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Default Disney Leading Hollywood to the Videogame Grail

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In 2002, when Graham Hopper was tapped to head Disney's videogame operations, his bosses gave him a choice: Come up with a dramatic plan to reinvigorate the flailing unit or downsize and focus exclusively on licensing to other companies.
It was far from an obvious choice. At the time, many Hollywood studios were getting out of the games game—Universal Studios, 20th Century Fox, and DreamWorks dumped the divisions they had launched during the digital boom of the 1990s, having learned the hard way that the ability to make successful films and television shows didn't mean squat in the interactive world. Producing quality videogames required hundreds of millions of dollars and years of patience.
Hopper convinced his bosses to hang on—with a small footprint, making cheap games based on Disney Channel fare like Hannah Montana and Kim Possible. Just five years later, that decision has put it ahead of the pack, as Hollywood goes hurtling back into videogames. Paramount and Universal are spending tens of millions of dollars to create a new slate of products, and MTV and Warner Bros. have invested hundreds of millions to build themselves into major publishers.
"If you were to build an entertainment company from scratch today, you wouldn't even question that games should be in it," says Hopper, a dapper South African who spent a decade in Disney consumer products before his videogame stint.
It's not the first time such words have been uttered in Hollywood, but there's a sense of inevitability—for some, perhaps even desperation—this time around. When Hollywood exited videogames five years ago, it was riding high on revenues from DVDs. Today, home entertainment is shrinking, box office is flat, the TV audience is increasingly splintered, and significant internet money remains hypothetical. Videogame revenue, meanwhile, shot up 34 percent last year and has increased 49 percent so far in 2008.
Companies are busily recruiting experienced talent, spending big on acquisitions, and pushing through early failures. Warner Bros. made its first stab at videogames with the 2005 flop The Matrix Online, but has gone on to release a much broader slate—and spent more than $200 million last year to buy British developer Traveller's Tales, maker of the ultra-successful Lego Star Wars games.
Movie-based videogames have a deservedly terrible reputation. Since they're often made on the 12- to 18-month timeframe of a film's production schedule rather than the three years it takes to produce a major console game, and can sell well on the back of a movie's mega-marketing spend, they're regularly amongst the lowest-quality titles on the market. For proof, just check the reviews of recently licensed games like Iron Man and Wall-E."
But even adaptations that sell can tarnish a brand with young consumers if the games stink—something studios now recognize. Universal, not wanting to rush its self-financed Wanted game, hasn't announced a release date yet, even though the film is out. Warner Bros. is turning Watchmen into a series of small downloadable games rather than rush one big package for the film's release next March.
"The ultimate goal for us is to have our best IP well established and sustainable on the videogame market," says Martin Tremblay, who worked at Ubisoft and Vivendi Games before becoming president of Warner Bros. Interactive Entertainment in June. Accomplishing that is a crucial first step for studios before becoming a fully legit publisher by moving into original titles.
So far, Disney is the only player in Hollywood that has already done so. After establishing girl-targeted brands like Hannah Montana and Kim Possible as million-unit-plus sellers in 2003 and 2004, it came into 2005 with a small but viable publishing operation. "This is a very disciplined company, so we were given a small amount of resources at first to prove we could be successful," recalls Hopper. "Then we were able to get more investment and just keep on growing."
Disney's C.F.O., Tom Staggs, said last year that the conglomerate is prepared to more than triple its spending on games from $100 million in 2006 to $350 million by 2012. Disney recently moved videogames out of the sprawling consumer-products unit and into a new operating division along with online media.
The revived Disney Interactive Studios (formerly Buena Vista Games) has used its capital infusion to acquire six development studios (the folks who actually make the games) since 2005, and has a slate of 19 titles for its fiscal year ending in September, significantly more than any other media conglomerate and even some pure-play publishers like Sumner Redstone's struggling Midway or Eidos.
"By the existing model, Disney is definitely in the lead. They are a good year or two ahead of Warner," observes Keith Boesky, a former president of Eidos who now leads his own videogame agency. "The question is whether one of the other studios will come up with a better way to pursue the market."
About 70 percent of Disney's games are based on existing film and TV properties like Prince Caspian and High School Musical—the bread and butter of Disney Interactive's business. But the real reason the company is willing to invest so much may lie in that other 30 percent. Its small but growing slate of original titles, which started last year with alien-exploration game Spectrobes and is expanding this fall with the stunt-driving title Pure and Guitar Hero-like music simulator Ultimate Band, are potentially more than just game properties. They're new franchises that can eventually flow through the Disney pipeline: Imagine Pure the theme park ride or Spectrobes the animated TV show.
"They're a content engine, like any other form of media," Hopper says.
Core videogame players are still largely young males, and Disney Interactive has started pursuing them with games like Pure and February's Halo-esque shooter Turok, based on a comic book about a dinosaur hunter. That's not exactly standard fare from the most conservative studio in Hollywood.
"Part of our opportunity here is to connect in a relevant way with demographics groups that are otherwise harder for our company to reach," Hopper says. "It's easy to get other publishers to license our hit movies or TV shows, but if we want to invest in new customers via videogames, we have to do it ourselves."


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