In regard to its gaming business, Disney’s (NYSE:DIS) has announced that it’s planning to develop social games for the mobile platform in partnership with Japan’s DeNA Co. Ltd. [1] Japan is a substantial market for social gaming with total sales in 2010 amounting close to $1.5 billion. Disney and DeNA plan to launch two games in Japan as well as the U.S. based on the Disney characters.
Social gaming has significantly picked up with the success of social networking platforms such as Facebook (FBOOK) and social game developers such as Zynga (NASDAQ:ZNGA). This development gives Disney an opportunity to leverage its brand and successful characters to create games that can attract millions of users.
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Disney recently launched a game on Facebook based on its Avengers franchise, and the user base is already approaching 4 million. Furthermore, Disney is also going to launch the game Disney Animal Kingdom, which is based on its theme parks. [2] 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 the social gaming market (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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Notes:- Disney, Japan’s DeNA to jointly develop mobile games, Hindustan Times, Mar 31 2012 [↩]
- Disney Social Games Creates First Facebook Game With Theme Park Tie-In, The Hollywood Reporter, Mar 26 2012 [↩]
