The franchise's second offering, "Skylanders: Giants", will hit stores in North America following the success of "Skylanders: Spyro's Adventures" whose U.S. sales have exceeded 286 million game packs, toys and accessories since its 2011 release.

Activision, which is better known for hardcore shooter games, is trying to stem the loss of subscribers from its bread-and-butter games like "World of Warcraft" and diversify revenue sources. Analysts say the "Skylanders" franchise can generate sales not just from games but also toys and licensed merchandise from apparel to bicycles.

"Skylanders" counts among 2012's top-selling games, helped by a fairly novel concept. It is sold with physical toys that come to life on screen when they are connected to consoles such as Microsoft Corp's Xbox or Sony Corp's PlayStation.

When figurines - priced from $10 to $15 - are placed on a small electronic portal, a chip inside them interacts with the console and records a player's achievements and progress.

That concept caught on after the first title, prompting the company to focus on building the brand and expand its licensing program, Activision Publishing Chief Executive Eric Hirshberg said.

"It just starts to take on that body language or footprint of a really meaningful pop-cultural set of characters, the way that Star Wars does or Transformers does," Hirshberg said.

Activision has heavily invested in the Skylanders franchise and marketed products, which are aimed at 5- to 10-year-olds, a demographic dominated by Nintendo Co Ltd.

"Many tens of millions of dollars" have been spent on Skylanders "to go through the development side that is both creation of the software, packaging and toys, and manufacturing of the toys and shipping," said Paul Reiche, who heads Activision's Novato, California-based Toys for Bob studio that develops "Skylanders".

Executives declined to disclose the exact amount it invested in the building the Skylanders franchise. But it is comparable to the amount it spends in creating its so-called triple-A, or high-quality, games like "Call of Duty", Reiche said.

GOING MOBILE

The company is expected to introduce new Skylanders titles for mobile devices in addition to its current "Skylanders Cloud Patrol" game for Apple Inc iPhones and iPads.

An exclusive Kindle version of "Skylanders Cloud Patrol" was launched along with Amazon.com Inc's Kindle Fire HD last month. The game is the first-ever app that allows users to buy, by clicking a button, Skylanders toys of more than 30 characters while playing the game on their Kindle tablets.

"The more that we can integrate the purchase process into the digital experience the better," Hirschberg said.

"Skylanders Spyro's Adventures" has been the top-selling game this year based on revenue from sales of the games, accessory packs and figures, according to research firm NPD.

The company has sold over 30 million Skylanders action figures in the United States so far, and hopes the new game will boost sales further.

Toys retailer Toys 'R' Us began pre-selling "Skylanders Giants" in July and "has seen a lot of demand," said Troy Peterson, vice president of the Electronics and Entertainment Division.

(Reporting by Malathi Nayak; Editing by Richard Chang)

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