Walt Disney ()
Disney (DIS) has come under siege over the past couple of years, due in large part to worries about ESPN and its future.
There are no shortage of opinions out there on what Disney should do with ESPN, which has lost nearly 10 million subscribers over the past few years. Liberty Global chieftain and media giant John Malone has posited that Disney could spin off ESPN. After doing so, Disney would be a more palatable purchase for a tech giant like Amazon (AMZN), Apple (AAPL), or whomever decides they need the Mouse House on their balance sheet.
Others have suggested that ESPN needs to keep laying off talented journalists and reporters to keep from crumbling under the weight of the enormous television rights contracts it has recently signed with the major sports leagues. Disney CEO Bob Iger has talked constantly about the upcoming direct-to-consumer service as a way to keep sports fans engaged, without the weight of the enormous cable bill.
BTIG analyst Rich Greenfield, a prominent media analyst and noted Disney critic, has recently suggested Disney should buy Twitter (TWTR) to help with ESPN. Greenfield has other suggestions for Disney, including that it should buy video game publishers EA (EA) or Activision (ATVI).
While interesting, acquiring a video game publisher is wrong for Disney. It doesn't just need a video game publisher.
It needs Nintendo.
Nintendo is undergoing a renaissance of sorts for a number of reasons. While investors are focusing on the early success of the Nintendo Switch, the remarkable performance of its now discontinued Nintendo Classic, the staying power of Pokemon Go (Nintendo owns a stake in The Pokemon Company) and its increasing strength in mobile games, are all helping boost Nintendo's appeal.
Acquiring Nintendo -- which admittedly would not be easy -- would give Disney more than just a video game publisher. It would give it another intellectual property brand at a time when there is little original intellectual property being created.
Characters like Mario, Luigi, Zelda, Donkey Kong and countless others are known around the world and have been for decades. Disney has become an acquirer of valuable intellectual property that can be exploited in countless ways -- parks, cartoons, merchandise, movies and more.
Outside of The Lego Company (and maybe Rovio's Angry Birds franchise), there are not many companies and brands out there that resonate with people of all ages the way Nintendo does.
Nintendo is finally starting to realize this, leveraging its characters for theme parks. When Disney acquired Lucas Films and Marvel, Iger and team talked about how they could leverage Darth Vader and Spider-Man to be in theme parks as well as on the silver screen. Adding Mario and friends to that stable would only enhance and strengthen Disney, while simultaneously hurting one of its main competitors in the theme parks business, Universal (owned by Comcast).
Nintendo would also help strengthen Disney's place in licensed merchandise, which have become a huge opportunity for the Burbank, Calif.-based company. Star Wars-related toys and other items helped boost licensed merchandise revenues in 2016 to $262.9 billion, according to the International Licensing Industry Merchandisers’ Association. But Pokemon saw a resurgence in licensed merchandise as well, thanks to Pokemon Go. Adding that to its coffers would be a boon for Disney.
Nintendo has also talked about putting its characters in other venues, including movies. The silver screen would be a holy grail for Nintendo, which needs to think of itself as not just a video game publisher, but as an entertainment company. Putting designs on Uniqlo t-shirts is one thing, but getting Mario and friends up on the big screen is a whole different story.
The company rightfully has reservations about how it handles its move to the big screen after the disastrous Super Mario Bros. movie, but if there is any company that has shown a willingness to take beloved franchises and expand them in an appealing way to both critics and fans, it's Disney.
Under Iger, Disney has become the king of nostalgia. Nintendo has built its business on nostalgia, a phenomenon that is actually backed up by science and explained by neuroscientists.
Acquiring Nintendo would give Disney a lock on nostalgia in a way that acquiring EA or Activision simply would not.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
