The Walt Disney Company (NYSE:DIS) is attempting to take hold of its video game segment with the planned release of Disney Infinity, a game that is slated to hit the market on August 18.
Every division of the company has performed well, including the theme parks and the cable TV segment. Signs of a turnaround have even been noted in the firm’s film studio. The Walt Disney Company (NYSE:DIS) Interactive is essentially the only segment that is falling behind.
In fact, The Walt Disney Company (NYSE:DIS) Interactive reported a negative profit margin for 16 quarters prior to releasing a quarterly profit in February. That could turn around, however, and further strengthen this diversified company if Disney Infinity catches on.
The company’s name is clearly an advantage for The Walt Disney Company (NYSE:DIS), as the brand is a source of nostalgia for many people. And new products are often backed by a slew of promotion that can be generated at the company’s theme parks, on the Disney Channel, and in various other vastly exposed venues that the company owns.
Disney Infinity features a number of favorite children’s toys and heroes in children’s entertainment, such as Captain Jack Sparrow from the “Pirates of the Caribbean” movies. The game is scheduled for release on Microsoft Corporation (NASDAQ:MSFT)’s Xbox 360, Sony Corporation (ADR) (NYSE:SNE)’s PlayStation 3 and Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY)’s Wii U consoles. The Walt Disney Company (NYSE:DIS) didn’t say whether the game will also be available for the year-end releases of the Xbox One and PlayStation 4.
Infinity is expected to be a massive hit. The Walt Disney Company (NYSE:DIS) priced the game at $74.99, and that includes three figurines. The complete set of figurines costs up to $300. Trefis estimates the game will help fuel $1 billion of revenue for Disney Interactive, which would likely result in a profit.
The competition
The video game industry is full of excitement right now with the PS4 and Xbox One releases coming in November/December (solid time frames haven’t been released.) Infinity is Disney’s answer to Activision Blizzard, Inc. (NASDAQ:ATVI)’s “Skylanders” games, a similar concept where gamers can collect action figures and then send them on adventures.
Activision Blizzard, Inc. (NASDAQ:ATVI) reported in February that sales of Skylanders: Spyro’s Adventure and Skylanders Giants together reached over $1 billion 15 months after release. “Skylanders‘ success can no longer be ignored and its 2013 iteration appears very strong,
” Ben Schachter, an analyst from the Macquarie Group, told Bloomberg.
But Activision is making more recent games as well, as the firm sold about 1.1 million copies of Starcraft II: Heart of the Swarm only two days after the game’s recent release. That shows the type of following the first release of the game received and it shows the company is locked into the gaming community, knowing exactly what customers want to purchase. Activision Blizzard, Inc. (NASDAQ:ATVI) has been steadily building profits along with customer loyalty, which was evidenced with the massive sales of the “Starcraft” series. Revenue reached $4.8 billion last year, an increase about $575 million in four years.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is an advanced games provider. Its stake in the gaming industry is heavily weighted on sales to the children’s market. The company is keen at turning games that are popular with adults and making them children friendly. For example, the MLB Power Pros is a baseball game that features players that look like toys. It also develops children’s adventure games such as Go, Diego, Go!: Great Dinosaur Rescue. The company has a lock on what kids want and will be tough to toggle out of a large share of the children’s market.
The firm also boasts booming sales and revenue increased by nearly 340% in the last four years. I’d be cautious about buying shares of this firm until it can get operating expenses in order, however. The company hasn’t been profitable since 2011 and looks to be biting off more than it can chew with games development.
Could this turn things around for this segment of Disney?
Releasing Disney Infinity tests Disney’s ability to do more than just release popular movies and theme park rides. The company has been criticized in the past for releasing games that have been more popular with girls than they were with boys, but its new release could change the playing field and give Activision and Take-Two a run for their money. Those companies have proven that once a children’s game has generated some attention, it is easier to keep momentum going by creating a trilogy, than it is to launch a new game. In short, if Disney Infinity catches on, this could be the start of a long and profitable saga.
The article Disney Tries to Turn Things Around in Its Gaming Segment originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard, Take-Two Interactive , and Walt Disney. The Motley Fool owns shares of Activision Blizzard and Walt Disney. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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