Disney unveils plans to revive its video game business

Long stuck in low gear, Walt Disney Co.’s video game division is aiming for infinity.

The entertainment conglomerate on Tuesday unveiled plans for a high-stakes initiative called Disney Infinity that could determine the success or failure of its video game business over the next few years.

Infinity will enable players to buy toys based on famous Disney characters like Mr. Incredible and “Pirates of the Caribbean’s” Jack Sparrow and “scan” them into a game. Each character can have adventures in his or her own environment – like Sparrow on the high seas -- or together in a “playground” mode where players create new worlds.

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Since industry veteran John Pleasants was named head of Disney’s games business in late 2010, the company has cut hundreds of jobs, slashed production for consoles like the Xbox and PlayStation, and focused on social and mobile platforms -- with mixed success.

Now, rather than releasing a slate of console games in the future, Pleasants plans to focus on updates to Infinity, which launches worldwide in June, with versions planned for all gaming devices from PCs and tablets to smartphones.

“The games business for Disney has not been profitable and not met the same level of excellence we have in ABC or our parks or Pixar,” Pleasants said in an interview. “If we’re going to be here, we want to make high quality stuff and keep doubling and tripling down. Infinity is a concept we think can scale and stand the test of time.”

At a Tuesday presentation at Hollywood’s El Capitan Theater, Disney animation’s chief creative officer John Lasseter said he was particularly excited about the playground mode because it resembles how children mix and match toys in the real world.

“This is one of the most creative things in the interactive world I’ve ever seen,” Lasseter said.

The launch of Disney Infinity will include the Incredible and Sparrow toys, along with Sully from Pixar’s “Monsters, Inc.” (Disney is releasing the film “Monsters University” in June.) Toys and other content for Infinity drawn from new and old Disney properties will be released in stores several times a year.

That could provide much needed recurring revenue for Disney’s Interactive Media Group, which also includes Web content and has not been profitable since it was formed in 2008. The unit’s total revenue dropped 14% during the company’s last fiscal year to $845 million, with an operating loss of $216 million.

Disney Chief Executive Bob Iger has told investors the interactive group will be profitable in the current fiscal year, which ends in September. Pleasants said Infinity is key to reaching that benchmark.

“We believe it will be ... a significant contributor towards our financial goal,” said the executive, who added that Infinity represents a “sizable capital investment” of tens of millions of dollars.

Infinity resembles two other successful video games played by children. The scannable toys are a near-replica of Activision Blizzard’s “Skylander” series, which has generated more than $500 million in sales since launching in late 2011. The playground mode is similar to the independent game “Minecraft,” which sold more than 15 million copies last year.

“Infinity seems to be a perfect vehicle not only to leverage their brands in a game setting but to exploit toys and other licensing opportunities,” said Wedbush Securities analyst Michael Pachter. “I think this is a home run if they execute well.”

Pleasants joined Disney in late 2010 after the company spent $563 million to acquire social games publisher Playdom, where he was chief executive. He shifted his new employer’s focus toward games for Facebook and mobile devices.

Social games revenue rose 11% in the last fiscal year, Disney said in a regulatory filing. But Playdom’s ranking among Facebook publishers has plummeted over the last two years, according to the site AppData.com. Playdom’s performance has not been good enough to trigger $200 million in bonuses for former owners included in the purchase contract.

Disney’s biggest recent success has been the mobile game “Where’s my Water?” which has been downloaded more than 100 million times.

The company’s only major console franchise in recent years has been “Epic Mickey,” a re-imagining of the classic character from the respected video game creator Warren Spector.

Although the 2010 game was a modest success, selling 1.3 million units in the U.S. from its November launch through the end of that year, 2012’s sequel sold only 270,000 copies during the comparable time period, according to a person with access to sales data from research firm NPD Group who was not authorized to share it publicly.

It’s unclear whether Spector and his Texas-based Junction Point Studios will continue working with Disney. Pleasants declined to discuss the topic and Spector could not be reached for comment.

Also on Pleasants’ agenda are integrating LucasArts, the video game unit of Disney’s recently acquired Lucasfilm, and managing the Marvel Entertainment portfolio.

The executive said he plans to expand last year’s hit social game “Avengers Alliance” with a mobile version and hinted that Marvel superheroes could appear in Infinity, but said comic book characters will primarily be licensed to other game publishers.

Pleasants said he ultimately wants to create new Disney characters, in games, that can spread to theme parks, toys and the big screen.

But another goal currently takes precedence.

“I aspire to have this division create original [intellectual property] and contribute to the Disney vault, but that’s not in the cards in the near future,” he said. “Our mission now is to be profitable.”

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