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Disney shut down a huge project that was supposed to be worth billions — insiders reveal what went wrong

The world's largest entertainment company doesn't make its own video games anymore.

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Disney — the folks behind "Star Wars," Mickey Mouse, Disneyland, everything Marvel, ESPN, and hundreds of other iconic characters — believes that the better option is to license its incredibly successful properties out to other companies. It still makes mobile games, sure, but Disney's out of the "big" game business; the stuff most people play on stuff like the PlayStation 4 and PC.

star wars battlefront vader luke skywalker
"Star Wars Battlefront" is a licensed game made by EA — one of several such efforts from Disney.
EA DICE

"We feel like we’re better off managing the risk that the business delivers by licensing instead of publishing," Disney CEO Bob Iger said in the investor call where the news was announced.

In the span of ten years, Disney purchased and subsequently closed at least six game studios. Hundreds of employees lost their jobs, and countless games were canceled.

It is, in short, a tremendous mess.

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Worse, it's a mess that's been brewing for years now.

Epic Mickey 2
Disney

How did the world's biggest, most successful entertainment company blow it on gaming? Tech Insider spoke with several former employees who explained what went wrong with Disney's video game initiative. Disney declined to comment for this story.

A strong aversion to risk

One of the most common refrains among ex-Disney staffers was that Disney had a strong aversion to risk.

They say Disney was rarely willing to make the investment — both financial and philosophical — required to become a major player in the video game business.

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"Disney is very buttoned up, financially, to an extent that was surprising to me," former Disney Interactive senior VP and general manager Alex Seropian told Tech Insider.

Seropian was the guy in charge of running Disney's "core" game group from 2009 until 2012. He was the guy who oversaw various game studios that Disney bought, who worked with external development studios to create games that could be made in-house. 

Halo: Combat Evolved
Seropian was directly involved in the creation of "Halo: Combat Evolved."
Microsoft

He's also a co-founder of Bungie Studios, the development studio that created blockbusters like "Halo" and "Destiny." After nearly twelve years as CEO, Seropian moved over to Microsoft after its purchase of Bungie to oversee the launch of the first ever "Halo" game.

Seropian understands how to create major new video games within a large corporation. But his knowledge and experience only got him so far at Disney.

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"Any big company has a finance department, has financial folks embedded in the product units, or business units will take the finances of the business very seriously, etc." Seropian said. "But I found at Microsoft that there was a little more of a focus on the product, at least from the business decision-making aspect, with a little bit more of, 'If we make the right thing the profits will come.'"

Not at Disney.

With film, TV, and other mediums where Disney already excels, the process of getting a project from idea to product was more streamlined, Seropian said. Disney knew how to predict the payoff of investment in those mediums. It couldn't do the same for video games, and that inability to predict success led to major problems in game development. 

Specifically, it forced Disney to "make decisions with a little bit more of an eye towards the spreadsheet than towards the product," according to Seropian. "You can look at that in many different ways, but it's just a very different environment in which to make a tech product or a software product," he said.

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Former software engineer Tom Eastman, who worked at one of the studios Disney owned, echoed this sentiment. "We were unable to start and continue working on projects," he told Tech Insider in a phone interview. "Wideload was basically managing upwards for the entire duration after the acquisition." 

Disney's Guilty Party
"Guilty Party" was one of just two games that Wideload released when owned by Disney. Many other projects were started, none were finished.
Disney

Eastman described a situation where the small studio he worked for went from being an innovation-focused development house to a family-friendly game maker to a free-to-play game maker to a mobile game maker in the course of four years, never fully digging into any one thing.

Project after project was pitched, prototyped, and killed. 

When one project was finally approved and funded by Disney, it seemed to quickly devolve into a bureaucratic mess, because it involved both Disney oversight and Marvel oversight. "Since we were making a Marvel game, we had red tape from Disney in Glendale, CA. and red tape from Marvel in New York," Eastman said. "That was especially bad with a mobile game. When you're making mobile games, it's supposed to be small and fast."

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Disney knows movies, but it doesn't know games

Disney knows how to make movies, TV shows, and theme parks. The company also knows how to run media businesses, from ESPN to ABC to Pixar. 

disney world

When it comes to video games, Tech Insider was repeatedly told that a lack of institutional knowledge kept the company from ever really investing. "There wasn't really much — if any — institutional knowledge regarding video games there," Seropian said. 

Originally, Disney's video games were little more than licensed fare.

