June 18, 2024

Disney & Epic Games Partner on New Fortnite Universe

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Disney bought a $1.5 billion stake in Epic Games, maker of Fortnite, to team up and develop a new expansive video game universe with their favorite characters and stories from Pixar, Marvel, Star Wars, Avatar,

Disney bought a $1.5 billion stake in Epic Games, maker of Fortnite, to team up and develop a new expansive video game universe with their favorite characters and stories from Pixar, Marvel, Star Wars, Avatar, and more. This post covers the announcement and our reaction to news of Disney’s latest foray into the video game world.

The news was revealed ahead of Disney’s Q1 FY24 Earnings Call, with the company announcing that Disney and Epic Games will collaborate on an all-new games and entertainment universe that will further expand the reach of beloved Disney stories and experiences. Notably, Disney will invest $1.5 billion to acquire an equity stake in Epic Games alongside the multi-year project.

In addition to interoperating with Fortnite, the new persistent universe will offer opportunities for gamers to play, watch, shop and engage with content. Players will be able to create their own stories and experiences, express their fandom in a distinctly Disney way, and share content with each other. This will all be powered by Unreal Engine.

“Our exciting new relationship with Epic Games will bring together Disney’s beloved brands and franchises with the hugely popular Fortnite in a transformational new games and entertainment universe,” said Disney CEO Bob Iger. “This marks Disney’s biggest entry ever into the world of games and offers significant opportunities for growth and expansion. We can’t wait for fans to experience the Disney stories and worlds they love in groundbreaking new ways.”

“Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite, and they use Unreal Engine across their portfolio,” added Tim Sweeney, CEO and Founder, Epic Games. “Now we’re collaborating on something entirely new to build a persistent, open and interoperable ecosystem that will bring together the Disney and Fortnite communities.”

“This will enable us to bring together our incredible collection of stories and experiences from across the company for a broad audience in ways we have only dreamed of before,” said Josh D’Amaro, the Chairman of Disney Experiences. (Remember, “Experiences” includes consumer products–so also video games. He doesn’t just run Parks & Resorts.)

D’Amaro added: “Epic Games’ industry-leading technology and Fortnite’s open ecosystem will help us reach consumers where they are so they can engage with Disney in the ways that are most relevant to them.”

Up to this point, Disney and Epic Games have already engaged hundreds of millions of players through Fortnite content collaborations, in-game activations, and live events. This includes the Marvel Nexus War with Galactus, which drew more than 15.3 million concurrent players.

Here’s a trailer for the Disney x Epic Games partnership:

Unreal Engine is used to produce assets and content across the Disney portfolio including in the development of video games like Kingdom Hearts 3 and Star Wars Jedi: Survivor; in cinematic editing and animation for film and streaming; and in the creation of more than 15 Disney Parks attractions like Millennium Falcon: Smugglers Run at Star Wars: Galaxy’s Edge.

This all builds on Epic Games’ participation in the 2017 Disney Accelerator program, which seeks to impact the future of technology and entertainment. The digital world is growing and evolving with more than 3 billion video game players worldwide who want to move safely and seamlessly between the worlds they love, unleash their own creativity, and experience great gameplay.

According to the company, Disney’s games business has delivered strong results since it shuttered Disney Interactive and shifted to a licensing business model back in 2016. Disney is a leading games licensor working with best-in-class developers and publishers, including on the best-selling superhero game of all-time, Marvel’s Spider-Man.

Licensed games from Disney garnered more than 150 award nominations, wins and other accolades in 2023, including multiple Game of the Year nominations for Marvel’s Spider-Man 2. Disney mobile games have 1.5 billion global installs, and to date, nine Disney games franchises have each grossed more than $1 billion in sales. Licensed titles from Disney regularly hit the annual top 10 best-sellers list in the United States.

Turning to commentary, we’re fans of this move. An existing games studio made our list of 5 Businesses Bob Iger Should Sell & Buy as an acquisition that Iger needs to make, even though he’s unlikely to actually make it anytime soon due to the company’s debt load. An acquisition would be ideal, since Disney has demonstrated it can’t build its own video game studio.

While this isn’t an outright acquisition of Epic Games, it gives Disney a significant stake in the company and is a meaningful move. In the last decade, the gaming industry has grown consistently, a trend that accelerated in 2020 when everyone was stuck at home. The global games market now has over $185 billion in annual revenue. That sum makes it bigger than Hollywood and the music industry combined!

The world’s biggest current franchises aren’t Avatar, Star Wars, Marvel, Cars, Toy Story, and Frozen. They’re Grand Theft Auto, Fortnite, Call of Duty, Pokemon, Minecraft and Mario. With each passing year, new video game franchises are born or strengthened by crossovers into legacy media.

For all of his dealmaking prowess and success in fostering the growth of Disney’s business units, Bob Iger had failed at establishing the Walt Disney Company as a major player in the video games space. After losing nearly $1.5 billion, Iger shut down the company’s in-house gaming division, Disney Interactive, back in 2016.

Iger also conceded during a 2019 earnings call that Disney is “not particularly good” at self-publishing games, and was satisfied with licensing its IP to third parties, like Electronic Arts. Being satisfied partnering with EA is like outsourcing restaurants to McDonald’s. Sure, it gets the job done and is efficient, but is it really what’s best for the Disney brands?!

This partnership and investment in Epic Games is effectively Bob Iger recognizing the mistake and doing what’s possible to remedy it. While Epic Games wouldn’t be my personal partnership target, that speaks more to my own preferences. Fortnite is undeniably popular with young people, and this will get a wide range of Disney IP in front of a ton of kids in a (debatably) higher-quality environment than what we’ve seen up until now.

Beyond that, I don’t have much more to add that we didn’t just cover a couple of weeks ago in Disney’s Biggest Weakness: Why Mickey Mouse Should Be More Like Mario. That was an article advocating for something exactly like this, and discussed how time spent with video games and mindshare is a really big deal. The average kid is not just consuming more video game content, but actively engaging with it. It’s occupying their minds and imaginations in a way that passive entertainment like movies and streaming simply are not.

It was surprising to me that this hasn’t been more important to Disney, a company that has historically recognized the significance of its theme parks as integral to brand affinity. Those immersive spaces forge fans and reinforce relationships with movies and other media. However, they also have huge barriers to entry in cost and location. They may seem dramatically different (to you), but video games offer a somewhat similar sense of immersiveness. There’s a reason why the Mushroom Kingdom was so easy for Universal Creative to translate to a theme park.

Ultimately, that’s why this partnership with Epic Games is a good move for Disney. Even if you don’t play Fortnite, and I suspect most of you do not, it is incredibly popular with younger generations. The creation of a Disney universe (think sorta like Disney Infinity, minus the toys) in that world will be huge for the future of Disney, and will likely ramifications for Parks & Resorts and much more. It’ll be interesting to watch develop!

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Your Thoughts

What do you think? Is Disney partnering with Fortnite maker Epic Games a good move? Should Disney develop its own video games studio from the ground up, or just stick to licensing? Is the company investing resources into video games, or is it just another money pit or distraction for Disney? Any questions? We love hearing from readers, so please share any other thoughts or questions you have in the comments below!

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