Disney buys into Toysmart.com

Disney has acquired a majority stake in Toysmart.com, thrusting the entertainment giant headlong into the wide open $US1.1 billion educational-toys market. In the process, Disney has helped to equip yet another deep-pocketed online merchant for the brewing battle between online toy stores.

Though Disney refused to disclose financial details of the investment, its stake in the company is valued at around $US45 million, according to sources familiar with the deal. As it has done with Infoseek, Disney has the option to increase its ownership portion in the firm. Disney executives will maintain three of five board seats.

"The two will feed on each other in a positive way," says Chuck Davis, president of e-commerce at Disney's internet group, the division that heads up Disney's online properties. Davis explains that Toysmart, which is geared toward parents interested in high-minded toys such as science kits rather than Star Wars action figures, will be promoted on Disney's Family.com; Disney's online promotional support could also be extended to sites like Disneystore.com and the Go Network. And Disney products, like its new cruise-ship vacation packages or trips to theme parks, could be offered on the Toysmart site.

Toysmart is highly regarded by educators and child-development specialists. David Lord, Toysmart founder and CEO, says his company's alliance with Disney gives it a good shot at becoming an overnight category leader.

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