A new "Pirates of the Caribbean" movie was coming out, for instance, so Disney contracted a game development studio and a game publisher to create and release a game version of said film. These licensed efforts were successful enough for Disney to attempt a bigger investment; that's the origin of the video game arm of Disney that just folded.

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Here's Seropian on that history:

The video game business that existed when I showed up was really built on the back of the licensing that they had done to grow it enough so that they could go, "You know what, we're good enough at this. Let's put real dollars in this. Our properties are fantastic. We're gonna make some original games. We're gonna make some games based on [existing properties]. We're gonna do it ourselves and not let other people do it. And the profit margins that come from that are gonna be even bigger. So let's do it!" That all happened before I got there, and it happened with a group that didn't have a lot of institutional knowledge making games.

When the business realities of being a major video game developer and publisher started to sink in at Disney, the company apparently got cold feet. A lot of those little hesitations, that unwillingness to dig in, ended up in Disney's outright shuttering of its video game division. 

Disney spent years losing money on video games, having invested billions and only just finally turned a profit in the last two. Investments in big new game series, like 2008's "Split/Second" and 2010's "Epic Mickey," didn't pay off. It was only "Disney Infinity," coupled with the closure of several of the studios Disney previously purchased, that helped the company finally turn the corner. 

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Split/Second
"Split/Second" was an excellent arcade-style racing game released in 2008, created in-house at Disney by Black Rock Studio. The studio was closed by 2011.
Disney

But, with "Infinity," Disney saw the writing on the wall — a projected decline in sales across the next several years meant that Disney wanted out before sales turned sour.

Here's the full statement from Disney's head of consumer products, Jimmy Pitaro, regarding the death of "Disney Infinity" (emphasis mine):

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.

That's a far cry from just two years ago, when Pitaro said, "We will be a billion-dollar franchise," in reference to "Disney Infinity." Disney did reach that billion dollar mark with "Infinity," but then chose to kill the franchise before it could potentially decline in sales. There are few better examples of Disney's risk-averse attitude and focus on the bottom line than the case of "Infinity." 

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Free trips to Disney World!

Even with all the problems making games at Disney, former staffers had nothing but positive things to say about how they were treated by the company. 

"Disney as creative overlords? Not so great," Eastman told us. "Disney as a company? Super awesome!" He has a pension, was given free passes to Disney theme parks, and liked the people he worked with. Seropian shared a similar sentiment. "I really do like and respect Disney as a company," he said. "I enjoyed working there. I really liked the people."

Walt Disney statue, Walt Disney World
Free passes to Disney's world-renowned theme parks were one of several perks.
Associated Press

Liking the people you work with, unfortunately, does not grant them innate understanding of the video game business. "The games business is hard, especially on the console side," Seropian said. "You have to take a lot of risk, it's a long time to get a return — and you may never get the return!"

He's not wrong. To become a game publisher in the modern era — to compete with the Activisions and Nintendos and EAs of the world on the same scale that they operate — requires both a tremendous financial investment and a tremendous time investment. You will almost certainly fail along the way, and you have to take those failures and keep going. It's about making careful bets and digging in on those bets.

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"You have to have enough scale to do four or five of these bets in order to make one of them pop and have a profit at the end," Seropian said. "If you're at a company that's well capitalized and has a 5-10 year view? Great, you can do that. There are very few companies like that, that go after that any more. Disney considered itself in that category in 2009 when I got there, but not too long after that they changed their minds."

It took another seven years before Disney fully gave up, but the writing was on the wall for years.

Disney routinely canceled interesting projects, intermittently closed entire studios it had acquired not long before, and failed to market projects that did end up surviving the development process.

Priorities

Disney is a huge, international company with a ridiculous amount of money. It owns the most important, beloved properties in the world. 

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For all the good this would seemingly do for a video game division within Disney, it also stood against its success.

star wars force awakens trailer
Why make video games when you can make, like, a trillion "Star Wars" movies?
Disney/Lucasfilm

"That's another challenge of being at a company like Disney: You've got $10 billion to invest in stuff," Seropian said. "And your choices are, well, I could make seven 'Star Wars' movies, and seven Marvel films, a couple of Pixar movies, a 'Star Wars' land at Disney World, and another 'Phineas and Ferb' TV show. Where do I fit in the five $20 million, $50 million video games?"

Indeed, in the long term, Disney didn't fit those game projects in, but we do know about the next five "Star Wars" movies. 

Gaming Disney
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