What Activision Blizzard, Inc. Has to Fear From Captain America and the Avengers

Infinity has helped reverse the fortunes of Disney's video game operations. Credit: Disney.

Thanks to the success of Skylanders, toy-driven video games are already big business for Activision Blizzard,  (NASDAQ: ATVI  ) . But now  Walt Disney (NYSE: DIS  ) is bringing Captain America and the rest of the Avengers to its comparable Disney Infinity universe. Will Marvel's Mightiest Heroes make the Skylanders look small?

Host Ellen Bowman puts these questions to analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

Nathan says that Skylanders is a huge franchise for Activision Blizzard. The company confirmed as much In its most recent 10-K filing, noting $2 billion in retail sales and 175 million toys sold since Skylanders debuted in 2011.

Together with Call of Duty and World of Warcraft, the Skylanders franchise accounted for 80% of Activision Blizzard's 2013 revenues -- up from 73% the year prior and 72% in 2011. Not surprising when you consider that Skylanders was the no. 3 best-selling franchise in North America and Europe.

Impressive figures, to be sure. And yet history shows that Activision Blizzard tends to have trouble keeping titles fresh. In this case, Nathan says that Skylanders revenue fell in 2013 despite bigger investments in marketing the franchise.

Skylanders has proven to be a big winner. Credit: Activision Blizzard.

If Skylanders is having a harder time selling to kids, Nathan says Infinity may be to blame. Revenue for Disney's Interactive division -- which sells the  game -- more than doubled in the fiscal fourth quarter. For the year, sales improved 26% to nearly $1.1 billion. By January, Disney had sold more than 3 million Infinity starter packs, gaming site Polygon reports. NPD says the game finished 2013 as the industry's 10th best-selling title.

Tim agrees, and adds that Disney's Infinity success is at least partially due to the company's licensing operations organized under Disney Consumer Products, which generates more than $3.5 billion a year in high margin revenue from selling imprints to makers of a variety of different consumer goods -- from cereal to textiles and, of course, toys.

Last year's reup of a deal with Hasbro (NASDAQ: HAS  ) should bring in over $300 million in guaranteed revenue. Tim says it wouldn't be surprising to see the toymaker develop specific Marvel and Star Wars figures exclusively for use in the Infinity video game world.

Now it's your turn to weigh in using the comments box below. Do you believe Activision Blizzard has much to fear from Disney Infinity? Please watch the video as Ellen puts Tim and Nathan on the spot, and be sure to check back here often for more 1-Up on Wall Street segments.

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  • Report this Comment On April 14, 2014, at 1:01 PM, Aldirick wrote:

    The only time that Activision Blizzard needs to start worrying about Disney is when they buy out a game production company and launch something with as much depth and storyline as World of Warcraft, Diablo and Call of Duty. Skyladers was a way to enter into the market and try to see if you can get two things for one, get kids to buy a game and action figures when the two are merged together. As usual, someone had to come along and copy the success of their work, and this time its Disney. The act that Disney has a history of generational interest in them is what they are banking on, the fact that Mom who likes Cinderella and the kids who like Monsters Inc and Captain Jack will play together. Act-Blizz really has nothing to worry about here.

  • Report this Comment On April 15, 2014, at 6:03 AM, Njancek wrote:

    @Aldirick;

    I agreed with you, up until you said Call of Duty has "...much depth and storyline."

    i think Disney would need to do better than a B-Action Movie.

  • Report this Comment On April 15, 2014, at 8:22 AM, hectoruno wrote:

    I think Disney infinity will do well. Marvel video games are usually successful. But I think the market can handle both game systems. Skylanders sold 175 million toys since Skylanders debuted in 2011. Disney sold 3 million. It is not like all these people are going to throw their Skylander system away for the Disney system.

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