Disney Sticks to Game Plan

Washington D.C. (TheStreet) -- Walt Disney Co.(DIS) hasn't been mousy when it comes to dealmaking lately.

Its $660 million divestiture of Miramax and $563 million acquisition of Playdom are just the latest moves the company is making in an effort to transform its business. The most representative deal from a strategy standpoint came last summer, however, when Disney agreed to acquire Marvel Entertainment for $4 billion.

It's a similar game plan to what worked so well with Pixar: Acquire, franchise and watch the business grow. During CEO Robert Iger's five years at CEO, Disney's acquisitions have totaled nearly $13 billion. While Iger seems like a big spender, he's no Michael Eisner, which topped that number with just one acquisition -- the Capital Cities/ ABC acquisition for $19 billion in 1996.

Disney's recent interest in the gaming business, especially application-based gaming business is no shocker. As the movie industry moves online and entertainment becomes a more social phenomena, Iger has shown a willingness to adapt.

Some of the moves have been from standard corporate toolkit, such as swapping executive positions and re-designing retail stores. Others are more innovative. For example, with the help of board member Steve Jobs, better known as the CEO of Apple Inc.(AAPL), Iger and Disney are building a digital entertainment cross-platform system called Keychest, which will allow Disney customers to transport movies and games from phone, to console, to computer; and to television.

Playdom and Tapulous, which Disney agreed to acquire in early July, give the Dow component access to the gaming world of Facebook and iPhone apps. Combine that with the social networking platform it has in Club Penguin and Disney's own gaming capabilities, such as Toontown, and you have a franchise network set for a superhero, or several.

"The fastest way to grow their gaming business is on the casual side. Playdom is one of the biggest players in the space," said RBC Capital Market's David Bank. "Even a $500 million acquisition is a needle mover for Disney. They can afford to take some swings that other smaller brands could not afford."

While the strategy seems sound, there is some feeling that Disney overpaid for its recent entrance into social gaming.

"The purchase price [for Playdom] seems aggressive. I'm sure they are looking at growth in the space," says Michael Hickey, an analyst atJanco Partners told TheStreet in a phone interview. "It's still the early days and it could lead to a 30% increase in topline growth. There are a lot of marketing ops through the target and maybe they are trying to appeal to the non-Disney audience through this acquisition."