uploads/2015/07/DIS-Interactive-yearly-op-income1.jpg

Disney Interactive Steps Up Its Game

By

Updated

Financial success with Disney Infinity

The Walt Disney Company’s (DIS) Disney Interactive segment was formed in 2008. The segment develops multi-platform video games, online short-form video, and mobile and social games. Disney Interactive also licenses content for Disney mobile phones in Japan (EWJ) and online advertising and sponsorships.

Disney Interactive has been suffering losses for quite some time, but in fiscal 2014, the segment turned profitable. As you can see in the above graph, the segment lost ~$1 billion until it reported an operating income of $116 million in fiscal 2014.

Article continues below advertisement

The reason for this financial success was the success of one console game: Disney Infinity. The company released the game in August 2013 and sold 3 million units in the United States until January 2014. Disney Infinity allows players to self-construct their video game adventures by mixing and matching popular Disney characters.

Disney is facing tough competition in this segment from Activision Blizzard’s (ATVI) popular Skylanders game and Nintendo’s (NTDOY) Amiibo.

Disney Interactive turns around

In 2014, Disney Interactive laid off about 700 employees due to mounting losses of ~$1 billion. In an earnings call in 2014, Disney said it was looking to change this segment’s strategy. It planned to leverage its IP (intellectual property), or popular Disney characters, in console gaming for licensing rather than in-house publishing, except for Disney Infinity.

Disney is also looking to leverage its IP such as Star Wars, Marvel, and Pixar characters on the mobile gaming side. The reason this segment is looking more at licensing than in-house development is due to the high costs of game development.

You can get a diversified exposure to Disney by investing in the SPDR S&P 500 ETF (SPY), which holds ~1% of the stock.

Advertisement

More From Market Realist