When You Wish Upon a Yuan

Over the past few years, Disney's (NYSE: DIS  ) childish cartoon characters have been reaching out to the jaded teen and young-adult audience. The same young 'uns who tearlessly bid farewell to Minnie Mouse and Goofy stuffed animals at the last family garage sale are now getting in touch with their inner toddler. The success of the Kingdom Hearts video game franchise for the Sony (NYSE: SNE  ) PlayStation, online games like Toontown and Virtual Magic Kingdom, and even the runaway success of Disney Channel's tuneful (but toonless) High School Musical movie have made Disney cool again.

The family entertainment giant is now hoping to make a similar connection in the world's most populous nation. After the successful opening of Hong Kong Disneyland last year, Disney announced this week that it would be partnering with Shanda (Nasdaq: SNDA  ) to develop an online game based on Disney's animated characters.

Shanda can certainly use the pixie dust. Unlike fast-growing rival NetEase (Nasdaq: NTES  ) , Shanda has conceded market share in the booming niche of online gaming. Last week's sobering earnings announcement found quarterly sales and profitability in a tailspin, indicating the waning popularity of the dozen online games Shanda currently offers.

The company's moves into gaming hardware and giving away older games have been puzzling and mostly unproductive. If anything, this new deal with Disney stands out like a sore thumb because it makes so much sense.

If China embraces Mickey Mouse as more affluent Japan has -- and early indications suggest it certainly might -- Shanda could have a hit on its hands when the new game is released early next year. China's leading games skew toward fantasy titles for older players. If Disney and Shanda help lure a younger audience into online gaming in the midst of China's booming economy, those pint-sized players could eventually help Shanda matter again as they grow up. There's little downside to this deal.

Shanda and NetEase have been active recommendations in the Motley Fool Rule Breakers newsletter service for more than a year. NetEase has crushed the market, while Shanda has simply been crushed. One game can change that.

Shanda's Goofy idea? It's not so goofy.

A spoonful of further Foolishness:

Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin gaming stocks for a long time; he recommended NetEase last year to Rule Breakers subscribers. He owns shares in Disney, aMotley Fool Stock Advisorpick. The Fool has adisclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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10/28/2016 4:03 PM
DIS $93.85 Down -0.17 -0.18%
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SNDA.DL $0.00 Down +0.00 +0.00%
Shanda Interactive… CAPS Rating: ***
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