Is it time for Disney Channel to rethink no-ads strategy?

Like Lizzie McGuire, Disney Channel is growing up fast.

Maybe too fast.

“Lizzie” star Hilary Duff ankled the network last month after contract negotiations broke down regarding the 15-year-old actress’s future with the cabler.

And with the prospects for “Lizzie’s” future revenue not as strong as once thought, might Disney Channel rethink its strategy on accepting outside advertising to cash in while “Lizzie’s” on fire right now?

Ever since launching in 1983, the network hasn’t taken in advertising from outside the Mouse House. It runs plenty of promos of upcoming Disney Channel fare and kid-friendly interstitials, and tubthumps pics from the studio division.

With ratings impressive as its ever been, is the company missing out on millions in revenue by not letting the Gap, Diet Coke and General Mills come aboard?

“That question has come up as the ratings have gone up,” says Rich Ross, Disney Channel’s president of entertainment. “This is a business plan that we subscribe to and support but who knows what the future is in the long term?”

Reasons behind the network’s no-commercial mandate are several: Cabler believes paid ads would confuse young viewers as to programming vs. advertisements. Plus, it assures parents that their kids won’t be screaming for every sugar cereal they see.

There’s also the agreement the network has with feature film studios. By agreeing not to have paid ads, Disney Channel has had to pay much less in license fees, assuring studios that more people will tune in to their pics because of the commercial-free arrangement.

Hence, if Disney Channel starts taking ads, studios will want them to pony up. In anticipation of that move, cabler has upped its original movie package and runs considerably less non-Disney fare than previously.

Content king

Not having commercials overlap with content makes sense for the Playhouse Disney component of the net, which caters to preschoolers 2-5. But can’t 11-year-olds watching “Lizzie” or newest series “That’s So Raven” tell the difference between Mickey Mouse and McDonald’s?

“Maybe they’re being overcautious,” says Brad Adgate, senior VP and director of research at Horizon Media. “While there’s certainly a lot of value to the promos and interstitials, you would think that a network in over 80 million homes would generate a lot of revenue.”

“Commercials could be the next evolution of the channel,” says cable consultant Ray Solley. “I don’t think viewers would be averse as long as it doesn’t get cluttered. I’m sure they’ve had people come to them with plans and proposals to get their products on the air.”

“Lizzie” already has clothes and cosmetics tie-ins, so the line separating content from commercials is admittedly fuzzy.

But with ratings at an all-time high, it’s certainly a good situation either way. Though Nickelodeon is still king of kid TV, Disney Channel and Cartoon Network are close in terms of total viewership depending on how you slice it. Disney Channel is up 34% with kids 6-11 from last year and has passed Cartoon Network for that age group.

Adgate believes if Disney decided to go with paid commercials, advertisers would be banging down the Mouse’s door. “All sorts of product categories would love to target their audience,” he says.

Trying to capitalize on “Lizzie’s” popularity, Disney Channel has already filmed 65 episodes of the series and has six in the can. They will air sometime between now and spring, most likely paired with an original movie.

‘Lizzie’ busy

There was also thought of launching another “Lizzie” series but that’s no longer an option with Duff bidding adieu.

Mouse House uses its entire platform to maximize audience potential. “Lizzie” appears on Disney Channel, ABC’s Saturday morning lineup and the feature film has grossed nearly $40 million.

“Flow is very important for a network business,” says Ross, who oversees original skeins such as “That’s so Raven,” “Even Stevens,” “The Proud Family” and the animated “Kim Possible.” “We have a unique opportunity to work with ABC and put it on that platform. You have to look at the broadest opportunities to get attention. That way kids will watch things on a more regular basis.”

Adds Solley: “It seems to be the strategy to take a property and maximize it across the entire Disney business plan. What’s really working for them is they have the entire Disney engine working behind them.”

So while there might not be ads strewn across the channel, that doesn’t mean there won’t be an “Even Stevens” playground at Disneyland.

“Maybe in the long run, there’s more long-term revenue in theme parks, merchandising and movies than ad revenue,” Solley opines.

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