It’s a better bet that, especially when one factors in the additional demand that will be created by new consoles from both Sony and Microsoft Corporation (NASDAQ:MSFT), both Disney and Activision will do quite well going forward. However, the distinct advantage that Disney will have is how its other properties, such as movies, TV and even its theme parks, will drive demand for Infinity in a way that Activision just can’t match today.
But with that said, Activision Blizzard, Inc. (NASDAQ:ATVI) isn’t only counting on Skylanders. It has a deep pipeline of upcoming titles, including the next release in the Call of Duty megafranchise, Ghosts, with a storyline written by Academy Award winner Stephen Gaghan of Syriana and Traffic fame. And 2014 will see the release of one of the most anticipated games in years: Destiny, from partner Bungie. Simply put, even the worst-case scenario of some sales loss via Disney’s foray into Skylanders’ territory shouldn’t cause any serious impact to Activision.
New consoles are key
Microsoft Corporation (NASDAQ:MSFT) has all sorts of things on its corporate plate. Between CEO Steve Ballmer’s retirement and the search for a replacement, the acquisition of Nokia‘s mobile phone business and the need to quickly integrate it into the rest of its operations, and the continued decline of the PC business, the November launch of the Xbox One is central to the company’s future as a “device and services” company. If Microsoft Corporation (NASDAQ:MSFT) doesn’t execute this launch well, there is risk of Sony’s Playstation 4 taking back some of the market share that Microsoft has come to dominate.
Here’s a key takeaway: The Entertainment and Services division generated 13% of revenue last year, but only 3% of the company’s profits. But if the company is going to evolve in the way it’s trying to, the Xbox’s place as the “entertainment hub” is central to Microsoft’s future. So it can’t drop the ball. As to Activision, it needs both Sony and Microsoft to have successful launches. The cost to produce content for essentially four consoles is very high. Faster uptake of new consoles will defray this expense.
Final thoughts
The video game market is primed for a rebound, and Disney’s entry into Activision’s territory is evidence of that. Both are great companies and solid investments; Skylanders and Disney Infinity are just small reasons why. Dig a little deeper, and there’s plenty to like about them both.
The article “Disney Infinity” Versus “Skylanders”: Can Activision Meet This Challenge? originally appeared on Fool.com is written by Jason Hall.
Jason Hall owns shares of Activision Blizzard. The Motley Fool recommends Activision Blizzard and Walt Disney. The Motley Fool owns shares of Activision Blizzard, Microsoft, and Walt Disney.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
