The investment marks Disney’s most substantial venture into the gaming arena. According to Disney CEO Bob Iger, it aims to enable consumers to engage with narratives featuring characters from Disney, Pixar, Marvel, Star Wars, and Avatar.
The agreement, contingent on meeting closing conditions and obtaining regulatory approvals, encompasses an equity stake in Epic Games and a multiyear initiative to develop a novel “games and entertainment universe” that will seamlessly integrate with Fortnite. This strategic move aligns with the company’s overarching strategy of emphasizing consumer interaction with stories featuring renowned characters and brands.
A few years ago, Seattle-based video game maker Epic Games shifted its focus from its core multiplayer shooter franchises to what its founder calls “the metaverse.” A metaverse is an online virtual world where people can interact through avatars and engage in activities like playing games, watching movies, shopping, trying products, and visiting amusement parks.
In 2017, the Cary, North Carolina-based company was among a handful of companies selected to participate in Walt Disney’s (DIS.N) Accelerator incubator program, where the game company’s founder held ambitions of incorporating the entertainment giant’s well-known characters into his digital playground. Several years later, that has happened with a variety of partnerships. The most recent, announced Wednesday, was to bring Disney’s Spider-Man character into the popular Fortnite multiplayer game.
The deal is a significant bet by Disney, focusing on expanding into newer media such as TV shows, films, and online content. It faces stiff competition from rivals such as Netflix (NFLX.O). It also comes as the industry shifts from one in which consumers download and play games to a subscription model that lets them access content over time.
Disney is a leading video game licensor, licensing its famous characters and brands to developers, including Fortnite developer Epic Games. But it has struggled to crack the code of making its blockbuster games that can compete with those from independent makers.
In announcing the partnership, Epic Games CEO Tim Sweeney, emphasized that the two companies had worked together for several years. He cited Disney’s success in bringing its own Spider-Man to the popular Fortnite game and Disney’s use of Epic’s Unreal Engine software for projects ranging from film editing to theme park attractions.
The companies have not revealed many details about their plans for the future, but Disney wants to use the new universe as a marketing tool for its own video games and amusement park experiences. According to a release, it has partnered on seasons, in-game events, and other projects around the Fortnite universe.
The deal is expected to close in early 2024, at which point Disney will receive a stake of about 4.4% in the privately owned company. It needs to be clear how much value Epic will gain from the investment and whether that will affect its current valuation. The share price was up in aftermarket trading Wednesday.