Walt Disney Co

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WALT DISNEY CO.

The Walt Disney Co.'s most successful Internet role was as a content provider. Since the mid-1990s the company has operated Web sites for kids and parents, including Family.com and the subscription-based Blast online. It developed other Web properties, including ESPN.com, ABC.com, ABCNews.com, and other Disney sites. In 1998 the company embarked on a strategy to create an Internet portal to compete with America Online and Yahoo!, among others. It acquired an interest in search engine Info-Seek in 1998 with an eye to transforming it into an Internet portal. In 1999 Disney purchased the rest of InfoSeek and launched the Go.com portal. Go.com was renamed the Walt Disney Internet Group (WDIG) in 2000, a separate company that encompassed all of Disney's Internet ventures. With AOL gaining added muscle through its merger with Time Warner, it became clear that Go.com would not be able to compete with the leading Internet portals. After sustaining more than $1 billion in losses from Go.com and other Internet properties, Disney announced plans to close Go.com in 2001 and fold the WDIG back into the company. The company said it would focus on information and entertainment content rather than portals and electronic commerce.

DISNEY PUT ITS CONTENT ONLINE

The Walt Disney Co. launched its free, family-oriented Web site Family.com in 1996. The site had partnerships with more than 100 local parenting publications. It also offered a recipe library and a customized activities index for parents and their children. Parenting sites like Family.com attracted a large percentage of women, and thus advertisers were attracted to the site's demographics.

In 1997 Disney launched its Daily Blast site for kids. This subscription-based site charged $4.95 per month and was aimed at children age 12 and under. Its content included animated storybooks, downloadable games, and educational toys and puzzles. It also featured news and sports stories written by children. Disney's popular characters—including Mickey Mouse, Donald Duck, and Goofy—were also present at the site. Through an agreement with Microsoft Corp., users of the Microsoft Network (MSN) had free access to the Daily Blast site.

Other Internet sites operated by Disney at the time included Disney.com, where the company sold its merchandise, and sites affiliated with subsidiaries ABC-TV and ESPN. Disney also owned a majority interest in Starwave, based in Bellevue, Washington, which ran the family-oriented Family Planet site as well as ESPN SportsZone.

Disney.com was a popular site and consistently ranked high in popularity. As more people began to shop online in 1997, Disney.com reported a fivefold increase in online sales over 1996. The shopping site at Disney.com generated about as much revenue as three brick-and-mortar Disney stores, according to the company. In 1998 Disney and bookseller Barnesand-Noble.com teamed up to create Disney book boutiques that featured Disney titles and was available online at both companies' Web sites.

PORTAL STRATEGY FOR E-COMMERCE, 1998-2001

In 1998 Disney acquired a 43 percent interest in Internet search engine InfoSeek, with an option to purchase the rest of the company. At the time media companies in general were looking for ways to achieve a dominant presence on the Internet. NBC had just paid $38 million for a 19 percent interest in Snap!, an Internet portal owned by CNET. Later in the year America Online acquired Netscape Communications and its popular NetCenter portal. As part of its $472 million acquisition of InfoSeek, Disney paid $70 million in cash and turned over ownership of Starwave to InfoSeek. Disney would regain ownership of Starwave when it completed its purchase of all of InfoSeek in 1999. Disney also committed $165 million to provide promotional support for InfoSeek.

Disney's acquisition of InfoSeek was part of its strategy to distribute its content over all available media. Toward the end of 1998 Disney, InfoSeek, and Starwave introduced a new Internet portal, Go.com, in a beta version for consumers, followed by the official launch of the Go Network in January 1999. The home page of the Go Network resembled that of Info-Seek, but it was easily customizable. Content was organized into five major sections, which were accessible through page tabs: a sports area featuring ESPN.com; a news section featuring ABCNews.com; an entertainment area that included ABC.com and MrShowbiz.com; a family and kids area featuring Disney.com; and a personal finance section.

The launch of the Go Network in 1999 was supported by a national television advertising campaign that ran in 14 major markets. At the time of its launch, the Go Network had 20 million unique users, with 8 million of them registered. Following its launch the Go Network added Go Shop, an e-commerce site that featured more than 200 merchants, and Go Games, which offered a variety of individual and multiplayer games. In March 1999 Disney redesigned its Disney.com site, creating 12 content channels and merging its subscription-based Blast Online for kids into Disney.com. With about 80 percent of the new Disney.com content available for free, subscribers could join Club Blast for $5.95 per month or $39.95 per year and gain access to premium content, including the Disney BlastPad, a proprietary kid-safe instant messaging service that parents could control, and the Mouse House Jr., an area designed for children too young to read.

In mid-1999 Disney decided to acquire the remaining 57 percent of InfoSeek for $1.62 billion in stock. It created a new tracking stock company, Go.com, that incorporated InfoSeek, the Go Network, and Disney's Buena Vista Internet Group. When the purchase closed in November 1999, the transaction was valued at $2.15 billion.

DISNEY REVISES ITS INTERNET AND PORTAL STRATEGY, 2000-2001

By early 2000 it was clear that Go.com would not be able to compete with dominant portals such as America Online and Yahoo!. The company reported a loss of more than $1 billion in 1999 from its Internet properties. Adding to Disney's Internet losses was its venture into electronic commerce through a $45 million investment in Toysmart.com in 1999. As was the case with the Go Network, Toysmart.com ran into serious competition when Amazon.com formed an alliance with brick-and-click retailer Toys "R" Us. Toysmart.com officially went out of business in May 2000.

During 2000 Disney attempted to redesign the Go Network portal to concentrate it more on Disney's traditional family-and-fun content, building a self-contained search engine for all of Disney's Internet properties. In August Go.com was renamed the Walt Disney Internet Group (WDIG). Later in the year Compaq Computer Corp. became the WDIG's preferred technology provider through a $100 million agreement. The redesigned Go.com Web site was re-launched in September 2000. The new design featured Disney's individual Web sites more prominently. While it kept the InfoSeek search engine, the new Go.com site was designed as a place to find entertainment news and vacation information.

In January 2001 the WDIG and Walt Disney Parks and Resorts formed an online operation called Walt Disney Parks and Resorts Online that expanded Disney's presence on the Internet. In the face of a general economic slowdown and a slowdown in the Internet economy, Disney made deep cuts in its Internet operations in early 2001. The company announced plans to close down the Go Network and the Go.com Web site. In the interim Disney said it would operate a streamlined version of Go.com while it moved services and registered users to other sites. As part of the cutback Disney eliminated 400 jobs and folded the WDIG back into the company. All outstanding shares of WDIG common stock were converted into Disney common stock effective March 20, 2001. In had become clear that the tracking stock company was not providing enough revenue for additional investments or acquisitions or to retain employees. The management of WDIG would continue to be in charge of Disney's remaining Internet properties.

While Disney was not able to create an industry-leading portal, the company's other Internet properties remained leaders in their categories. Its experience with InfoSeek and Starwave enabled Disney to create a single, scalable platform for its Internet businesses. For the future, the company planned to continue to create and operate innovative, highly popular content sites. During 2001 the company was also involved in initiatives to bring online content to automobiles and wireless devices.