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Should you dump Disney on topless Miley Cyrus mag cover?

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The New York Times reports that the Walt Disney Company (NYSE: DIS) could be in for a world of hurt. That's because its $1 billion Miley Cyrus franchise is at risk thanks to the June 2008 cover of Vanity Fair. That's where you'll find the 15 year old Cyrus draped in a satin sheet -- and nothing else.

In case you don't have children of the right age, Cyrus is the star of the wholesome Disney Channel blockbuster "Hannah Montana." Retail sales for the franchise are expected to total about $1 billion in 2008. A motion picture is in the works for 2009 and Cyrus signed a seven-figure book deal with the Disney Book Group last week.

But all this money could be at risk for Disney. That's because people like Lin Burress who writes a marriage and parenting blog, Telling It Like It Is, is not a happy camper. Referring to the mountain of Hannah Montana retail items - makeup, shoes, clothes - in the marketplace the Times quotes her as saying: "Parents should be extremely concerned. Very young girls look up to Miley Cyrus as a role model."

It should be interesting to see whether this Cyrus publicity hurts or helps Disney stock. Even if the entire Hannah Montana phenomenon went up in smoke, it would account for a fairly modest percent of this $35 billion company's revenues.

But even if it does, Disney has a long track record of creating child stars who grow up (remember Britney Spears and Justin Timberlake?). So I am guessing Disney has the next Miley Cyrus in its corporate incubator even as we speak.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Disney securities.

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Last updated: July 03, 2009: 07:32 PM

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