Disney Adds Game Muscle

It buys one studio and sets plans to build another.
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Disney

(DIS) - Get Report

is stepping up its video-game efforts, announcing on Tuesday that it has acquired one game studio and is starting up a second one.

The media giant's Buena Vista Games purchased Salt Lake City-based Avalanche Software for an undisclosed amount. Meanwhile, Buena Vista Games is setting up a development studio in Vancouver that will focus on action-adventure games.

The moves "mark a significant milestone in becoming a top-tier video-game publisher by securing the industry's top talent to build and create game franchises," said Graham Hopper, Buena Vista Games' general manager, in a statement.

Disney and rivals such as

Viacom

(VIAB) - Get Report

and

News Corp.

have been vocal in recent months about their interest in the video-game space. While such companies have struggled with their publishing, television and even film divisions, the video-game market has been steadily growing sales and users.

Much of the speculation centered around the possibility those media companies might buy one of the major video-game publishers, such as

Electronic Arts

(ERTS)

or

Activision

(ATVI) - Get Report

. Disney and some of the other film studios sank millions into setting up their own game divisions in the 1990s, but largely saw disappointing returns.

By buying Avalanche, Disney is securing an established development house, if not one of the top-tier ones. Avalanche developed

Tak and the Power of Juju,

which is published by

THQ

(THQI)

, and

Dragon Ball Z: Sagas

for Atari. Disney did not say whether Avalanche would continue to develop games for other publishing companies. The developer will focus on creating "family-friendly" games, Disney said.

Meanwhile, the Vancouver-based studio will be headed by a team of developers that were formerly at EA.

Shares of Disney were up 31 cents, or 1.2%, in recent trading to $27.25.