By Ben Fritz
On a Wednesday afternoon in late May, 120 staffers from across
Walt Disney Co. gathered at a meeting room on its Burbank, Calif.,
studio lot to learn about "The Lion Guard," a new series based on
the 1994 "Lion King" movie, coming to the Disney Junior
network.
The goal: To see what types of toys, bedsheets, apps and books
they might develop in tandem with the show's planned launch in late
2015. "We do this in the very earliest stages to get people
thinking," said Nancy Kanter, general manager of Disney Junior,
whose target audience is preschoolers.
Television has long been Disney's most profitable business, but
not a prime source of fodder for consumer products and theme-park
visits. That has traditionally been the province of the company's
film studio, which created multimedia juggernauts like "Cars,"
"Pirates of the Caribbean" and, until recently, every one of the
company's princess characters.
The formula has been flipped with Disney Junior, a
three-year-old lineup of shows that has enjoyed mixed ratings, but
is already a blockbuster on store shelves. Sales of products based
on the network's shows have more than tripled in two years, to an
estimated $3 billion in the fiscal year ending this September,
according to the company. Analysts estimate that at least 10% of
that revenue flows into Disney's coffers based on licensing
deals.
"Disney didn't used to be focused on the preschool business, but
in the past few years they've created a whole ecosystem," said
Stephen Berman, chief executive of Jakks Pacific Inc., which makes
a number of toys based on Disney Junior shows.
Key to that success has been the Disney consumer-products unit's
willingness to bet early on television. Rather than waiting until
Disney Junior shows became a success, as is typical, the company
lassoed toy makers more than a year before its new preschool lineup
started airing so that programs and products would launch near
simultaneously.
"That's an absolute first for us...and was a bit of a calculated
risk," said Bob Chapek, president of Disney's consumer
products.
The result has been a faster rise in a business where it
previously lagged behind. But the risk remains that a flop can be
magnified by warehouses full of tea sets and toy swords nobody
wants. An earlier Disney show for preschoolers, called "JoJo's
Playhouse," fizzled on toy shelves after the company made a big
bet, including a float at the Macy's Thanksgiving Day Parade.
To be sure, Disney Junior doesn't yet match up to the media
giant's biggest licensed brands such as "Cars," Disney Princess and
Mickey Mouse. But "Doc McStuffins," who treats ailing toys, and
"Sofia the First," the company's first preteen princess, were both
among the five fastest-growing toy licenses in 2013, according to
NPD Group.
Disney Junior launched as a programming block on the Disney
Channel in 2011 and then as its own 24-hour channel in 2012. Shows
like "Sofia the First" and the Peter Pan spinoff "Jake and the
Never Land Pirates" boosted ratings compared with a prior lineup
called "Playhouse Disney."
The Disney Junior channel's Nielsen ratings regularly beat those
of competing preschool networks: Viacom Inc.'s Nick Jr. and Comcast
Corp.'s Sprout. Across all networks, though, Disney had only three
of the 10 highest-rated shows among 2-to-5-year-olds in May,
compared with seven for Nickelodeon, according to Nielsen data
provided by the companies.
With no commercials and a modest monthly fee paid by cable
operators to run the channel--14 cents a month per subscriber,
according to SNL Kagan--Disney Junior isn't a cash cow.
Disney Channels Worldwide President Gary Marsh said the channel
is "a success financially as part of the television operation." But
he added that Disney Junior also introduces young children to the
media giant's brand and inspires popular products. "Its success
gets amplified in how other lines of business have been able to
monetize it, in a gigantic way, " he said.
At a Toys 'R' Us location in Los Angeles recently, Disney Junior
products occupied more shelf space than other preschool licenses.
The only one close was Nickelodeon's long-popular "Dora the
Explorer."
A Nickelodeon spokesman declined to provide annual sales data
for consumer products based on that network's preschool
programs.
Los Angeles resident Scott Kramer's 7-year-old daughter
regularly watches Disney Junior with her 5-year-old brother, wears
a "Sofia the First" nightgown, and reads books based on the
show.
"It's really easy for the grandparents to take them to the mall,
go to the Disney Store, and pick up something from the Disney
Junior section for them," said Mr. Kramer.
Sales have consistently grown, Mr. Chapek said, in part because
after taking over the consumer-products unit in 2011 he reorganized
it to dedicate staffers to each of the company's key brands
including Marvel, the Muppets and Junior. Previously, Disney
Consumer Products was organized by product line, such as clothing,
toys and furniture, and older brands faded in favor of the new.
In some cases, his unit has passed on the opportunity to
immediately sell products for Disney Junior shows that don't appear
to have much toy appeal, such as the recently launched "Sheriff
Callie's Wild West" and "Henry Hugglemonster."
But Products are already in the works for "The Lion Guard" and
another 2015 program, the science-fiction adventure series "Miles
from Tomorrowland."
Early in the development of "Miles," Disney Junior artists
worked on certain items the consumer-products group was excited
about, such as the title character's spaceship. "We're not
designing toys before the show, but we put certain things they need
at the head of the design pipeline," said Ms. Kanter.
Write to Ben Fritz at ben.fritz@wsj.com
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