them profess to like Steve Jobs. Some think Apple and its iTunes Store hold too much sway over the download business, but those on the panel didn't seem to agree. Warner Bros. called Apple "a great partner," and Paramount is really, really happy that 5- and 10-year-old film titles are selling in volumes of hundreds of thousands today on iTunes. Disney, perhaps unsurprisingly, was almost defensive of Apple. (Jobs is Disney's largest shareholder.)

"Apple wanted to legitimize the marketplace," said Albert Cheng, executive vice president of digital media for Disney-ABC Television. "They compete with so many other different options, including piracy. To say Apple has so much control is looking at a very narrow slice of pie."

All had plenty to say on the impact of the Web on professional content. But despite talk of successes with viral video, streaming branded sites, and partnership deals across different platforms, none had an articulate response when an audience member asked when online revenue would surpass traditional revenue sources for each.

After some amused stares with each other, finally Fox's Fawcett was able to stammer: "Nowhere in the forseeable future."

iParenting Media has become Disney's latest Mouseketeer. The Walt Disney Internet Group announced Tuesday it acquired iParenting Media.

The mouse house plans to integrate iParenting's content, reviews, and services into Disney Online's family oriented Web sites such as FamilyFun.com, Wondertime.com, and Family.com.

Besides offering content generated by various experts and professional writers, as well as users, iParenting operates a product review site, iParenting Media Awards. That, too, will be integrated into the Disney sites.

And financial terms of the deal? The mouse ain't talking.