Disney reclaims Toy Story license

Last year, Disney announced it would be significantly ramping up spending on its games label, Disney Interactive Studios. The media conglomerate said that it would funneling roughly $350 million a year into its games business, with the majority being spent on developing established franchises. The House of Mouse has also brought in big-name talent to be part of its development stable, namely Deus Ex creator and Ion Storm founder Warren Spector.

While it remains to be seen what effect the refocus on games will have on Disney, the move may already be having a negative impact on THQ. The publisher--which has handled the game adaptations for several of Disney's most recent productions, including Cars and Ratatouille--may soon be having a core aspect of its business sliced clean away, as Disney has opted to develop the game adaptation for Pixar's upcoming Toy Story 3 in house, reports the Wall Street Journal (registration required).

"We would have loved to keep the business, but when you see a company like Disney scaling up, we weren't surprised they went internal with it," said THQ CEO Brian Farrell. However, Farrell remains optimistic that Disney's handling of Toy Story 3 development is an anomaly, rather than precedence for the future. "I've seen this before and the jury is still out," noting that media companies have in the past taken a crack at game development on numerous occasions, with questionably successful results.

THQ has entered a tumultuous period of late. Reporting on its holiday-quarter sales earlier this month, THQ noted that while revenues had actually grown by 7 percent to $509 million for the quarter, profits had plummeted by nearly 75 percent to less than $16 million. The publisher also abruptly shelved a number of franchises and projects in January, including the recently acquired Juiced and Stuntman driving series, as well as the Frontlines: Fuel of War for the PlayStation 3 and Destroy All Humans: Big Willy Unleashed for the PlayStation 2.