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URGENT: Video shows beheading of second American journalist

DUBAI (Reuters) - The Islamic State militant group released a video purporting to show the beheading of U.S. hostage Steven Sotloff, the SITE monitoring service reported on Tuesday. A masked figure in the video also issued a threat against a British hostage, a man the group named as David Haines, and warned governments to back off "this evil alliance of America against the Islamic State", the monitoring service said. (Reporting by William Maclean, Editing by Angus MacSwan)

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Toys and video games hook up on new Disney game platform

By Malathi Nayak

SAN FRANCISCO (Reuters) - Children will be able to move plastic toys that look like pirate Captain Jack Sparrow and other movie characters into a virtual world on a computer or TV screen in a game platform Walt Disney Co unveiled on Tuesday in hopes of boosting revenue at a loss-making division.

Disney's new "Infinity" concept, to be released in June, comes with games inspired by "Monsters University," "Pirates of the Caribbean" and "The Incredibles" franchises. The toys will come to life on-screen after being placed on a small electronic portal, similar to Activision Blizzard's "Skylanders," one of 2012's top-selling games.

In Disney's "Infinity," users will transport Disney and Pixar characters into on-screen adventures by placing their toys on a flat hexagonal board. A starter pack with software, the board and three plastic figurines is priced at $75.

Other Disney and Pixar characters will also be incorporated into the platform as the platform evolves, John Lasseter, Chief Creative Officer of Walt Disney and Pixar Animation Studios, said at a launch event in Hollywood, California.

The company's Disney Interactive division, which makes video games and interactive content, has been reporting losses over the last year, and analysts say it badly needs a hit.

"We've put a big bet on this," said John Blackburn, vice president and general manager of Disney's Avalanche Software studio that developed the platform.

In 2011, Activision launched "Skylanders," which connects to consoles such as Microsoft Corp's Xbox or Sony Corp's PlayStation. Activision said this week that the Skylanders franchise hit $500 million in U.S. retail sales.

Disney's Infinity will be able to connect to computers and consoles including Xbox, PlayStation and Nintendo's Wii U.

Sterne Agee analyst Arvind Bhatia said Infinity's concept is similar to Skylanders, except that it uses better-known characters, like Jack Sparrow of "Pirates of the Caribbean."

"Activision has the lead and the head start," Bhatia said.

He said Activision's "Skylanders" is heading towards hitting a billion dollars in revenue, making it tough for Disney to compete.

Infinity also comes with a "Toy Box" mode, where users can create their own virtual worlds by mixing backdrops and characters from different Pixar and Disney franchises.

(This story corrects day of the week to Tuesday in first paragraph)

(Reporting by Malathi Nayak; Editing by David Gregorio and Phil Berlowitz)

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