Disney game arm posts $45 million operating loss

February 4, 2009 12:14PM PST

House of Mouse returns dismal holiday-quarter performance as Interactive Media business sees increased revenue overtaken by development and marketing costs.

For the first time, media giant the Walt Disney Company reported specific results for its Interactive Media Group. The unit comprises Disney Online, Disney-branded mobile-phone initiatives, and its video game-making arm, Disney Interactive Studios.

The new segment returned mixed results for the company. The Interactive Media Group posted growing revenues of $313 million for the quarter, up 13 percent from the division's adjusted haul from the previous year. Those returns were tempered by a substantial falloff in IMG's operating income, which fell from a $58 million gain last year to a $45 million loss during the October-December period. Disney did not report net income--or losses--for the sector.

Disney attributed IMG's loss to sales lagging behind higher production costs and increased marketing expenses. Last week, Disney confirmed for GameSpot that it had begun layoffs at Propaganda Studios, creator of last year's tepidly received Turok, as well as its Nintendo-focused outfits Avalanche Software and Fall Line Studios.

Like its game division, the Mouse House's overall earnings were not immune to the deepening global financial crisis. For the quarter ended December 27, 2008, Disney said that total revenue slumped to $9.59 billion, down 8 percent from last year's $10.45 billion haul. More alarmingly, net income was substantially off, dropping 32 percent to $845 million year-on-year. Operating income saw an equally precipitous decline, falling 36 percent to $1.44 billion.

Although Disney's two most lucrative segments--Media Networks and Parks & Resorts--were both in the red during the October-December quarter, the entertainment company saw its biggest declines in its Studio Entertainment division. Ironically, the film unit was a victim of its success from the previous year, with 2008 holiday DVD sales unable to match Q4 2007 blockbusters Pirates of the Caribbean: At World's End, High School Musical 2, and Jungle Book.

By Tom Magrino

Tom Magrino has covered the games industry since 2006. He's been compared to Steve Martin by Ozzy Osbourne and Daniel Craig by Tim Schafer. His voice, heard largely on GameSpot's podcast, recalls that of Kermit the Frog. It ain't easy bein' Magreen.

Follow @TMag_GS

15 comments

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SonicDBZRacer

HA HA! Disney sucks the worst of them all.

TehUndeadHorror

Yeah I agree with somberfox, joint projects would be sweet! If they work as well as Kingdom Hearts... =)

somberfox

Maybe if Disney started licensing their property to good developers like Capcom the way they did in the NES/SNES days... Or at least do more joint projects with more competent developers like they do with Kingdom Hearts, instead of pushing their own shovelware.

ropumar

Motorstorm PR is way better than Pure. But Pure is very fun though.

CPM_basic

well they made Pure which is like the sickest racing game I ever played. the only reason I didn't buy it is because I didn't have enough money at the time. But I'm gonna pick it up now. Everyone should play Pure before trashing Disney.

im-a-roustabout

Maybe since companies seem to think were just animals anyways, they should see us as a lab mouse. After eating the wrong piece of cheese b/c it electrocuted us (playing Disney's horrible movie tie-in's) we stop biting it and move on to the next one (or we stopped buying those games altogether knowing the experience is gonna suck). They need to make quality games now, b/c consumers are shopping smarter with their money in this slow economy.

DemiNite

Kingdom Hearts is the ONLY great game i can think of with Disney Involved.. maybe if they produce games similar to that.. Disney RPG? Then again most of their games are concentrated on the younger audience so you cant really expect their games to have the quality or the complexity us teenagers or adults expect.

FelixTheGreat15

Well maybe if they upped the quality on some of their movie tie-in games, they would sell better. Most people don't want a half-baked game that certainly doesn't live up to the graphical or playablity standards of 09.

grigjd3

Not surprised in the least.

gnbfd

but... they made Pure. That was the best racing game I'd played in a while. Then I got Burnout Paradise. Then it was 2nd best. But it is HUGELY underrated

neverland

I think there is a lot of potential for this studio once it gets rolling. I hope they do not give up on it too soon.

saturo123

crap games produce crap results

k0r3aN_pR1d3

Walt Disney + Games = Major Suck

Cwagmire21

I hate to see more people lose their jobs, but can they honestly be surprised when most of your products are rushed movie-based games?

FoxExecutive

Um, thank goodness? They make subpar games and they are pretty much all the same game. I say thank god and hopefully they stop throwing out movie titles to garner a profit.

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