Disney's Dilemma: Kids Aren't Clicking With Mickey

Mickey Mouse is still Mickey Mouse, but Disney is no longer the company it once was. The icon of American culture, which in its heyday regularly steamrolled Wall Street's expectations as it churned out top-notch entertainment, is struggling to redefine itself as an evolving society threatens to make its core business less relevant.

This five-part series, which runs through Friday, takes a look at the challenges facing Disney as it tries to reverse its recently flagging fortunes.

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Experts on children refer to the threat Disney (DIS Quote) faces as "age compression." That's a fancy way of saying that kids are growing up more quickly than they did a generation -- or even a decade -- ago.

Of course, for most of this century's second half, American parents have worried about controlling their children, especially as they enter adolescence. It's hardly a secret that many teenagers rebel against parental and societal structures by creating their own culture and heroes, some very disagreeable to adults.

But a great deal of evidence, some anecdotal, some statistical, suggests that kids -- not teenagers, but kids aged 2 to 11, who are Disney's core audience -- really have changed in the past decade, and that the rate of change is accelerating.

"The general trend is that kids are getting older younger," says Michael Cohen, a psychologist who has consulted for Disney and a principal at ARC, a New York research firm. "A 10-year-old today looks like a 12-year-old 15 years ago."

The signs are everywhere. Children don't have to play dress-up anymore. They can wear miniature versions of their parents' clothes from companies like Gap (GPS Quote) and Tommy Hilfiger (TOM Quote). Girls as young as 9 can choose from their own brands of lipstick and cosmetics, and kids of both genders are highly brand-aware. Sales of traditional toys have fallen dramatically for kids aged 8 through 11, according to Chris Byrne, the editor of Playthings MarketWatch, a toy industry newsletter. The Toy Manufacturers of America reports that overall toy sales fell slightly last year, while sales of video games leapt more than 20%.

"By the age of 6 or 7, kids have given up traditional toys," says Byrne. "They're much more sophisticated. Since birth, [they've] been molded to be brand-conscious, brand-aware."

Marketers have even invented a new word to describe preteen consumers -- "tweens."

"We define tweens as 9 to 12 years, and what we see overall is that tweens are more and more like teens, because they hit the issues of teens and the media [desires] of teens at an earlier age," says Johann Wachs, vice president of strategic planning for Kids' Connection, a division of the Saatchi & Saatchi advertising agency. "For [kids aged] 9 and 10 years, to be fashionable and to be hip and to be peer-focused and peer-oriented is something that is very, very important."

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Many factors are driving age compression. But two dynamics -- one largely positive, the other mostly negative -- are paramount, experts say. (The first trend is explored in depth below. A look at the second follows in a related story.)

First, the good news: The current generation of American children is the first to grow up surrounded by computers and the Internet, and kids have taken to computers with a speed that leaves many of their elders astonished.

"It astounds me the age that children can handle a mouse and really get through a program, 2- and 3-year-olds," says Stewart Katz, president of Noodle Kidoodle (NKID Quote), an upscale specialty toy chain. Noodle, which sells most of its toys to kids ages 8 and under, has set up computer kiosks in its stores so that children and their parents can test software, and 10% of the company's sales are now computer programs.

"Children are very sophisticated in the way that they are technologically fluent. Some of these kids that live with us and next to us are more sophisticated than we are in understanding 3-D graphics and interfaces," says Idit Harel, the chief executive and founder of MaMaMedia, a Web site designed for children that has attracted more than 200,000 members.

Harel, who has studied computers and children for 15 years, says children who've grown up with computers and the Internet find television stifling. Children now "have an expectation about being part of the media experience," Harel says. They "see media creation as something in which they can participate."

So MaMaMedia lets children design their own stories and games using characters and templates provided by the company, then encourages them to send their inventions in to the company so that other kids can see what they've done. "We always give them a chance to make their own and publish their own" stories, Harel says.

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Traditional media companies might be tempted to dismiss Harel as a computer booster who's let her enthusiasm for the Internet get in the way of the facts. But statistics offer compelling evidence that computers have already substantially changed the way children entertain themselves.

From September 1985 to September 1998, the average amount of television watched by adults 18 and over rose from almost 28 1/2 hours per week to nearly 29 1/2, according to Nielsen Media Research. That fact alone is pretty interesting. In the face of longer workdays, longer commutes and the rise of the Internet, adults are actually watching television a bit more, testament to the power of the little box.

But what's true for adults has not proved true for children. Over the same 13-year span, the amount of television watched by children aged 2 to 11 has fallen sharply, from about 24 hours per week to roughly 18 1/2. That's a decline of almost one-quarter in just over a decade, a drop too big to be explained by increased homework or after-school activities.

Cohen of ARC says he was "the most skeptical" about whether new media really had the potential to change childhood -- until he watched his 7-year-old daughter. "My daughter can sit at a keyboard and do all kinds of things. It was just part of her life from when she was a kid," Cohen says. "Technology is just kind of woven into the fabric of their life."

Geraldine Laybourne, who headed the Nickelodeon children's television network for a decade before leaving in 1995 to head Disney's cable operations, summed up the emerging trend at a media conference last month. Children "are growing up in a world that's completely different," Laybourne said. "A 3-year-old thinks [a remote control] is broken if all it does is change channels." (In May 1998, Laybourne quit Disney to found Oxygen Media, which already has some Web sites for women and plans several more, along with a TV network.)

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The hold computers have on kids hasn't gone unnoticed at Disney. The company's Web site is loaded with games and activities for children. In addition, the site contains a premium area called Club Blast that features more games and members-only areas. Disney claims Club Blast is second only to The Wall Street Journal among subscription Internet sites, with 190,000 subscribers paying $5.95 per month, or $39.95 per year.

The company has hired some of the best talent in the software design business, including MIT Professor Seymour Papert, a colleague of Harel's and a pioneer in using computers to teach children, to make its Internet offerings more entertaining. Later this spring, the company plans to introduce a line of interactive Internet toys that will give kids a chance for more sophisticated play.

Even so, computers don't play to Disney's strengths, says Richard Chase, a Johns Hopkins psychiatry professor who has consulted for Nickelodeon and Disney. Characters like Mickey Mouse and Donald Duck are entertaining and fun, but Disney traditionally hasn't given children a way to participate in their stories, Chase says.

"Disney certainly has enormously powerful properties in the story and character world, but whereas entertainment used to make it on story and character, it now has to make it on compelling experiences," Chase says. "The new media stretch minds, invite us all to participate. The passivity that was tolerated in older media is no longer possible."

As an example, Chase cites the difference between watching a movie about an arctic expedition, "where you have a beginning a middle and an end, and you can't ask questions," and following the same expedition online with daily updates. For children reared on the Internet, the second is "more compelling," Chase says.

Disney, "along with all the media companies, needs to rethink what their audience wants," Chase says. "Younger kids, they're going to have less time for conventional media products."

Click here to see Part 2 of this story.