Musings on VMK and Disney's online presence

For awhile I have been thinking about the media storm brewing in the online Disney community about the death of VMK.  I have done a lot of studying of the Disney company over the last couple of years and while they have a pretty tight ship (some things about how the company relates to itself can only seem to be created to keep lawyers employed and anybody trying to find out who owns what in obscurity, which is quite normal for any modern Fortune anything company BTW) you can read some things between the lines to infer certain things about that structure and business environment.

If you look closely, you'll notice that DIG (the Disney Internet Group) is pretty much responsible for the general management of the disney.com domain (which in reality if you've been around long enough turns out to REALLY be the remnants of the failed Michael Eisner era GO.COM in the Internet bubble), certain standards for the web site presence across the companies online media (think the toolbar you see at the top of most disney.com sites as one example), and a number of popular online Disney destinations (like Toontown Online, POTC Online, family.com, and movies.com among others. . .  you can get the full list here). 

It also is responsible for advertising that Disney places on select web pages on its sites for presumably companies that have either an affiliation with Disney or who meet Disney standards as someone Disney is okay in having their name and brand associated with.  It's a BIG deal for a company like Disney to give the impression that you can trust some one else's products, so we all know they take this part pretty seriously. 

Okay, so what you say?  Well, if you look closely at the management team page here and through the yearly report here, you will notice that WDIG is a FULL BLOWN business unit, right up there with Jay Rasulo for Parks and Resorts and Dick Cook for the Studios, among others.  Nobody in big business makes something a business unit (BU) unless they intend for it to MAKE money.  DIG right now doesn't do that, or at least they don't show it on the consolidated financials independently, so if it does it is still immaterial to the bottom line overall (my bet right now is on loosing money, but that's only a guess).  But they DO talk about it a lot, and it's a heavy focus area as we all know of the top brass, Bob Iger himself.

So why is that important?  If you look at some of the other links on the disney.com domain, like oh say disneyworld.com or disneyland.com to name two, you'll notice they are actually paid for and managed by Parks and Resorts (P&R), NOT DIG.  I don't know enough about the inner workings yet to know if P&R has its own data center or if they host it all through some big DIG data centers, but from some of the job postings I've seen I'd say they do both to some extent.  Regardless VMK was a P&R creation, hosted by P&R, and run presumably by P&R.  But most importantly it was in the P&R BU budget and it created ZERO monetary value. 

Sure, it was somewhat effective advertising to a certain slice of us online folks, but not what Disney would do for a typically marketing campaign I think.  My grandmother can't even tell you what VMK means, let alone surf the web effectively enough to use it. 

Which in my mind just goes to show why it was easy for P&R to pull the plug.  It was coming out of their budget, and not the budget of say, oh, the Internet Group.  And P&R, inlike DIG, DOES get reported in the financials directly.  Likewise, if they were starting to hit scale problems for numbers of users online, amount of money to invest to expand, etc. that ties up future capital that can go elsewhere in P&R, like the parks or other promotions (and of course the kicker, it wasn't making money anyhow, since it was never designed too).

Look at it this way:

1. closing VMK presumably frees up money in the P&R segment to do something else (maybe they will make an Internet version of Toy Story Mania, the subject of my long post yesterday, like they did Buzz Lightyear in California, or something else exciting we don't know about yet)
2. it is my theory for why Bob Iger just combined DIG and the Interactive Studios to form the Disney Interactive Media Group.  Scale and business acceleration.

So it is all in the name of accelerating Disney's move into the online and electronic frontier. . . profitably (and that's a good thing for you, me, the shareholders and the general public).  It's also why VMK had to go:  P&R didn't have the continual money to invest, because P&R could have handed it over to DIG, but DIG already has its plate FULL of all those other fun online adventures, and budgets just don't give way for unexpected projects on a whim.