Disney Interactive was the one black spot on the Walt Disney Corporation's financial results for the three months ending April 2, after it sustained a loss of $115 million, more than double the $55 million hit the division took in the same period last year.
While the division's revenue rose by 3 per cent to $159 million, it was not enough to stem the flow of cash out of the business. Costs relating to the $763 million acquisition last year of social game developer Playdom, as well as "higher mobile and virtual world product development costs", make for a dismal balance sheet.
Disney Interactive's shift in focus, away from consoles to mobile and social games, also appears to have had an effect. News broke last week of layoffs at Split/Second developer Black Rock, following the closure of Tron: Evolution developer Propaganda Games in January, and a further 250 redundancies soon afterwards to ensure the division's "future success in the digital space."
According to GI.biz, CEO Robert Igor said on an investor call that the division was set to break even by 2013.
"We took a five month hiatus which has not been planned from releasing games, to build a higher quality game, and then also, to restack our technical capabilities to deal with volume, or to deal with scale, which we are hoping to achieve," Igor said.
With Disney Interactive the only division not to turn a profit, investors quite rightly asked whether there was any point in the firm remaining in the game business. Richard Greenfield, of trading and funding firm BTIG, said: "Looking at people's reaction, people are just kind of shocked at the size of the Interactive losses, and so there's a lot of questions like: Why did Disney need to be in this business versus just licensing its content? Why is this so important to you?"
In response, Igor said that Disney was getting to the social game party earlier than many rival firms, and that a quick shift in focus now would reap literal dividends in the long term. "We believe that there's an opportunity to leverage current IP or create new IP in a space that we think is still in its infancy," he said, "but we still thought that it would be wise betting on a new technology platform earlier than maybe when we were betting our resources on the console space.
"The opportunity for growth on the social games side, at least at this point of our entry, is probably greater than it had been when we entered the space on the console side. We just feel that controlling our destiny and making some smart bets that have potentially greater upside, albeit bearing some more risks, would be the right thing for us to do."
Source: Disney / Gamesindustry.biz