In 2017, Epic Games was among several companies selected to participate in Walt Disney’s Accelerator incubator program, where the game company’s founder had ambitions to incorporate the entertainment giant’s well-known characters into the digital worlds Epic was creating.
Now Disney is making a much bigger bet that will make that possible.
Disney CEO Bob Iger announced a 1.5 billion USD investment aimed at allowing users to interact with stories and characters from Disney, Marvel, Pixar and Star Wars in Epic’s Fortnite, which collects 100 million monthly players. This is a recognition of the amount of free time that Generation Alpha, Generation Z and Millennials devote to gaming.
“It was astounding to me that the total amount of screen time they spend on video games is equal to what they spend on TV and movies”, said Bob Iger to the analysts and investors after the company’s financial report. “And the conclusion I came to was that we should be there. And we need to be there as soon as possible in a very compelling way”, added he.
Disney’s stock price rose on Thursday after the report, posting a more than 13% gain in its best day in more than three years.
“Gaming is becoming a key part of the entertainment world, especially for younger people, and this puts Disney in a position to catch up in this important area”, commented Douglas Arthur of Huber Research Partners.
Epic Games CEO, Tim Sweeney, has long wanted Disney characters to populate Fortnite’s digital realm, two former executives say.
“Disney was one of the first companies to believe in the potential of merging their worlds with ours in Fortnite”, said Tim Sweeney in a statement, adding that Disney uses Epic’s tool for creating real-time 3D graphics, the Unreal Engine.
Other companies, such as Lego, have entered into similar partnerships with Epic.
Wedbush analyst Michael Pachter argues that Disney has repeatedly failed to develop its own games. It struggled to monetize even popular titles like “Disney Infinity”, he argued, referring to a game that features a large collection of Disney characters.
Since switching to a licensing business model in 2016, nine Disney game franchises, including Spider-Man and Kingdom Hearts, have generated more than 1 billion USD in revenue, Disney claims.
Michael Pachter calls Disney’s investment in Epic Games “a really smart strategic move: one that aligns with the company’s approach to expanding brand awareness and protecting brand integrity”.
