Disney vs. Activision Blizzard: The $1.5 Billion Brawl
The skirmish over the video-game market for kids is about to turn into an all-out war. In a few days, Disney's Infinity game, which has owned the toys-to-life category since launching in August, meets its biggest threat: Activision Blizzard's Skylanders SWAP Force. There's so much at stake for these two companies that the upcoming battle for market share promises to be a very long, and very public one.
For Disney, Infinity represents its best shot at actually turning a profit on video games. The House of Mouse routinely cranks out big earnings at four of its five business units, with media networks leading the way at $7 billion in 2012. But the video-game division has been a consistent loser for Disney, burning through more than $200 million in each of the past three years.
Infinity should change that dynamic and finally bring Disney's video game business into the black. The early word is that the title is selling well: It was the second most-popular game behind Electronic Arts' Madden NFL in August. Still, despite a huge marketing budget and the deep lineup of popular characters that it owns, Disney finds itself in the unusual position of being the underdog in this fight.
Activision was the company that pioneered the toys-to-life game category, after all. The pairing of collectable toys and an interactive console game proved to be a video game gold mine. Activision launched the Skylanders franchise in 2011, and it quickly grew it into a $1.5 billion business. It is now one of Activision's largest brands, joining the ranks of Call of Duty, Diablo, and World of Warcraft as a tentpole franchise.
Source: Activision Blizzard.
That's a big reason Activision is supporting its newest Skylanders launch with a huge marketing spend. On Thursday, it's even throwing a party at Times Square to draw attention to the game. Activision also managed to boost the amount of shelf space that retailers will devote to the Skylanders toys, giving it a key advantage over Disney this year.
Rooting from the sidelines
However, there's at least one company that should really enjoy this fight: GameStop . The retailer told investors in August that sales growth will return to its struggling business this quarter -- in a big way. After shrinking for more than two years, GameStop expects revenue to rebound by as much as 15% this fall.
The Disney-Activision brawl promises to scuff up both companies, but it will be a boon for GameStop no matter which way it goes, as it should drive traffic into its stores, and boost profits thanks to those higher margin toy sales.
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The article Disney vs. Activision Blizzard: The $1.5 Billion Brawl originally appeared on Fool.com.
Fool contributor Demitrios Kalogeropoulos owns shares of Apple, Walt Disney, Netflix, and Activision Blizzard. The Motley Fool recommends and owns shares of Activision Blizzard, Apple, GameStop, Google, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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