Disney Doubles Down On Building A Metaverse Via Epic Games Partnership

Walt Disney Co. is investing $1.5 billion in Epic Games for a stake in its equity, aiming to create what it terms a persistent universe. This move follows the decision by Disney to close its metaverse division less than a year ago.

In a statement on February 7th, Disney announced a long-term venture, pending regulatory approval, to develop a gaming experience that integrates with Fortnite, the ultra popular title by Epic Games. This collaboration aims to establish a comprehensive games and entertainment universe, enabling users to interact with the various intellectual properties of Disney through playing, viewing, purchasing, and engaging with content, characters, and narratives.

A Significant Collaboration

Tim Sweeney, the founder and CEO of Epic Games, emphasized the intention to construct a persistent, open, and interoperable ecosystem. Disney CEO Bob Iger hailed it as the most significant foray by Disney into the gaming realm to date. Disney also highlighted the opportunity for players and fans to craft their own narratives and experiences. Although specifics regarding the launch date of this metaverse-like project were not disclosed, it was mentioned that Unreal Engine would power the envisioned universe.

The initiative comes after Disney chose to dismantle its metaverse division in March 2023, which involved laying off approximately 50 employees as part of cost-cutting measures. The company had previously obtained a patent for a virtual-world simulator in a real-world venue. Epic Games, despite earlier setbacks, remains enthusiastic about the potential of the metaverse. However, Epic faced its own challenges, including a significant workforce reduction of around 16% in September, attributed to overestimations of revenue by metaverse-related ventures.

Getting Back On Track

Epic Games has prior experience in collaborative projects, having received a $2 billion investment via Sony and KIRKBI in April 2022 to develop a metaverse. This collaboration led to the creation of the open-world survival game LEGO Fortnite.

The announcement of this partnership coincides with the release of the first-quarter 2024 earnings report of Disney, following a string of underperforming box office and streaming releases in the previous year. Despite revenue growth remaining stagnant compared to the same quarter last year, Disney slightly exceeded various revenue estimates by Wall Street. The company also declared a dividend increase of 50% to 45 cents per share, prompting a nearly 7% surge in its after-hours trading price to over $105.