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I still think EA would make a nice bolt-on addition to Disney. But, when Lucasfilm only costs $4 billion, it is hard to see Disney paying $5.3 billion for EA (a 20% premium to the current market capitalization if you apply $1 billion in net cash to the purchase cost).

The refresh of the game consoles should help the game business. With Lucasfilm's characters, the new wholly-owned Marvel characters, and the classic cartoon characters, Disney may finally have the fire power to make it in the game business on its own.

Buying EA would provide Disney a wide range of family-oriented games. Being able to market Disney's small band through EA's powerful system seems like a one-plus-one situation that comes up to more than two. Disney is #1 in so many businesses it just might want to look at EA and see if it can't be #1 in game entertainment too.

Just a thought...

W.D.
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Buying EA would also result in Disney owning game titles, such as EA Sports or Dead Space, that do not exactly fit in its family entertainment image. Do you sell those off? If so, you sell off a chunk of profitability.

Fuskie
Who is not convinced Disney needs to be a market leader in the console game business...
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EA Sports would fit nicely with ESPN. I would think getting EA Sports would be a main driver behind wanting Disney to buy EA. Disney could use ESPN to cross-promote the heck out of sports games like Madden NFL, NBA Live, Tiger Woods PGA, and the FIFA, NCAA Football, and NHL series.
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The problem is that playing sports video games, such as EA NHL Hockey, tend to be a bit more bloody and violent than the broadcast versions.

Fuskie
Who isn't saying that all of EA's games are inappropriate for Disney, but there are titles that would raise eyebrows...
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Buying EA would also result in Disney owning game titles, such as EA Sports or Dead Space, that do not exactly fit in its family entertainment image. Do you sell those off? If so, you sell off a chunk of profitability.

A question with no opinion implied: So do you think that "Shooter" games are less appropriate to the Disney image then TV shows about high schoolers having sex and getting pregnant and having babies?

And a opinion: I wouldn't be for EA until they can show they can survive in the non-Console game market. I think while PS, XBOX and Wii try to redefine themselves for the changing market away from consoles we don't want to buy the star in yesterday's game if they aren't going to be a leader in tomorrows game.
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EA Sports would fit nicely with ESPN. I would think getting EA Sports would be a main driver behind wanting Disney to buy EA. Disney could use ESPN to cross-promote the heck out of sports games like Madden NFL, NBA Live, Tiger Woods PGA, and the FIFA, NCAA Football, and NHL series.

Thats already been tried by ESPNs competitor with the 2K games a number of years ago and it didn't help them.

As it ends up most of the games like Madden have exclusive deals or in the case of the NBA EA had a game that was getting killed by 2K so they took it off the market to revamp the game. Both last year and this year a new NBA game was suppose to be launched and both years EA cancelled the release because they couldn't produce a game without bugs or that they thought would sell. ESPN won't help with that problem either.

Moe
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Buying EA would also result in Disney owning game titles, such as EA Sports or Dead Space, that do not exactly fit in its family entertainment image. Do you sell those off? If so, you sell off a chunk of profitability.

EA has games like SimCity that are family friendly. At the other extreme is Crysis. In between are Star Wars (yes, a Lusasfilm licensed product), The Simpsons, and Poker. Plus, it is expected to make almost $300 million (after taxes) in the fiscal year that ends March 2013. EA would yield a 5% after-tax return to Disney on the basis of a $6 billion purchase price. Or, thought another way, it could cover-up the poor performance of today's limping operation. I'd leave EA untouched in terms of the games they would offer under Disney ownership.

Speaking of a family image, I remember the days when Walt Disney was fearful of serving alcohol in the theme parks. Now, it is a featured item in such events as EPCOT's Flower and Garden Festival. [I could have mentioned the EPCOT Food and Wine Festival but that was too obvious.] Even the Magic Kingdom has it on the menu at Be Our Guest [after years offering it at Club 33 -- a private affair inside the park.].

https://disneyworld.disney.go.com/events-tours/epcot/epcot-i...

http://www.hlntv.com/article/2012/09/14/alcohol-magic-kingdo...

Disney seems to have no problem moving away from a family image at the corporate level. Touchstone Pictures was created so Disney could release more adult-oriented movies. Pulp Fiction, a cult classic and a very profitable movie for Disney, is a Miramax release and is not aimed at Bible Belt families. ABC recently had no problem bringing Good Christian B*tches to prime time. So, worrying that an EA title may not be family friendly is hardly something that would cause a problem at Disney headquarters.

