Is Activision aiming to be the next Disney?

An image from the movie "Warcraft," due in June of next year.
Source: Warcraft

For the past 36 years, Activision-Blizzard has focused almost exclusive on its core competency: Making games for videogame console systems. But the winds of change at the company are nearing Category 5 hurricane strength these days.

In the past month, the publisher has unveiled a new eSports unit, dropped nearly $6 billion on mobile game publisher King Digital and launched its own film and television division, with two projects already well underway.

It's an expansion that is designed to cement Activision's leadership position in the world of interactive entertainment — and some analysts say it has all the hallmarks of creating dynasty that could be on par with the one Walt Disney created in 1923.

Colin Sebastian of R.W. Baird said the cross-media strategy Activision has unveiled creates "Disney-like growth opportunities." And Benchmark Co analyst Mike Hickey wrote that "the company is positioning its future growth opportunity, parallel with how Disney has built their media empire."

Certainly, there's no real comparison to be made between the two companies just yet. Activision has laid the groundwork for expanding into other fields, but it has yet to achieve success in any of them. And there could be some false starts along the way.

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The upcoming "Warcraft" movie (due out June 10, 2016), for example, could be a red herring for investors. Activision did not develop the film, giving it some deniability should it underperform (and Hickey says the movie "does not look promising"). However, Sebastian points out, the film still "marks Activision's first major 'test' on its ability to engage its 73 million monthly average users through an alternative media channel."

2016 will provide another test of user engagement, though. "Skylanders Academy," an animated series directly overseen by Activision's new film division, is expected to launch in the second quarter of the year. (The unit is also working on a "Call of Duty" feature film that's targeting a 2018-19 release.)

ESports, meanwhile, is another largely untested field (at least in terms of longevity), but one that's loaded with potential. Revenues across the industry are expected to reach $1.8 billion by 2020, according to Baird — a big leap from the estimated $200 million it will raise this year. There are significant opportunities with tournaments, advertising and sponsorships, broadcast contracts and wagering.

The audience is growing, too. According to Newzoo, there are 226 million eSports fans around the globe and that number will increase to 323 million by 2018. Sebastian said he expects the eSports division to become a meaningful revenue and profit contributor to Activision within two to three years.

Beyond the cash opportunities, though, eSports allows Activision to have a controlling stake in how its games are presented to the mass audience.

"The development of eSports [is similar] to how Disney drove engagement and fun for its IP with the development of theme parks," says Hickey.

Even the King acquisition could have some Disneyesque qualities, as it gives Activision a chance to monetize its back catalog in a new way. While it's unclear whether the company will lean on King to create mobile versions of "Call of Duty" — and Blizzard has its own successful mobile team overseeing its games for smartphones and tablets — the company has hundreds of dormant properties that could be exploited, Hickey wrote.

Riccardo Zacconi, chair of King.
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"We believe that some of these older franchises could be used as the foundation for Activision games cross-promoted to King's audiences," he said in a note to investors.

The key to Activision's success to expand into new fields may lie in the management of these new divisions. Activision CEO Bobby Kotick certainly has business skills, but has never been mistaken for (nor claimed to be) the creative genius Disney was. Rather, he's a chessmaster, moving pieces on the board.

But analysts say the units seem well positioned.

Steve Bornstein, former CEO of ESPN and the NFL Network, will serve as chairman of the eSports division (with Mike Sepso, co-founder and, until recently, president of Major League Gaming, as senior vice president). King's founders have signed long-term contracts. And Nick van Dyk, a former Disney senior executive who played a role in the acquisitions of Pixar, Marvel, and Lucasfilm, will be co-president of Activision Blizzard Studios. (The company says a second top creative executive will be announced soon.)

"It's going to be a really interesting collaborative exercise between a bunch of alphas to get where they're going, but the portfolio of resources they have ... could take [the company] to some very interesting places," says John Taylor, managing director at Arcadia Investment Corp.