Disney's partner-first gaming strategy starting to pay off amid industry reshuffle

Disney (DIS) has big plans for its gaming division.

During its first-ever Disney & Marvel games showcase at D23 Expo, the company released new trailers for Avatar: Frontiers of Pandora and Marvel’s Midnight Suns, while also revealing new projects including Disney Illusion Island, TRON: Identity, and an untitled Marvel ensemble game created in collaboration with Skydance New Media.

Disney made the decision to shutter its in-house video game studio and axe its popular Disney Infinity series in 2016, announcing that it would transition exclusively to a licensing model.

Many in the industry took this as a sign that Disney had given up on games entirely.

"[Are games] still on your radar," Sanford Bernstein analyst Todd Juenger asked then-CEO Bob Iger during a 2019 earnings call — a valid question given the ambiguity surrounding the company's gaming strategy at the time.

Iger admitted that Disney could never quite figure out the publishing side of the business, but did note that the media giant has "been great at the licensing side."

"We've tried our hand in self-publishing. We've bought companies. We've sold companies. We've bought developers. We've closed developers. And we found over the years that we haven't been particularly good at the self-publishing side, but we've been great at the licensing side, which obviously doesn't require that much allocation of capital," Iger explained.

"We're good at making movies and television shows and theme park attractions and cruise ships and the like, and we've just never managed to demonstrate much scale on the publishing side of games," he added.

Flash forward to today and the fruits of that partner-first strategy are showing,

"So much of our transition has been about empowering really creative, really talented folks in this medium," Sean Shoptaw, Disney's vice president of global games & interactive experience, told Yahoo Finance in an interview following the D23 presentation.

"Hopefully what everybody saw today was a really good illustration of what our strategy has been these last four or five years across our entire portfolio," Shoptaw added.

Disney's unveil comes at a time when the video game industry is consolidating.

Most recently, rumors swirled that Electronic Arts (EA) was up for sale after the game developer reportedly held acquisition talks with NBCUniversal (CMCSA), Apple (AAPL), Amazon (AMZN), and, yes, even Disney.

Microsoft’s (MSFT) highly publicized $68.7 billion purchase of "Call of Duty" maker Activision Blizzard (ATVI) will make the tech giant the world’s third largest gaming company by revenue — behind Tencent and Sony — once it closes next year.

And Take-Two Interactive (TTWO), the company behind games like "Grand Theft Auto;" "Red Dead Redemption;" and the "2K" series, announced its purchase of mobile gaming giant Zynga (ZNGA) for $12.7 billion earlier this year.

In 2021, Sony (SONY) purchased six game studios, including Valkyrie Entertainment, for an undisclosed sum, while Nintendo acquired "Luigi’s Mansion 3"-developer Next Level games. Microsoft also acquired Zenimax for $7.5 billion.

And now, streaming giants like Netflix (NFLX) want a piece of the action, too.

The platform announced its move into the gaming sector last year with the hire of 30-year gaming industry veteran, former EA and Oculus executive, Mike Verdu.

Shoptaw wouldn't comment on whether or not the Disney+ streaming platform would integrate or experiment with video games like Netflix, but he did recognize the convergence happening across the entertainment sector.

"We're certainly aware of what's going on in the broader market, but our core focus is just on delivering value, and hopefully doing it for a long time with this playbook of working with the best," Shoptaw said.

The executive went on to explain that games can eventually serve as the catalyst for future iterations of Disney films, TV shows, and even amusement parks, emphasizing the medium's ability to tell new stories, create new worlds, and attract new audiences (even the casual gamer.)

"The mass market is finally seeing the power of games — how engaging they are, the fact that they are original stories, and that you can explore these worlds in an immersive way," Shoptaw said.

With additional reporting from Dan Howley.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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