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

Three Fools take to the Internet to talk about Marvel characters joining "Disney Infinity," and what it means Activision Blizzard. Inc.'s "Skylanders."

Apr 13, 2014 at 9:30AM

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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 Characters Header En

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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Neither Ellen Bowman nor Nathan Alderman owned shares in any of the companies mentioned in this article at the time of publication. Tim Beyers owned shares of Walt Disney. The Motley Fool recommends Activision Blizzard, Hasbro, and Walt Disney and owns shares of Hasbro 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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