The Walt Disney Company’s recent announcement of a $1.5 billion equity stake in Epic Games has raised eyebrows, particularly considering Disney’s closure of its metaverse division less than a year ago.
In a statement released on February 7th, Disney unveiled plans for a multiyear project aimed at creating a “persistent universe” in collaboration with Epic Games, the developers behind the popular game Fortnite. Described as a “games and entertainment universe,” the project intends to offer users a platform to “play, watch, shop, and engage with content, characters, and stories” from Disney’s vast array of assets.
Epic Games founder and CEO Tim Sweeney emphasized the goal of building a “persistent, open, and interoperable ecosystem,” while Disney CEO Bob Iger hailed the partnership as Disney’s most significant foray into the gaming world to date. The project, which will utilize Epic’s Unreal Engine, aims to provide players, gamers, and fans with the ability to create their own stories and experiences within the universe.
Disney’s move into the metaverse realm comes as a surprise to some, given its decision to dismantle its metaverse division in March 2023, resulting in layoffs of approximately 50 employees. This move followed Disney’s patent approval for a “virtual-world simulator in a real-world venue” the year prior.
Epic Games, on the other hand, has long been a proponent of the metaverse concept, with Sweeney touting the vitality of the metaverse despite setbacks. Despite a significant staff reduction in September 2023, attributed to overambitious revenue expectations, Epic has continued to explore metaverse initiatives, including a collaboration with Sony and the Lego Group to develop a metaverse experience that led to the creation of Lego Fortnite.
The announcement of the Disney-Epic partnership coincided with Disney’s first-quarter 2024 earnings release, following a challenging year marked by underperforming box office and streaming ventures. While Disney’s revenue for the quarter ending December 30, 2023, exceeded analyst estimates, overall revenue growth remained stagnant compared to the same period in the previous year.
In response to the partnership news, Disney’s share price experienced a modest increase in after-hours trading, reflecting investors’ optimism about the company’s future prospects in the evolving landscape of gaming and entertainment.