Why This Disney Losing Streak Is About to End
The eye-popping losses tied to Disney's box-office flop The Lone Ranger held investors' attention last week. But there was another, less followed piece of the company's business that gushed red last quarter: its video-game unit.
That division reported a $58 million loss over the past three months. Sure, that's small potatoes compared with the $190 million that Disney burned on The Lone Ranger. Still, what the interactive division lacks in dramatic flair it makes up for in depressing consistency. The unit sapped $103 million from Disney's profits over the past nine months, and better than $200 million in each of the last three years.
Loss from interactive division
However, Disney hopes that losing streak is about over. On Aug. 18, the company will release its Infinity video game, which takes aim at Activision Blizzard and its popular Skylanders franchise. Activision built a new and extremely profitable game category with Skylanders, one that pairs retail toys with console games. That combination has powered the franchise to blockbuster success, pulling in more than $1.5 billion in sales. Now Disney wants a piece of the action.
It's a natural fit for the House of Mouse. Unlike Activision, Disney has a deep catalog of already-popular characters to draw from for toys to accompany its game. And Disney's other businesses keep stoking that popularity. Infinity's starter pack will include characters from Monsters University, which saw major box-office success this summer and will be fresh in consumers' minds when they're shopping for entertainment this month.
It's no wonder, then, that Activision is bracing itself for a fight. The company warned investors last quarter that the second half of the year would be challenging, in part because "our Skylanders franchise will face more direct and substantial competition than it has in the past."
If Disney's Infinity performs well starting next week, investors should see the company's interactive division finally end its drag on the company's earnings. It probably won't be enough to turn the unit profitable for 2013, but it could make for a positive earnings contribution as early as the third quarter. That would be nice, for a change.
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The article Why This Disney Losing Streak Is About to End originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of Walt Disney and Activision Blizzard. The Motley Fool recommends and owns shares of Activision Blizzard 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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