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Disney bets on iOS App Store games to return interactive unit to profitability

post #1 of 23
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After losing millions of dollars trying to produce console games for Xbox 360 and Playstation 3, Disney is betting on Apple's low cost app market to become profitable and create new characters capable of driving sales of movies and merchandise.

Disney's interactive unit lost $86 million in the last quarter, and has continuously lost money every quarter since the company began breaking out results for its interactive unit in 2008, according to a report by the Associated Press.

The company's dismal efforts in gaming have been tied to expensive failures created for console games, particularly Microsoft's Xbox 360 and Sony's PlayStation 3. Those titles require hundreds of programmers and take two to three years to finish, the company said.

Mobile games, on the other hand, can be created by teams of fewer than a dozen, and can be brought to market in about six months. Disney's chief financial officer Jay Rasulo told an audience of investors yesterday that the company's interactive unit was focused on delivering products at lower cost.

By targeting inexpensive App Store games rather than full blown console games with move-like budgets, the company's interactive unit now hopes to become profitable by 2013.

Finding young audiences

At the same time, the company sees Apple's mobile software market as being "central to kids lives," the report noted.

"To me, this is where a generation of kids is growing up," said Bart Decrem, the general manager of Disney Mobile. "And it's really critical for the success of the company that we be there and telling stories and introducing characters to a new generation of kids."

This week, Disney launched a new character named Swampy making his debut in the App Store title "Where's My Water?"



The 99 cent title is finding positive initial reviews, and is optimized for both iPhone and iPad. It also ties into Apple's Game Center.

The game has players routing water through a game board to the alligators' bathtub located underground in a big city, while avoiding enemies that want to sabotage Swampy's efforts to stay clean.

"Maybe five years from now, wouldn't it be great if there was a movie that started up on the App Store?" Decrem asked.

The game changes

Disney is not alone in targeting mobile games in the App Store. Earlier this year, the developer of World of Goo profiled its iPad launch as being "by far" the fastest selling and highest revenue generating game platform, stacked up against Nintendo's WiiWare, Valve's Steam market for Mac and PC, Microsoft's Xbox Live Arcade and Sony's PlayStation Network.

Critics mocked initial observations that Apple's iPhone could possibly challenge dedicated mobile game devices like the Nintendo DS and Sony PSP two years ago, but now the App Store is rivaling the online markets of the top game consoles, a remarkable turn of events given how new both the App Store and the iPad are, and particularly given how inexperienced and even resistant Apple has been when it comes to embracing gaming as a market.

Evidence that Apple's iOS devices were killing off the market for handheld gaming devices like the Nintendo DS and Sony PSP first began appearing a year ago, prompting investors to push Nintendo to bring its games to iOS, something the company currently refuses to do.
post #2 of 23
How has Disney NOT put games on iOS this whole time... considering all the kids with iPod Touches?
post #3 of 23
Quote:
Originally Posted by AppleInsider View Post

By targeting inexpensive App Store games rather than full blown console games with move-like budgets, the company's interactive unit now hopes to become profitable by 2013.

I often wonder what executives mean by 'become profitable'. Does that mean that they will eventually stop losing money or does it mean they will recoup the millions in losses already on the books and then earn more than enough money to cover their operating expenses?

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post #4 of 23
Quote:
Originally Posted by Michael Scrip View Post

How has Disney NOT put games on iOS this whole time... considering all the kids with iPod Touches?

I agree it is staggering they have only just thought of this.
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post #5 of 23
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Originally Posted by digitalclips View Post

I agree it is staggering they have only just thought of this.

Actually Disney has games for the iPhone (TS Mania, for example). They've been available for years. Maybe now there are going to increase their effort in developing for iOS.
post #6 of 23
people buy $.99 cent games with less thought than the $60 console games where you have to read the reviews to avoid the junk.
post #7 of 23
Quote:
Originally Posted by AppleInsider View Post

"Maybe five years from now, wouldn't it be great if there was a movie that started up on the App Store?" Decrem asked.

Uh, RIO?
post #8 of 23
Quote:
Originally Posted by digitalclips View Post

I agree it is staggering they have only just thought of this.

Well, duoh! Think about it. If, as the article says, that console games take hundreds of programmers YEARS to produce, and they started in 2008. . . Can you do the math?

It's not too hard to divide $86M by 3 years by 300 programmers. You come up with something like $100K per programmer per year. But no, you also have to subtract for hardware, facilities, utilities, administration, logistics, software licensing, etc. etc.--all UP FRONT costs over those three years BEFORE anything is finished and out the door to finally start selling.

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post #9 of 23
Quote:
Originally Posted by studiomusic View Post

Uh, RIO?

Close, but the Angry Birds/Rio tie-in was coincidental. But Angry Birds is the best example of this phenomenon. Who would have thought a little iPhone app about slingshotting birds at pigs would become a mini-empire with plushies and t-shirts, etc.

Somehow I don't think Swampie is going to be the next Angry Bird, but who knows.
post #10 of 23
Quote:
Originally Posted by mstone View Post

I often wonder what executives mean by 'become profitable'. Does that mean that they will eventually stop losing money or does it mean they will recoup the millions in losses already on the books and then earn more than enough money to cover their operating expenses?

Generally, it means one thing only - the company is profitable based on specific accounting rules during the period of reporting (usually a quarter). To become profitable by 2013 means to be profitable on that basis for at least one quarter in that year.
post #11 of 23
Quote:
Originally Posted by mstone View Post

I often wonder what executives mean by 'become profitable'. Does that mean that they will eventually stop losing money or does it mean they will recoup the millions in losses already on the books and then earn more than enough money to cover their operating expenses?

