Never underestimate the power of a free T-shirt," Andrew Mooney, the chairman of Walt Disney's consumer products division, joked as bikini-clad sunbathers dived into a sparkling pool at The Standard hotel here last week.
Mooney was quoting Philip Knight, the founder of Nike, with whom Mooney worked for 20 years. But he was referring specifically to a promotion he spearheaded in 2001, hoping to get celebrities like Jennifer Garner and Sarah Jessica Parker to wear Mickey Mouse T-shirts and give the character a more contemporary appeal.
It was a hit. Retail sales of the retro T-shirts have doubled annually since they were introduced that year, and the designers Dolce Gabbana have designed a $1,400 sequined Minnie Mouse T-shirt to be in stores this fall.
Mooney shook his head and laughed. "Who would have thought?" he said.
It was the kind of "out of the ordinary" thinking that Disney needed to revive its moribund consumer products division, which had been steadily eroding since its peak in 1997, he said.
The consumer products division provides only about 9 percent of Disney's overall revenue, but toys, costumes and backpacks have a life far beyond the movie theater door. And Mooney hopes to turn Mickey and company into the Martha Stewart of bed, books and apparel for kids. In effect, analysts said, he is trying to do for Disney's consumer products business what Knight did for Nike: make the Disney name into a lifestyle brand.
Since 1999, when Mooney joined, Disney has published its first original book series - W.I.T.C.H., a collection of stories about teenage girls with supernatural powers. The series sells well worldwide, and is being developed as a television show for Disney's cable networks.
Mooney and his team made being a princess both hip and profitable: the Disney Princess line of costumes and accessories will earn $2 billion this year in retail sales and has spawned a series of princess-related events at Disney's theme parks. "For the first time there seems like there is a coherent plan," said Tom Wolzien, a media industry analyst at Sanford C. Bernstein. "The division has been beaten up for so many years it looks like he's breathing new life into it." Not every new idea is a hit, of course. A few years ago, Disney tried to market, under the Always Fresh label, women's nightshirts and T-shirts, including one depicting a seductive Snow White and the phrase, "Attracts Strange Little Men." Reminded of the unsuccessful venture, Mooney groaned.
"We were young," Mooney said. "You have to undergo a degree of chance if you want to succeed."
Mooney acknowledges that he has a long way to go to match the division's best performances. In its heyday in 1997, the consumer products division had $893 million in operating income drawn from 749 Disney stores worldwide and more than 4,200 licensees, selling products related largely to Winnie the Pooh and Mickey Mouse, as well as popular animated movies like "Snow White" and "The Lion King."
But when the retail market declined, so did profits. Disney stores expanded into second- and third-tier malls, and those stores quickly showed losses as the economy sputtered. The quality of Disney-branded products was suffering as well; the Disney name could be found on almost anything. By 2000, operating income for the division had dwindled to $386 million and even Mickey Mouse's popularity was showing signs of wear.
Mooney, 49, had his work cut out for him. First, he halved the number of licensees. Then he began actively pursuing companies Disney wanted to work with, rather than waiting for them to call, as his predecessors had done. He also began selling Disney's underperforming stores and seeking high-end retailers like Fred Segal in Los Angeles to sell specialty products. Most important, he strengthened Disney's relationship with large retailers; the division opened its first 15-person sales office in Bentonville, Arkansas, home of Wal-Mart, the country's biggest and most influential mass retailer.
Now, four years later, the consumer products division earned $388 million in operating income in the first three quarters of 2004, which already puts it ahead of 2003. Industry analysts predict that operating income could reach $511 million for the fiscal year. While some of the increase in operating income is a result of the sale of some Disney stores, analysts also attribute some growth to the popularity of new products. Further, Disney has signed a nonbinding letter of intent to sell its more than 300 stores in the United States to The Children's Place retail chain.
One of Mooney's major initiatives is to expand into clothing and household goods like bed linens that will rely on the Disney reputation, but not Disney characters.
Next spring, the company plans to introduce, under the Disney Denim brand, pants and jean jackets that have whimsical elements like pocket fabric inspired by Disney cartoon strips, or an unobtrusive "D" stitched onto a back pocket.
Parents who do not want to dress their children in head-to-toe Mickey Mouse can mix and match, Mooney said. Retailers get a break, too, paying a royalty fee of 5 percent on Disney Denim instead of the 10 percent they usually pay to sell apparel with Disney characters (although they can sell the Disney-branded clothes at a premium to other private labels). Mooney hopes to expand the offering into linens and other household products. But lifestyle products with an untraditional touch are what seem to excite Mooney most.
At Fred Segal in Los Angeles, Disney recently tested Snap watches, which have interchangeable faces and wristbands and are based on Disney characters but with a hipper, more urban appeal. That appeal comes at a price, however: $35 a watch.
In his interview at the hotel, Mooney held up a pink T-shirt from the Disney Cuties line for young girls and teenagers, introduced 15 months ago. The shirt was printed with a blue and white Eeyore outlined in thick black lines, more anime-style than conventional Disney animation.
"This is Japanese anime meets the library," Mooney said. "We started in T-shirts and now we're making pillows and cellphone cases. We are always looking for sustainable ideas that cross all lines of business."
He said the consumer products business was growing faster outside the United States, and new products were being introduced in Japan or Europe well before they hit American shores. That was the case with Disney's new W.I.T.C.H. books, which chronicle the lives of five teenage girls who spend their days worrying about boys and their nights fighting evil-doers. (The initials stand for their first names.) The comic books were introduced in Italy in 2001 and now sell a million copies worldwide each month.
The first W.I.T.C.H. graphic novel was introduced in the United States in June this year. It has already sold 650,000 copies, Mooney said. And next year, Disney plans to broadcast a W.I.T.C.H. animated television show both in Europe and in the United States on the company's cable stations.
