Disney To Launch Playmation Toy Series In October

Disney’s (NYSE:DIS) consumer product division recently announced the launch of Playmation, a line of toys that combines wearable gadgets with role-play of various characters. ^[1] Playmation will hit the retail stores in October this year and the initial package will be priced at around $120. Earlier, Disney saw stellar success with its Infinity video game (launched in 2013) and now Playmation appears to be have similar potential for success.  In fact, there is a good chance that it can boost Disney’s value by around 5%, according to our estimates.

We currently forecast revenues of around $53 billion for Disney in 2015 and EPS of $5.00, which is in line with the market consensus of $5.00, compiled by Thomson Reuters. We currently have a $105 price estimate for Disney’s shares, which is slightly below the current market price of $111.

Understand How a Company’s Products Impact its Stock Price at Trefis

Playmation’s Style Point Towards Potential Success

Playmation combines physical video gaming with role-play of a character. For instance, a player can wear Iron Man “repulsor” (a forearm attachment gadget), which would enable the player to play the role of Iron Man in the game. For now, up to two players can go on missions together or play against each other. The starter pack will come loaded with 25 missions and new missions can be downloaded in the future. It appears to be an interesting product given that it will keep kids active rather than just glued to the screen. ^[2]

Disney used to maintain somewhat strict boundaries between its different franchises, but they disappeared with the introduction of Infinity in 2013. Similarly, the Disney Playmation Avengers starter pack is just the beginning and it will come up with other packs of different franchises, including Star Wars and Frozen, in the coming years and this will aid the segment’s top-line.

Looking at Disney’s consumer products division, revenues have grown from $2 billion in 2007 to around $4.25 billion in 2014 given the high demand for Disney’s merchandise. ^[3] We currently estimate revenues of around $5.50 billion by 2016, partly reflecting the contribution from the newly opened Shanghai store. However, revenues could go north of $6 billion if Playmation turns out to be a successful product for Disney and it sells 5 million starter packs at a price tag of $120 by the end of 2016. With more starter packs, Disney can look forward for higher revenue growth in the coming years. The margins associated with consumer products business are also higher at around 43%, according to our estimates.

Having said that, there remains a concern on physical sales of gaming titles across the industry. The gaming landscape has changed over the last few years with the advent of smartphones and tablets, providing easy access to games and eventually leading to the rise of casual gaming. Easy access to gaming content, with the help of extra downloadable content (DLC), has completely revolutionized the gaming industry. As a result, the gamers are gradually shifting away from physical sales of software titles. This was clearly evident last year when software sales lagged hardware sales.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. Disney Announces Playmation – The Next Step in the Evolution Of Play, Disney’s Press Release, June 2, 2015 [↩]
2. Disney unveils new toys that play back with you, The New York Post, June 3, 2015 [↩]
3. Disney’s SEC Filings [↩]