Disney Doesn’t Have Enough ‘Confidence’ in Video Games to Keep Making Them

Yesterday, Disney announced that it's canceling its "toys-to-life" franchise (physical toys that interact with video games) Disney Infinity. Around 300 people at Disney's Avalanche development studio in Utah will lose their jobs as a result of this decision. Additionally, Disney said it will no longer develop and publish its own console games.

"[The video game] business is a changing business, and we did not have enough confidence in the business in terms of it being stable enough to stay in it from a self-publishing perspective," Disney chairman and CEO Bob Iger told investors during the company's earning call yesterday. "We just feel that it's a changing space and that we're just better off at managing the risk that that business delivers by licensing instead of publishing. It's just that simple."

You read that right. One of the biggest media companies in the world thinks that the AAA video game business is just too risky to be immersed in completely. This is the same company that just last year tried to argue that it was dominating the emerging toys-to-life space, which has been highly profitable for its primary competitor, Activision's Skylanders franchise.

Of course, this doesn't mean we'll stop seeing games based on Disney's near monopolistic ownership of pop culture. Remember, in addition to Mickey and his goofy friends, Disney owns everything Star Wars, Pixar, and Marvel.

As Iger said, Disney will simply license these properties to other companies and let them figure out how to eke out a profit in a market where AAA games are increasingly more expensive to develop and competition from mobile and free-to-play games encroaches on the traditional console game business.

The annual onslaught of new Star Wars movies is an important factor. Star Wars has a decades long, and mostly not terrible legacy of video games. The heaviest hitter to release since Star Wars: The Force Awakens is the multiplayer first-person shooter Star Wars Battlefront, which is published by Electronic Arts and developed by its Battlefield team DICE. It has done very well, selling 14 million copies since it was released in November 2015.

Electronic Arts and Disney, which signed an exclusive deal to make Star Wars games in 2013, are already working on a Battlefront sequel and have intrusted two new AAA games with high profile talent: the developers of Titanfalland the developers of Dead Space, now led by Amy Hennig, who previously directed PlayStation's Uncharted series.

Disney Infinity 3.0, the latest addition to the game, was supposed to give the franchise the boost it needed in the form of new Star Wars characters from the new movie. Evidently, it under performed, and if Electronic Arts already has the Star Wars games under control, why would Disney continue to pay for its own studio? In retrospect, the fact that Disney merged its toy and video game divisions last year should have been a sign it's thinking that way.

There isn't a similar deal in place for video games based on the Marvel video games, which is probably why you haven't been playing any AAA Iron Man games in recent years. However Disney does eventually decide to tackle this challenge, we now know it won't try to do it internally, but contract the work to a company like Electronic Arts.

But just because more Star Wars games are coming doesn't mean this isn't a concerning move. If one of the biggest media companies in the world thinks it can't risk competing in the increasingly dangerous AAA game space, how long before companies like Electronic Arts, which increasingly lean on profits from mobile and free-to-play games as well, back away from AAA as well?