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Disney Missing the $14B Games Business It Should Have

Playdom might pan out, but Disney has a better option on the table

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It’s hard to not to wonder if Disney is going about its games business in the wrong way, though. With other entertainment wings of the company — like its theatrical film division — making less money now than it has in the past, Disney could use developing segments like Interactive to pick up some of the slack. And while Disney has spent large sums to build the segment for the future, one wonders why Disney hasn’t instead focused solely on building up its licensing business in social and mobile gaming.

Put another way: Why spend to beat them when you could more easily — and more profitably — join them?

Look at the Disney Consumer Products segment. According to a report released during the company’s investor conference last February, consumer product licensing generated $1.4 billion in 2010. The bulk of that revenue came from toys using Disney’s character brands, not including those owned by comic book entertainment subsidiary Marvel.

While Disney still licenses its brands to other companies in the game space — Activision Blizzard (NASDAQ:ATVI), for example, makes games using Marvel brands — it seems like the company’s greatest earning potential on Facebook and mobile phones would be to put Mickey, Woody, Simba and Spider-Man in Zynga’s games rather than spend the money to build a competitor to meet Zynga head-on.

But Disney played the long-term game with Disney Interactive, and its spending on Playdom and others could start yielding real results by 2013. And maybe having control of its own developers is the way to go for Disney. Maybe not, though. Even if it insists on maintaining an in-house game maker, it shouldn’t be afraid to spread the wealth of its brands beyond that business. There’s no reason Disney’s games business — internal segments and licensing together — shouldn’t sniff that $14 billion mark.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

Article printed from InvestorPlace Media,

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