Disney announced Tuesday that it will be closing the doors on its Disney Infinity line of video games, citing the risk in an constantly changing market as too big of a risk.
The company will swallow $147 million in unsold inventory and lay off around 300 employees, mostly from Salt Lake City-based Avalanche Software, which Disney purchased in 2005.
Disney CEO Bob Iger admitted to industry experts that the risks "caught up with us." Although Infinity Games did have its successes - Disney's interactive division was profitable in recent years - the company intends to limit risk going forward by licensing characters rather than develop video games from the ground up on their own.
"That business is a changing business, and we did not have enough confidence in the business in terms of it being stable enough to stay in it," Iger said.
Disney Infinity was responsible for creating games that featured famous characters from "Pirates of the Caribbean," "Cars," "Frozen," etc. It was launched in 2013 as a means to bring "toys to life," a move that was popularized by the game "Skylanders." It offered a multi-pronged revenue stream with direct tie-ins to Disney merchandise.
When Infinity first launched in August 2013, it helped right the sinking ship of the company's fledging Interactive business. It also served as a precursor for the Playmation line of connected toys that Disney launched last year. However, declining sales of infinity harmed the consumer products unit that was folded into the interactive division last year.
The high cost of Infinity was revealed to be even more of a glaring weakness when Disney licenses characters and stories to Electronic Arts for the hugely successful "Star Wars Battlefront." The game provided a necessary boost in the previous quarter and indicated a new way of doing business.
Infinity's sub-par production contributed to Disney falling short of Wall Street expectations in the latest quarter through March. Its adjusted earnings of $1.36 per share fell well below the $1.40 that experts at Zacks Investment Research had projected.
The entertainment division posted $12.97 billion in revenue in the period, also below what Zacks had forecasted ($13.26 billion). However, Walt Disney Studios recently became the fastest studio to reach $3 billion at the worldwide box office in history. The Mouse House's failed video game branch won't hurt the company's bottom line too much.
Follow Brandon Katz at @Great_Katzby
