The toys-to-life market has one less major player today, and unfortunately that also means that hundreds of employees have also lost their jobs.
In a blog post made this afternoon, Avalanche Software's John Blackburn announced that Disney would be discontinuing Disney Infinity in June. Additional information emerging from an earnings report and investor call indicates that Disney will be closing developer Avalanche Software. According to the Wall Street Journal's Ben Fritz, this will result in the release of nearly 300 employees.
The earnings report is (understandably) filled with lots of business jargon that makes it hard to follow. I'm not an expert, but I'll try to break it down as best as I can:
- Disney is taking a "$147 million charge in connection with the discontinuation of our self-published console games business, principally Infinity." My understanding is that this means that because of this one-time event (the shuttering of Avalanche), Disney is taking a loss during this financial period of $147M. They say this to signal to investors that this is a one time issue, not a cost that will likely repeat indefinitely. In the opening of the report,
- "The Infinity Charge was primarily due to an inventory write-down." An "inventory write down" is what happens when a company realizes that assets it has aren't going to sell for the price they were predicting they'd sell for. In this case, Disney is basically telling its investors that there was a $147M difference between the estimated value of the Infinity line of products and the actual market value that they now think the line has.
- The report also notes that this charge also includes "severance and other asset impairments," but these are secondary causes. Specific numbers aren't given here, so it's hard to speculate with any accuracy about the percentage these make up of the $147M charge.
The long and short is that Disney is sitting on a ton of Infinity merchandise that just isn't worth the money they thought it would be, leading the company to make a sharp exit from the games publishing market.
Don't expect this to be the end of Marvel, Star Wars, and other Disney-property games, though. In a statement provided to GamesBeat, Disney confirmed that it will continue to license its many properties out to other developers and offered some additional perspective on their decision to cancel future Infinity products:
After a thorough evaluation, we have modified our approach to console gaming and will transition exclusively to a licensing model. This shift in strategy means we will cease production of Disney Infinity, where the lack of growth in the toys-to-life market, coupled with high development costs, has created a challenging business model. This means that we will be shutting down Avalanche, our internal studio that developed the game. This was a difficult decision that we did not take lightly given the quality of Disney Infinity and its many passionate fans.
According to Blackburn, Infinity will offer two more retail releases, "including three new characters from Alice Through the Looking Glass later this month, and the Finding Dory Play Set launching in June." Blackburn additionally thanked the long term fans of the series for their support and enthusiasm.
It's worth taking a peak at Avalanche's development history, which includes a number of late 90s console ports of major Midway games like Mortal Kombat Trilogy and NFL Blitz 2000.
Hopefully those affected by these layoffs will be able to find new employment soon.
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