An EA buy could fix a broken and money losing Division while at the same time trying to build long-term synergies. For example, Disney is not a distribution powerhouse in games. EA may have lost its #1 position but it still knows how to market a game -- and kill one before it becomes an embarrassment in the marketplace. These are skills that Disney does not seem to have in its current structure.

As others have mentioned, there are natural synergies like ESPN and Madden NFL. But, there are lots of backgrounds in games that could provide good advertising space for other Disney properties. Plus, there is the ability to write in places like Disney World into plots for games like The Simpsons. Instead of licensing a name to use in a game, use a Disney property name that you already own. Save money. Self-promote.

There are obvious concerns that dedicated home game consoles may be a dying market. That may be true but gaming isn't dying. As phones and tablets become more powerful, the simple games found on them today will yield to more graphically exciting products. Those games will require the development resources of an EA and that in my mind is what cements EA into game entertainment's future.

Disney has tried to steer clear of gambling in its theme parks. While I don't see why that is so taboo, I do realize that a gambling oriented hotel probably isn't critical to any theme park's future. But, the idea of gambling via the Internet is something I think EA could be used to develop. Governor Christie wants to bring it to NJ casinos.

http://news.yahoo.com/nj-gov-ill-quickly-sign-204454532.html...

Disney has in Lucasfilm the game developers that could bring the eye candy and sounds to take an Internet-based gambling over the top. EA has the same thing too. The two could combine to produce something quite powerful and, potentially, be the ESPN-like asset that people do not know brings in the bulk of the earnings at Disney. US gambling, in 2007 (according to Wikipedia), was a $168 million business in legal book making, $34 billion in commercial casinos, and $92 billion in all its legal forms (including Indian casinos).

http://en.wikipedia.org/wiki/Gambling_in_the_United_States

Like I said, I see EA as the finishing touch on Mr. Iger's desire to be big in gaming. It just might also allow Disney to become #1 in gambling. Imagine an ESPN book making operation (and I am not talking about children's books). ABC Family BINGO (with the option to not play for money). Retirement homes with Disney on-line games...

I was in a retirement home this week and they had scheduled games. That takes dedicated staff and, although popular, is offered on a limited basis. BINGO is the most popular activity! If Disney could find a way to weave their games into retirement homes, maybe there is the opportunity to lower staffing costs for the operator while at the same time providing 24-hour a day mental stimulation for the patients. Just a thought...

How that for a long answer to a two sentence question? Ha!

W.D.
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No. of Recommendations: 2
I have to disagree with the concept of buying EA. Here's why.

While an interesting prospect, I think the risks going forward in an industry that EA has a lot of exposure to would outweigh whatever benefits might be acquired by such an investment.

I think recent acquisitions have to be taken into account. We own Pixar, and we own Lucasfilm. Those two companies right there could theoretically take care of all of Disney's gaming-studio needs. Lucasfilm has a very serious and respected game division, while Pixar could, I have to assume, have some of its programmers work on simple console/handheld titles on the weekend (by simple I mean traditional platform-type games that were prevalent on the 16-bit platforms; Epic Mickey on 3DS might offer an example).

There would be too mucy difficulty in integrating the company with Disney.

$6 billion is a lot of money. It could fund a sizable dividend increase, an attraction or two, and a bunch of movies cum marketing budgets. Considering that we've already made several acquisitions, and considering that the acquisitions made by Interactive have either failed or come up short (in my opinion, while not a defined failure, I believe Club Penguin has definitely come up short and is not a particularly attractive asset for the company), I don't think Disney should be making any acquisitions for this division. Instead, let the fortunes either succeed or fail on the back of the investment made in Infinity.

Remember that a solution exists as far as exposing the company to video games is concerned: licensing. Disney can always license its IP. I've said this before, but what Disney really should do is try to bundle all those old NES/SNES/etc. platform games from the past and sell them to audiences today on digital platforms (and maybe even on the DS/Wii/PS3/etc. in physical form). Remember the Capcom games? Remember The Lion King for Genesis. Look up the gameplay on YouTube. I can't be the only one who would love to see those games again. I wonder if there would be licensing problems with this idea; one would thnk Disney retained rights to the source code, but I have no idea.
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