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Disney Electronics Eyes 100% Growth In ’05

New York — Disney Consumer Products expects to double its sales of Disney-themed consumer electronics in 2005, largely through a recent distribution-base expansion, but also through an increased product selection, its entry into new product categories, and an increased focus on infant electronics.

In 2006, the company will further expand its sales through an increased focus on boys, said Chris Heatherly, global electronics VP of the Burbank, Calif.-based company, on a press tour, here.

The new retail partners are Best Buy, Kmart and Wal-Mart, which join Circuit City, Sears, Target and Toys ‘R’ Us. The new categories include portable DVD players, digital cameras and MP3 players, helping expand the company’s selection this year to about 40 SKUs from last year’s approximate 15. By the end of the year, the company will add another 10 SKUs.

The Disney-owned company also plans to sell prerecorded music on flash-memory cards later in the year for its planned MP3 players, which will be targeted mainly to 9- to 12-year-old “tweens.” Disney could become the first company to sell music on flash memory if no one else jumps in before then.

With the initiatives, the company expects to increase its market-share lead in the growing kids consumer electronics market, estimated by Disney at more than $300 million at the factory level in 2004. “Kids are getting electronics at very young ages, and they’re getting a lot,” he said, noting that the 13-inch TV market is “really a kids market.”

Some retailers — including Best Buy, Kmart, Sears, Wal-Mart and Toys ‘R’ Us — have acknowledged the category’s potential by appointing a single buyer to purchase all kids electronics, Heatherly said. To highlight the category in stores, Sears, Toys ‘R’ Us and Wal-Mart merchandise kids electronics in one area, and Best Buy does so in “a significant number” of stores, he said.

“Compared to two years ago, retailers get it — that kids or getting a lot of electronics, and big brands like Disney are what kids are looking for,” Heatherly said. “Design, brand and the efficiency of manufacturing and distribution” are the largest differentiators between CE brands, he added.

Disney claims top market share “by far” after having entered the kids electronics market aggressively only about three years ago, initially with now-discontinued cordless phones and FRS radios. In 2003, Disney added AV products that included a Mickey-themed 13-inch TV, companion DVD player, portable audio, and a clock radio. In 2005, he expects Disney to garner about a 25 percent share of the 13-inch TV business in 2005 in no am, up from about 15 percent in 2004.

Prior to the 2003 launch, Disney limited its brand selection largely to a handful of novelty phones and clocks marketed by Kash N Gold and targeted largely to adult collectors, Heatherly said.

To differentiate itself from competitors, Heatherly said, Disney is intimately involved in product development, design, and marketing and shuns the practice of “slapping a logo” on products. As a result, the Disney line delivers unique designs, including TVs with Mickey ears, and “special features fitting a kid’s play patterns,” he said. TVs, for example, come with onscreen displays that feature Disney characters. The TVs also come with two remotes, one for a kid’s smaller hands.

The key driver of Disney’s growth this year is an expanded distribution base that this year includes Best Buy, Kmart and Wal-Mart stores, Heatherly said. In 2003, A/V distribution was limited to Circuit City, Sears and Target, with the later addition of Toys ‘R’ Us. In the fourth quarter of last year, Best Buy and Wal-Mart ran successful holiday-season tests, and in January, Wal-Mart rolled out the selection to 2,000 stores. Wal-Mart will add Disney to another 800 stores in August, Heatherly said. For its part, Best Buy launched Disney products in April and May in 500 of its approximate 660 stores, he said.

Besides adding distribution, Disney is also adding new products to give retailers a greater selection of Disney SKUs this year. In April, it began shipping personal DVD players, including one-piece handheld models with 3.5-inch color screen on the outside shell at a suggested $129. A model with flip-up 7-inch 16:9 screen at a suggested $199 is also available. The one-piece model is available in multiple styles, including Disney Princess, Power Rangers and a vintage Mickey comic-book look. The flip-up model has Mickey ears. Portable DVD “is a category completely driven by kids,” Heatherly noted.

The first Disney digital camera is a pink heart-shaped locket with VGA camera on one side and a place to display printed digital mages on the other. It’s available in August to consumers at a suggested $29 with 8MB built-in memory.

Without divulging product details or pricing, Disney said it will offer its first headphone MP3 portables in time for the holidays, all with removable SD memory cards and in various Disney themes including Mickey. They will decode MP3 and WMA files.

At that time, Disney will also sell prerecorded music albums on SD memory cards at CD prices. Most cards will offer compilations of pop music, some of which will be from Disney labels. The music will be targeted mainly to the tween market of 9- to 12-year-olds. “Kids don’t have credit cards to download music,” Heatherly said of the music initiative. “Kids buy music at retail with allowance money.” Nonetheless, kids still want MP3 players, he said.

MP3 players will raise the brand’s adoption by boys, but a bigger push for boys’ dollars will come in 2006, when Disney plans Power Rangers products and products based on the Disney movie Cars, which will hit theaters in the summer of 2006, Heatherly said.

In other product expansions:

·TVs will be available in four themes instead of two.

·Disney plans a limited launch of Winnie the Pooh infant electronics in the fall through Toys ‘R’ Us. Broader distribution will follow in 2006.

Infant products will include a picture-frame baby monitor at a suggested $39 and a boombox that looks like Pooh’s honey pot. It also projects multiple images on the ceiling, making it a “video mobile” that infants can’t reach when they get bigger.

Other new products for 2005 include a Cinderella-carriage karaoke machine, a Kmart-exclusive Pooh TV and DVD player, a 13-inch Cinderella TV at a suggested $99, and DVD/VCR players in the Cinderella and Pooh themes at a suggested $69. Disney also offers a 19-inch TV.

For the North American market, Disney contracts with Memorex-licensee Memcorp to market the products and source many of the products from contract manufacturers. Disney also collaborates with Memcorp to produce POS material.

One of Disney’s two TV manufacturers is Orion, but later this year, the first TVs from TTE, the Thomson-TCL joint venture, will hit the U.S. market. Disney wants to take advantage of TTE’s scale and global manufacturing base, Heatherly said. TTE will become Disney’s biggest TV supplier, he noted.

Disney’s competitors include Emerson, which licenses the SpongeBob, Dora and Nickelodeon brands, and Spectra, which markets the Hello Kitty brand exclusively to Target, Heatherly said.