The founder of Epic Games had hopes of bringing the popular characters from the entertainment conglomerate onto his virtual playground when he was one of the select few firms chosen to take part in Walt Disney’s (DIS.N) new tab Accelerator incubator program in 2017.
Disney is now placing a far larger wager that will enable this.
On Wednesday, Disney CEO Bob Iger revealed a $1.5 billion investment intended to enable users to engage with narratives and characters from Disney, Marvel, Pixar, and Star Wars on Epic’s Fortnite, a game that attracts 100 million players every month. It was a recognition of the amount of free time that millennials, Generation Z, and Generation Alpha spend gaming.
Following the release of quarterly results, Iger addressed analysts and investors on a call. “In terms of their total media screen time on video games, it was stunning to me – equal to what they spend on TV and movies,” Iger remarked. “And I came to the conclusion that we must attend. And we need to make a strong case for ourselves there as soon as we can.”
The day following the company’s earnings release, on Thursday, shares of the stock shot up, rising over 13% in what would be their biggest day in over three years.
Douglas Arthur of Huber Research Partners stated, “Gaming is becoming a critical part of the entertainment world, particularly for the younger demo, and this positions Disney to play some catch-up in this important area.”
According to two former executives, Epic CEO Tim Sweeney had long dreamed of Disney characters filling Fortnite’s virtual playground.
Walt Disney employs Epic’s real-time 3D graphics development engine, Unreal Engine, according to a statement released by Sweeney. “Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite,”
Similar alliances have been formed between Epic and other businesses like Lego.
Wedbush’s Michael Pachter, an industry analyst for the video game business, claimed that Disney had repeatedly failed to create its own games internally. He claimed that the company had trouble turning a profit even on well-known games like “Disney Infinity,” which featured a vast cast of Disney characters that came to life in the virtual toy box of the game.
Nine Disney gaming brands, including Spider-Man and Kingdom Hearts, have brought in more than $1 billion in income since the company switched to a license business model in 2016, according to Disney.
Disney’s purchase in Epic Games, according to Pachter, is “a really smart strategic” move that is in line with the business’s strategy of raising brand recognition and preserving brand integrity.
“Disney, I think, is acknowledging … we are really good at brands and exploitation of those brands,” said Pachter. “And Epic is really good at hooking consumers and getting them engaged and having fun.”