Lost in the shuffle of concerns at ESPN, a rare quarterly earnings miss, and a surprising dip in attendance at its Florida theme parks, Walt Disney (NYSE:DIS) is shutting down its Disney Infinity line of video games. It's a bigger deal than you think.
The media giant took a page out of the Activision Blizzard (NASDAQ:ATVI) playbook when it introduced Disney Infinity in 2013, blending video console games with RFID-backed action figures that would be placed on a connected platform to enter the virtual realm. Activision Blizzard raised the bar with Skylanders Spyro's Adventures four years ago, becoming the industry's best selling game through the first half of 2012. By the time that Disney Infinity hit the market in the summer of 2013, Activision Blizzard was already discounting aggressively.
It was easy to see why Activision Blizzard feared Disney's arrival. The undisputed champ of family entertainment came in with a fleet of characters far more popular than the Skylanders crew. However, disruptors get disrupted, and it was no surprise that Disney Infinity struggled after Lego got in on the fun with the launch of Lego Dimensions last year.
Winding down the product line is going to be painful. Disney still plans to introduce three new playable characters from Alice Through the Looking Glass later this month. That will be followed by a Finding Dory play set next month. A Peter Pan set that was to follow has been given the hook --yes, Captain Hook's hook.
There may not be much of a market for the two upcoming orphaned sets. Parents and older gamers know that the franchise is toast. Why invest more money on a platform that will be clearance bin fodder later this summer?
"We hope you had as much fun playing the game as we had making it," Disney Interactive offers up on its blog's rosy death notice, but it's hard to think that gamers or the parents of gamers will see it that way.
Disney Infinity wasn't cheap. The $75 price for the starter kit was fair, but by the time you begin tacking on $30 to $35 for every new action figure pack the investment starts to build up. Disney Interactive discontinuing the product line doesn't make it worthless. Folks will still be able to play in the virtual world that they paid for. However, the expectations that there would be years of updates and new figures to justify the time and effort of participating in the Disney Infinity ecosystem is gone.
Disappointment has a sequel
It's not the first time that Disney burns gamers. Virtual Magic Kingdom also had a shelf life of three years, letting early Internet users explore an avatar-fueled experience through its theme parks from 2005 though 2008. However, at least Virtual Magic Kingdom was free. The only thing that folks like me poured into that kingdom was time. Disney Infinity's three-year run feasted on time and money.
Disney will rightfully argue that it lost even more in the fire. It's taking a $147 million charge in connection with shooting down the Disney Infinity dream. Disney's in-house developers will also have it worse than Joe or Joanna Gamer. Disney's console gaming strategy will now focus only on licensing its content and characters.
However, it's going to be hard for consumers to trust Disney the next time that it launches a gaming platform. The growing number of burned customers will warn the next generation of players about what happened to folks that embraced Virtual Magic Kingdom or Disney Infinity. Building something only to destroy it three years later is more than just bad business -- it's bad brand building.
Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.