NEW YORK: Entertainment companies are increasingly looking to smartphone apps to expand their revenue streams and engage young consumers.

"A generation of kids is growing up with cellphones," Bart Decrem, Disney's senior vice president and general manager of mobile, told the Wall Street Journal. "We are trying to create characters and stories so we are relevant."

Apps offer a fresh opportunity to profit from the entertainment industry's long-standing practice of licencing merchandise and spin-off products from films, comics and TV programmes.

Disney has already found success in this space, with its apps holding the top three spots in the paid downloads category in Apple's App Store in June.

Its number one and number three-ranking apps were created from scratch, and feature its characters. However the number two app, "Temple Run: Brave", came from a partnership with developers Imangi Studios.

The original "Temple Run" game was created solely by Imangi Studios, and became the number one free app in the App Store over Christmas 2011. When Decrem noticed it had "taken over the playground", he contacted Imangi Studios and suggested a tie-up.

The result was "Temple Run: Brave" which integrates the protagonist of Disney Pixar's film "Brave" into a new version of the game.

By leveraging Disney's brand power and the app's existing fanbase, "Temple Run: Brave" has secured over 16m daily players and earned millions of dollars. The game is also set to move into the physical realm with licenced board and card games, to be produced by the Canadian toy company Spin Master.

Licencing represents a potentially lucrative on-going revenue stream, as demonstrated by the success of Finnish game maker Rovio Entertainment's "Angry Birds".

The game, which has been downloaded over 1bn times, now has more than 300 licencees, according to Claes Kalborg, senior vice president of licencing at Rovio.

Kalborg said toys, costumes, board games, T-shirts, posters and other spin-off items account for 30-40% of the $106m in revenue Angry Birds generated in 2011. He predicted merchandise sales will triple in 2012, and continue to contribute roughly one third of the brand's income.

Lisa Harnisch, senior vice president of toy retailer Toys "R" Us, attests to the profitability of this app, noting that Angry Birds merchandise is one of the store's top-five selling licences, alongside iconic brands like Barbie and Star Wars.

"Kids identify with the characters and want to play with them," she said.

Data sourced from Wall Street Journal; additional content by Warc staff