U.S. Markets closed

What Does Zynga's (ZNGA) Partnership with Disney (DIS) Have in Store?

Nimah Quadri
Just recently, gaming company Zynga (ZNGA) and media giant Disney (DIS) signed a partnership deal for Zynga to develop video games based on the Star Wars franchise.

Just recently, gaming company Zynga ZNGA and media giant Disney DIS signed a partnership deal for Zynga to develop video games based on the Star Wars franchise.  Just today, the multi-year partnership has pushed ZNGA's stock upwards by 8%. The developer will initially start off with two free-to-play mobile games, which will be based off of the Star Wars: Commander game released in 2014.

Recent performances of the companies, as well as other factors, will help both Disney and Zynga earn attraction and user success.

Disney’s Current Position

Overall, Disney saw a 21% increase year-over-year in revenue, whereas the Consumer Products & Interactive Media sector revenues decreased by 8%. As stated in their quarterly report, this is due to the fact that there was a decrease in operating income from licensing activities, driven by lower revenue from products based on Spider-Man and Cars.

Disney has seen a number of partnerships with different gaming companies in order to produce content. For example, it recently partnered with 21st Century Fox’s FOXA video game division FoxNext. This past year has been quite big for Disney with its Marvel franchise. The most revenue came from that specific division and has been doing well with the video game sector as well. However, in order to gain more valuation, Disney will need to see a large push in its video game industry.

Zynga Trying to Find its Place in the Gaming Market

In 2014, Zynga's business didn't do so well, due to a decrease in its user base and lack of new game launches. Zynga sees very high competition with other developers in its market, but its partnership with Disney could potentially reel the company out of its slump. Zynga expects the partnership to boost users and its presence in the gaming market.

In its most recent quarterly report, the company saw a 4% increase in revenue, as well as a 12% increase in mobile DAU's and a 10% increase in mobile MAU's. As we all know, Disney is a huge media giant and one of the most popular in the industry. So this partnership, more so, would be benefiting Zynga in the long run.

Mobile Video Game Popularity

Most people would think that a majority of video game users come from PCs, PlayStation or Xbox. However, in a recent study done by NewZoo, between mobile, PC and console games, mobile had the largest global games market at 51%, or $70 billion. According to Refinery29, mobile gaming seems to be more convenient and efficient, especially for people on the go. Although gaming on computers and consoles are still intact, users are seemingly taking the easier route, which in turn increases user demographics for mobile video games.

Bottom Line

Zynga’s partnership will prove to be a beneficial one for both companies, respectively. If the developer creates a game which could spike user growth, especially from the Star Wars fan base, it could really help boost Zynga’s presence in the market.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Zynga Inc. (ZNGA) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Twenty-First Century Fox, Inc. (FOXA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research