Disney's push into social games
The entertainment company finds new ways to market its movies and other products.
Disney (DIS) plans to develop social games for the mobile platform in partnership with Japan's DeNA Co. Ltd. Japan is a substantial market for social gaming, with total sales in 2010 near $1.5 billion. Disney and DeNA plan to launch two games based on the Disney characters in Japan and the U.S.
Social gaming has significantly picked up with the success of social networking platforms such as Facebook and social game developers such as Zynga (ZNGA). This development gives Disney an opportunity to leverage its brand and successful characters to create games that can attract millions of users.
Disney recently launched a game on Facebook based on its "Avengers" franchise, and the user base is already approaching 4 million. Disney is also going to launch the game "Disney Animal Kingdom," which is based on its theme parks. It appears that the company has kept its acquired social gaming unit, Playdom, quite busy. Disney acquired Playdom in 2010 for $763 million, marking its entry into social gaming (see Disney Needs 30% Annual Revenue Growth from Playdom).
Although there's a lot of activity around the company's gaming business, the incremental benefit for Disney is likely to be small. We estimate that the consumer products business, under which these revenues are accounted, constitutes just about 6.5% to its stock. Nevertheless, the expansion into social gaming gives Disney an opportunity to better engage its customers and market additional products, including theme park tickets, other games, holiday packages and promotion of new movies.
Our price estimate for Disney stands at $52.15, implying a premium of little under 20% to the current market price.
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