Walt Disney Co., well established as having the Midas touch in entertainment, now wants to duplicate its success in the online world. In the process, it’s looking to build an Internet empire that rivals America Online.
Already, Disney ranks tenth in the nation for most heavily trafficked Web properties, thanks in part to a partnership with Seattle-based Starwave Corp., the company responsible for such hot Web sites as ESPN SportsZone.
But now, it’s no longer a mere partnership. Disney, which had a minority stake in Starwave for the past year, bought the remaining interest last month from Microsoft Corp. co-founder Paul Allen giving Disney chairman Michael Eisner a new cornerstone in his growing Internet endeavors.
“Eisner and the rest of the company view the Internet as a mission-critical, global medium that is central to every part of the company,” said Jake Winebaum, chief executive of Buena Vista Internet Group, which is responsible for all of Disney’s online initiatives.
Disney’s Web sites including the flagship Disney.com and sites operated by its ABC News and ESPN subsidiaries are only surpassed in the number of visitors by companies dedicated exclusively to the Internet, such as Yahoo, Netscape and America Online, according to RelevantKnowledge Inc., an Atlanta-based Web research company.
The reason stems from the company’s entertainment diversity. The sites collectively attract over 2 million hits a day from a wide demographic audience, according to Winebaum. Women and children hit the Disney sites, the ABC News site attracts an adult audience, and SportsZone draws in young men.
Analysts warn, however, that Disney’s goal to edge out its competitors poses a significant challenge.
“Everyone wants to be the next Yahoo; it’s this month’s buzz topic but it’s not going to be realistic for most,” said Melissa Bane, senior analyst at Boston-based Yankee Group. “To give Disney credit, however, they have gone from dabbling in the Internet to really stepping up their efforts. With their family appeal, there is a good chance that they are going to be able to attract a real crowd (to their sites).”
Bane went on to say that the key to becoming a one-stop site is to have an “arsenal of content” which is exactly what Starwave brought to the Buena Vista Internet Group.
The Buena Vista group already runs Disney.com, which features news and an online store, as well as Disney’s Daily Blast, a news and entertainment site targeted at kids under 12.
The Starwave acquisition now gives Disney control of a range of additional sites, from Paul Allen’s musical tribute, Wall of Sound, to the official Web sites for the National Football League, the National Basketball Association, the Women’s National Basketball Association and Nascar racing.
“Our next step is to better leverage our name across all our products,” he said. “And with the demographics we’re drawing, we can now package all of the sites to advertisers, which we haven’t done before.”
Advertising is only one albeit significant component in the Buena Vista Internet Group’s revenue stream. The group’s business model is also fueled by subscriptions to some of its online services, e-commerce through the online Disney Store, and ticket sales for Disney productions.
Winebaum has been the driving force behind these online endeavors. He first joined Disney in 1992, when the company acquired his Family Fun magazine. He subsequently became president of Disney’s magazine group.
But it was his children who first turned him on to the Internet in 1994.
“My kids are mostly responsible,” Winebaum said. “As an editor and publisher, I saw firsthand how powerful the new medium was. As a parent, I saw how natural kids were with computers and using the Internet. So I started thinking about creating a comprehensive online site for families.”
Winebaum went to Eisner with his proposal, and by 1995 was named president of the newly created Disney Online, which began as a unit of Disney Interactive. Two years later, Disney was juggling several online projects and consequently decided to form the Buena Vista Internet Group to oversee the various enterprises.
With Winebaum as president and chief executive, both the Internet Group and Disney Online left the interactive division and moved over to Walt Disney Co. Winebaum began reporting directly to Eisner.
Starwave management will now be consolidated into the Buena Vista team. Burbank-based Winebaum is still the chief executive.
“Our biggest challenge now will be to get the balance right between Starwave’s and Disney’s assets,” Winebaum said. “Starwave is lean and scrappy, and Disney has amazing resources and experience. We need to combine the best of both as we work to become a leading provider of news and unique entertainment.”
Disney executives would not comment about future Internet acquisitions or partnerships, but Winebaum did say that the company will continue to look at new opportunities as they arise.
Bane expects to see the Buena Vista group pursue strategic partnerships from this point out, rather than acquiring other content-creator companies.
“They’ve got the content, now I’d look to Disney to forge marketing partnerships and partnerships with access providers,” she said. “Knowing Disney, I’d say that they are after an online empire and will take some aggressive steps to see that become a reality.”