It means that they are profitable for the quarter or year in question. There's absolutely nothing that says a company has to earn enough to cover past losses in order to consider themselves profitable.

This is business 101, folks.
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post #12 of 23
Quote:
Originally Posted by stelligent View Post

Generally, it means one thing only - the company is profitable based on specific accounting rules during the period of reporting (usually a quarter). To become profitable by 2013 means to be profitable on that basis for at least one quarter in that year.

Thanks. I'm sure that is what they do. Doesn't make any sense to me but I'm not a bean counter.

So theoretically, you could fire all your staff and sell a couple hundred copies from inventory during a quarter and become profitable just before you go bankrupt?

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post #13 of 23
Quote:
Originally Posted by mstone View Post

Thanks. I'm sure that is what they do. Doesn't make any sense to me but I'm not a bean counter.

So theoretically, you could fire all your staff and sell a couple hundred copies from inventory during a quarter and become profitable just before you go bankrupt?


That's what HP did when they sold off all their tablets lol
post #14 of 23
Quote:
Originally Posted by al_bundy View Post

people buy $.99 cent games with less thought than the $60 console games where you have to read the reviews to avoid the junk.

Even if I buy a 99 cent app or game, I am expecting quality. Just because an app costs 99 cents is no excuse for lazy or amateurish developers to release junk.

You're right though that buying a 99 cent game is completely different than forking over 60 dollars for a typical console game. The most I've spent for a single iPad app is 20 dollars.
post #15 of 23
So they make a bad game (laziness), populate it with Disney characters (to entice the kiddies), slap the Disney moniker (parents will buy it to babysit their kids) on it and they end up losing millions of $$$.

Good for them!!! They deserve to lose that money!!!
post #16 of 23
Quote:
Originally Posted by DanielSW View Post

Well, duoh! Think about it. If, as the article says, that console games take hundreds of programmers YEARS to produce, and they started in 2008. . . Can you do the math?

It's not too hard to divide $86M by 3 years by 300 programmers. You come up with something like $100K per programmer per year. But no, you also have to subtract for hardware, facilities, utilities, administration, logistics, software licensing, etc. etc.--all UP FRONT costs over those three years BEFORE anything is finished and out the door to finally start selling.

What on earth has what I said got to do with your comment? First off no need to be obnoxious, did you rant at the wrong comment or something? I was referring to what I assumed was the close link between Disney and Apple. Pixar seems an obvious source of material and given Steve Jobs is a major share holder my comment was aimed at the fact Disney hadn't supported iOS from the start. An iOS development would have cost very little had they started simple (stupid).
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post #17 of 23
So they realised it is cheaper to make terrible .99c games than terrible $60 games. Nice job.

Maybe they should focus on you know, making decent games for a change, rather than Disney-branded shovelware.
post #18 of 23
Teenage boys playing war games on gaming consoles don't buy Disney products.

I glad my children are past the Disney years. Disney's use of innocent children's games to launch a full-frontal onslaught on parents pocketbooks is likely their intention.

Back before the modern web and fancy browsers, when sites like AOL and GeoCities were important, I used to like the D.I.E. (Disney is Evil) website. It was outrageous, and sidesplitting funny at times, but it really dug into Disney for using its emotional control over Children to sell stuff. I miss it. I'm sure Disney Inc. doesn't.
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post #19 of 23
Ironically, just wait a few short years when the iPad will easily beat the PS3 in terms of "console gaming" capability.
post #20 of 23
Quote:
Originally Posted by mstone View Post

Thanks. I'm sure that is what they do. Doesn't make any sense to me but I'm not a bean counter.

So theoretically, you could fire all your staff and sell a couple hundred copies from inventory during a quarter and become profitable just before you go bankrupt?

No. Accounting is much more complicated than that.

To give a more typical example, if you build a factory for $10 million (that is expected to last 10) years) and pay for it in cash up front. For the next ten years you have to treat 1/10th of that cost as occurring that year (actually there are other options for how you depreciate it, but you MUST depreciate it). You can't just say "we lost $10 million in year one and then make a profit of $100K every year after that." You'd have to report that as (something like), "we lost $900K a year.

And then if you canceled the product line before the 10 years was up, you'd be required to immediately recognize all the costs that you had expected to count in future years. So HP's books are going to look horrible with respect to the WebOS stuff.
post #21 of 23
Quote:
Originally Posted by nvidia2008 View Post

Ironically, just wait a few short years when the iPad will easily beat the PS3 in terms of "console gaming" capability.

STUPID comment. So you are saying that an iPad 5 or 6 to be released in 2014ish will best a PS3 (released in 2006).

How about comparing current models ... a PS4 versus an iPad 5 or 6??? (when these are most likely released).
post #22 of 23
So Disney couldn't sell their terrible games in one market, so they will move their terrible games to another market. All that seems to say is they hope the iOS customers are more willing to purchase terrible games
post #23 of 23
Quote:
Originally Posted by jfanning View Post

So Disney couldn't sell their terrible games in one market, so they will move their terrible games to another market. All that seems to say is they hope the iOS customers are more willing to purchase terrible games

Yes. As the parent of a 7 year old girl, I am painfully aware of Disney's grip on the youth market. (My wife is also a Disney-cultist.) Kids that age don't care much about all the complex things adults and hardcore gamers do. They just want to play with the characters in their world. We've played the Disney Princess and Tangled games over and over and over.

Disney should be able to churn out Princess games with simple but immersive gameplay and make a killing. They already have plenty of Flash games on their website. Migrate some of those to iOS as free games. Make larger games $0.99. And have AAA titles for more.

- Jasen.
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