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Thursday, Mar 28, 2024

DISNEY—Disney Is Mum on Web Strategy After Go.com Demise

With its once promising Go.com on the waste heap of failed Web portal dreams, The Walt Disney Co. is reconsidering its Internet strategy and whether it will ever be a major player in cyberspace. After taking a $790 million bath with Go.com, Disney unceremoniously dumped the site in January and laid off 535 people who worked at the unit, now renamed the Disney Internet Group. The company’s homegrown efforts bore little fruit and have been tremendously expensive despite the company’s name recognition and its internationally known cartoon characters and products, said Arthur N. Newman, an equity analyst with ABN AMRO. But as Disney readies to lay off about 4,000 more employees from its other units none from an already streamlined Internet group the company is widely viewed as having its job cut out for it if it hopes to compete with the giants of the Internet. Newman said Disney must wonder whether it really wants to go up against AOL-Time Warner, Yahoo or Terra Lycos when it comes to getting a piece of the Internet pie. “I don’t think they’ll ever be a major player in the Web unless they want to make some acquisitions and buy their way into it,” Newman said. “They were committed to their Internet strategy and they came up with great content and with some great advertisers, but they really couldn’t get the advertising they needed.” For 2000, Go.com posted a $242.1 million loss despite a 9-percent increase in Internet revenue, which includes e-commerce and advertising. But it was clear the Web portal was still a long way from profitability and, after three years of losses, Disney pulled the plug on the unprofitable unit, saying it would now focus on its other sites. Susan Murdy, a spokeswoman for the Disney Internet Group, said the company would not have any comment for the Business Journal due to the ongoing impact of its cost-cutting moves. “We’re not making any statements for at least another month,” she said. Some analysts have said Disney’s mistake was trying to save money with its “build-from-within” methods, rather than spending the millions necessary to acquire an already successful Internet company. Newman said Disney balked at acquiring Yahoo in 1997, after expressing initial interest, and Internet analyst Jordan Rohan of Wit SoundView said Go.com’s demise might well be a simple case of bad timing on Disney’s part. “They may have gotten in too late. Just too many players out there,” he said, pointing to AOL, Yahoo, Excite.com and others that were already firmly established online. Go.com’s initial plan to be a general interest portal, featuring news, games, chat, entertainment and sports, met with lukewarm response from the public. But after Disney revamped it to reflect entertainment-related content, interest grew along with revenue, but not enough to stave off the inevitable. “They just tried to be all things to all people and that didn’t work, so they tried something else and it didn’t really help,” said Lanny Baker, an equity analyst for Solomon Smith Barney. While it plans to write off $790 million in losses and an additional $25 million to $50 million in severance pay to laid off Go.com employees, Disney remains mum on how or whether it will build a major Internet presence like AOL. Baker said Disney must first examine how it failed with Go.com before making moves. “They’re clearly in a hunker-down mode and are not saying anything, but they have to change the way they see the Internet,” Baker said. “They were very cautious and careful in taking these treasured Disney equities, brand names and trademarks to the Internet But it was Disney products and content that they needed to emphasize and they didn’t.” Baker said that instead of a marketing strategy that revolved around Disney merchandise, movies, characters and products, Go.com tried to offer a search engine, information content, chat rooms, e-mail and other kinds of non-Disney-related entertainment. Disney CEO Michael Eisner has deemed Disney’s retreat from the Internet temporary. At a March 7 stockholders meeting, he said the company would “soon” begin offering movies on its Movies.com Web site. Eisner also pledged to begin developing an online service using wireless technology for those with portable Web devices. Baker sees what Eisner described as a temporary break as a way for Disney to solidify its more successful Web sites like the family-oriented Disney.com, the popular ESPN.com and ABC.com. “They have accumulated some learning and experience in this business that some companies don’t have, and that’s going to help them,” Baker said.

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