The move -- due to declining sales and growing competition -- could be a boon to toys-to-life rivals

By Sarah E. Needleman 

Walt Disney Co.'s decision to discontinue its "Infinity" product line suggests the once-hot marriage between videogames and collectible figurines is flaming out.

But the surprise move could end up a boon for rivals such as Activision Blizzard Inc. and Warner Bros., which appear no longer to have to contend with a powerful brand, analysts said.

"Disney Infinity" is in a genre of videogames known as "toys to life," in which players pair figurines with devices to make digital versions of the characters pop up in games. With "Infinity," players place figurines on a mat that communicates with a game console.

A typical starter pack -- game software, a device to connect to consoles and a few figurines -- could run upward of $100. The beefy price turned off some buyers, yet Disney released three starter packs in as many years.

The games, pioneered by Activision Blizzard's "Skylanders" series in 2011, were a hit with consumers, particularly collectors who wanted to own all the figurines.

Revenue for the toys-to-life category in 2015 rose 7% in the U.S. to $720.5 million, according to market researcher NPD Group.

The increase, however, was driven by figurines. Software sales declined 4%. That suggests buyers were less interested in new versions of the games than new toys to put on shelves.

Disney's ability to leverage characters from its namesake brand, as well as those of Pixar, Marvel Entertainment and "Star Wars" -- allowing, for example, Mickey Mouse to run alongside Iron Man -- made "Infinity" a formidable competitor.

As the market heated up, though, it became saturated. Nintendo Co. released figurines called amiibo, featuring iconic characters such as Mario and Pikachu from "Pokémon." Warner Bros. last fall introduced "Lego Dimensions," a digital universe with fan favorites such as Batman, Gandalf from "The Lord of the Rings" and the Time Lord from the "Dr. Who" science-fiction series.

On an earnings conference call with analysts on Tuesday, Disney Chief Executive Robert A. Iger said the company, which spent $100 million getting "Infinity" off the ground, lacked confidence in the genre's future amid declining sales and mounting competition.

Disney still plans to release two final updates with characters from the movies "Alice Through the Looking Glass" and "Finding Dory."

"The shelf is crowded," said Michael Pachter, an analyst at Wedbush Securities, who estimates toys-to-life category generated $1.25 billion in revenue world-wide in 2015, about the same as the year before.

While the overall space isn't growing, it isn't declining rapidly either, Mr. Pachter said. The absence of Disney "leaves a whole lot of room for remaining players," he said.

Toys-to-life sales at Activision Blizzard slowed after characters from Warner Bros. and Disney showed up. "Skylanders" games aren't tied to any well-known characters outside their own.

Activision, which has released a new "Skylanders" game every year, is moving ahead with a new installment and an animated TV series later this year.

"We've got a tremendous plan for this holiday [season] in place," said Josh Taub, a senior vice president at Activision Publishing.

Nintendo is quiet about amiibo revenue, but in its April quarterly financial report said it sold 24.7 million toys during the fiscal year ending in March and that "sales continued to maintain momentum." The company declined to comment on Wednesday.

A spokesman for Time Warner Inc.'s Warner Bros. Entertainment, which partners with Lego on "Dimensions," said a sequel is coming in the fall.

One way toys to life can start growing again is by expanding into new areas such as role-playing games, or targeting female players and different age groups, said Liam Callahan, an analyst at NPD.

Toys-to-life competitors will have to work at winning over stunned "Infinity" gamers. Sean Callaway said he has spent about $400 on all three "Infinity" games and a few dozen figurines for his 7-year-old son, Connor.

The technology worker from Yorba Linda, Calif., was disappointed to learn it is coming to an end. "We probably would've picked up another play set or two," he said.

He isn't interested in buying other toys-to-life games. "I'm afraid they'll all disappear," he said. "I don't want to spend more money on something that may not have a future."

Write to Sarah E. Needleman at sarah.needleman@wsj.com

 

(END) Dow Jones Newswires

May 12, 2016 02:48 ET (06:48 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Time Warner (NYSE:TWX)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Time Warner Charts.
Time Warner (NYSE:TWX)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Time Warner Charts.