Is Activision Blizzard Afraid of Disney?

One of last year's best-selling video game franchises is a popular markdown this week.

Activision Blizzard (NASDAQ: ATVI  ) stumbled on a sleeper hit in Skylanders last year. Skylanders Spyro's Adventures was the industry's hottest seller through the first half of 2012. Combining actual action figures that engage in video game battles once docked on a console-connected portal, the leading video game publisher succeeded in winning over young gamers that seemed to have given up on following their older siblings and parents into diehard gaming.

Now we're seeing Skylanders Giants starter pack -- a platform that rolled out late last year with larger figures for $75 -- being aggressively discounted.

Sifting through Sunday's circulars, here are some pretty nifty deals I came across.

  • Best Buy (NYSE: BBY  ) is marking the starter pack down to $55, and buyers get a free lunchbox.
  • The starter pack made the front page of Target's circular with a mind-blowing $40 price.
  • Toys "R" Us is offering a $25 gift card with any Skylanders purchase of $80 or more, and it's also marking down additional figurines by 50%.
  • Not to be outdone, Amazon.com is matching Target's rock-bottom price.

Popular video games do get popular as they age, but it's not a coincidence that we're seeing a wave of discounts. Retailers just began taking preorders for a similar Disney (NYSE: DIS  ) gaming experience.

Disney Infinity won't hit the market until this summer, but it's easy to see why Activision Blizzard is getting aggressive. It's a similar format where physical figures are docked to enter Disney's virtual realm.

We're not talking about Daisy Duck and Mickey Mouse, here. Disney Infinity's starter pack includes pirate Jack Sparrow, Monsters's Sully, and Pixar superhero Mr. Incredible. The family entertainment giant knows its audience, so it's building this franchise on its more recent characters that appeal to young gamers.

This will be a threat to Activision Blizzard, but the gaming giant caught a break. Disney Infinity was supposed to hit the market by the end of June, but now the release date has been bumped to mid-August. The $75 preorder price also gives Activision Blizzard time to build out its installed base of Skylanders players at a lower price point.

Things will get interesting soon. One winner will naturally be GameStop (NYSE: GME  ) . At a time when digital gaming is gnawing away at the retailer's growth, along comes a new platform that requires physical purchases. Best Buy will also naturally benefit from games where starter packs and low-priced additional figures will bring in repeat traffic to its meandering stores. Losers here may include traditional toy makers, as Skylanders and Infinity characters eat into the conventional playthings market.

Forget the battle between Skylanders figures and Disney characters. The real fight here will be between the two franchises. 

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