Old School Retailers

Cable World, Sept 11, 2000 by K.C. Neel

Some networks shun the Web for old-fashioned store fronts

While many media and entertainment firms are busy concentrating on their virtual e-commerce businesses, a slew of programming networks -- and an MSO or two -- are counting on the bricks-and-mortar retail world to expand their presences and spheres of influence.

The retail industry has benefited from a strong economy for the past five years, and companies such as Discovery Communications have jumped into the business with both feet. Discovery bought the Nature Co. about three years ago to expand the business and cross-promote Discovery programming.

It's worked splendidly, according to Keith Harband, Discovery Retail's SVP-marketing. After three years, more than 100 Nature Co. stores have been rebranded as Discovery Stores. By the end of the year, the transition should be just about complete, he says.

Discovery hasn't settled for just running the stores it bought. The company has opened an additional 45 stores this year alone, making a total of 160 retail outlets nationwide.

A transition to retail from programming isn't easy. Ask ESPN, which opened three retail stores in Southern California a couple of years ago only to shutter them a year-and-a-half later.

"We tried opening a straight retail store. It started out as a way to transition and extend our brand," says ESPN's SVP-marketing Lee Ann Daly. "We didn't succeed, but we learned a lot."

For instance, a retail environment didn't provide enough of an "experience" for sports junkies. Buying sports paraphernalia wasn't enough to entice people to come back time and again.

ESPN isn't the only company to have problems with retail. Viacom shuttered its lavish Viacom Entertainment Store in Chicago last year after only 18 months. It's also in the process of phasing out its 15 Nickelodeon stores. Instead, it's leaving the retail business up to retailers by selling products such as Nickelodeon's Blues Clues merchandise to Sears, Roebuck & Co.

ESPN regrouped, coming up with the ESPN Zone idea -- a place people could come to gather, watch sporting events on many TV screens, gaze on sports-oriented art commissioned or found by ESPN and buy merchandise.

This lime, the company hit a home run, Daly says.

"We produce a number of shows at our ESPN Zone establishments," she says. "A kid can go into the Zone and see their favorite talent at work live and in person. A store couldn't replicate that experience."

At this point, there are ESPN Zones in Baltimore, Chicago, Atlanta, Washington, D.C., and New York City. A new Zone is scheduled to open soon in Anaheim, Calif., and Daly says the company is always scouting for new locations to open more Zones.

In addition to its slew of mall stores, Discovery has four mega-superstores scattered across the map -- Washington, D.C., San Francisco, Baltimore and Santa Monica, Calif. The product mix in these retail establishments is more expansive and somewhat different, Harband says.

"For instance," he says, "our book selection in these stores is very extensive and very strong. We also have a large area dedicated to Discovery product. It's the place to go for people wanting Discovery stuff like shirts and hats."

There's also the "WOW" department -- unique items Discovery doesn't carry in its smaller stores, he adds.

Although networks generally won't break out their retail and restaurant revenues, most executives say the retail business has been successful. No wonder; they've opened stores and restaurants in a booming economy. No telling what will happen if and when the economy turns sour. Consumer confidence has started to erode, and some retail chains have started to report a dip in sales.

To expand their retail presence, some networks market their product to their own stores as well as other outlets. Disney Channel has long provided merchandise for Disney stores around the country, but the network also sells merchandise to other retail stores.

Disney Channel has a slew of product that is exclusive to the Disney stores, but it also sells merchandise to retailers such as Sears and JC Penney. The idea isn't to make money as much as it to promote the channel and its programming, says EVP-marketing Elio Hensleigh.

"From our perspective," she says, "merchandising is just part of our brand extension."

An internal brand management group works closely with the corporate consumer products division to work out product development and dissemination at the company-owned stores, as well as outside retail sources.

"Our job is to make sure the consumer-products people know what we're doing. From our perspective, our most important mission is to make quality entertainment TV by building and creating characters that have value for our viewers."

Programmers aren't the only media companies getting into the retail business. As cable modems continue to expand in popularity, many MSOs are either cutting deals with local retailers to sell the modems, or they're selling the boxes outright to consumers.

Cablevision Systems jumped feet first into the retail arena by spending $100 million two years ago to buy then-bankrupt consumer electronics chain Nobody Beats the Wiz. Analysts dissed the move, saying Cablevision was treading into an arena its executives knew nothing about.