The Walt Disney Company announced today during their second quarterly earnings for 2016 that the fan-favorite Disney Infinity game series has been cancelled and the company has “discontinued their self-published console games business.” They confirmed that going forward their strategy will be to focus their video game content on licensing the games to other developers and publishers.
Despite the staggering numbers run up by blockbuster movies such as Star Wars: The Force Awakens and Captain America: Civil War, Disney’s second-quarter revenues and profits came in below analysts’ expectations for the first time since March 2011. As a result, overall profit and revenue, while each increasing, missed Wall Street’s expectations, a rarity for Disney. Shares of Disney fell about 6 percent in after-hours trading, to about $100.85.
Disney and other media companies have been hit by the trend of “cord-cutting” as younger viewers opt for streaming services over cable and satellite TV channels. Investors are particularly focused on how ESPN, one of the strongest cable brands, weathers the storm.
“Cable networks continue to face meaningful headwinds and Disney has yet to really answer how they are going to restore growth,” BTIG analyst Richard Greenfield said.
Excluding some items, Disney earned $1.36 per share, missing analyst average expectation of $1.40 per share. Revenue rose to $12.97 billion from $12.46 billion, below the Wall Street target of $13.19 billion, according to Thomson Reuters I/B/E/S.
Chief Executive Bob Iger told analysts he does not “currently have any plans” to stay at Disney beyond his contract’s expiration in June 2018.
Infinity has performed well, but sales have plateaued amid intensifying competition. Ending production of the game, which effectively removes Disney from the self-published console game business, resulted in a $147 million charge in the quarter. More than 300 employees will lose their jobs.
The division that housed Infinity, Disney Consumer Products and Interactive Media, posted operating income of $357 million, an 8 percent decline from the year-earlier period, because of softer game sales and unfavorable foreign exchange rates. The Disney Store chain, lifted a year ago by “Frozen” merchandise, also declined.
By contrast, operating income at Walt Disney Studios soared 27 percent, to $542 million, because of the success of “Zootopia,” which is closing in on $1 billion in worldwide ticket sales, and “Star Wars: The Force Awakens,” which collected $2.1 billion at the global box office.
“From the beginning, Disney Infinity was built for you—our fans—and I wanted to take a moment to thank you not just for your support over the years, but for creating a community that made Disney Infinity more than just a game,” John Blackburn, SVP & GM of Disney Infinity wrote on the official blog.
“Our goal for Disney Infinity was to bring the best of Disney storytelling to life in homes around the world, and with your support we accomplished that. We hope you had as much fun playing the game as we had making it.
“So what’s next for Disney Infinity? We have two final retail releases coming, including three new characters from Alice Through the Looking Glass later this month, and the Finding Dory Play Set launching in June.
“And as we turn to the next chapter in our story, I want to thank everyone who helped bring Disney Infinity to life, particularly Disney’s Glendale-based production and publishing teams, our external development partners, and of course the incredible Avalanche team for their tireless dedication to this project.
“But most of all, I want to again thank you for making Disney Infinity a part of your lives—and for adding to the Disney legacy by being a part of this community.”
The first version of Disney Infinity was released in 2013 and featured a number of playable characters from the Disney pantheon such as Captain Jack Sparrow from Pirates of the Caribbean, Mr. Incredible from The Incredibles, Jack Skellington from The Nightmare Before Christmas, among others. It was followed by a second installment the next year, focusing primarily on Marvel Super Heroes and allowing players to swing as Spider-Man, fly as Iron Man and Thor, or take to space with Rocket Raccoon. The third and final release debuted last year and was built entirely around Star Wars, with play sets for the original trilogy, prequel trilogy, and Star Wars: The Force Awakens.