Disney to invest $1.5 billion in Fortnite maker Epic Games; games & entertainment universe on cards

Disney CEO Bob Iger Iger believes this deal will enable them to attract younger audiences who are huge consumers of video games

Disney is investing $1.5 billion in Fortnite maker Epic Games for a small equity stake, marking the company's biggest entry into the world of video games, CEO Bob Iger said on February 7.

With this investment, Disney plans to launch a new 'games and entertainment universe' that integrates the entertainment conglomerate's storytelling into Epic's popular game Fortnite, enabling consumers to play, watch, create and shop for both digital and physical goods, Iger said during the company's earnings conference call.

Iger believes this deal will enable them to attract younger audiences who are huge consumers of video games and are spending a significant amount of their screen time on playing these games.

"This new universe from Disney and Epic provides us with a tremendous opportunity to not only meet more consumers where they are but to allow more audiences to cultivate a bond with Disney's iconic brands and franchises including Marvel, Star Wars and much more" he said.

Iger said this universe will allow people to play games that Disney creates, create their own games, interact with one another, and watch content including short form videos. "We may even use the platform to distribute some of our content" he said.

"Just as we take our IP (intellectual property) from our movies and television and have them express in our parks. This is a great way to do it in games" Iger said. All these experiences will be powered by Epic Games' game engine Unreal Engine.

“Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite, and they use Unreal Engine across their portfolio,” said Epic Games founder and CEO Tim Sweeney

“Now we’re collaborating on something entirely new to build a persistent, open and interoperable ecosystem that will bring together the Disney and Fortnite communities” he said.

Longtime collaborators

Epic Games had participated in Disney's accelerator programme in 2017 and both the company have collaborated on various initiatives in recent years.

This includes Fortnite content integrations, season collaborations, in-game activations, and live events, including the Marvel Nexus War with Galactus, where Marvel's biggest heroes were pitted against the cosmic villain Galactus. Disney said this event on Fortnite drew more than 15.3 million concurrent players.

The entertainment giant said it has also used Unreal Engine to produce assets and content across its portfolio including in the development of video games like Kingdom Hearts 3 and Star Wars Jedi: Survivor, in cinematic editing and animation for film and streaming, and in the creation of more than 15 Disney Parks attractions like Millennium Falcon: Smugglers Run at Star Wars: Galaxy’s Edge.

Disney shut down its video game division in 2016 and shifted to a traditional licensing business model, where it licenses its IPs to developers and publishers. The company said that its mobile games have clocked 1.5 billion global installs, and to date, nine Disney games franchises have each grossed more than $1 billion in sales. This includes Marvel’s Spider-Man franchise, which was the most successful video game last year, Iger said.

For Epic Games, this investment comes after it raised $2 billion funding from Sony and Kirkbi, a family office of the Kirk Kristiansen family, which founded the Lego Group. In December 2023, Epic and Lego launched a new survival game called Lego Fortnite that's available inside the Fortnite game.

The Apple angle

This investment is also noteworthy because of the contrasting relationship shared by both the companies with tech giant Apple.

Disney has shared a close relationship with Apple dating back several years. The entertainment giant bought Pixar, previously owned by Apple founder Steve Jobs, for $7.4 billion in 2006.

In June 2023, Iger made an appearance at Apple's annual Worldwide Developers Conference (WWDC) to announce a partnership that brought its streaming service Disney+ to Apple's Vision Pro mixed reality headset.

On the flipside, Epic Games has had an adversarial relationship with Apple and has even sued the iPhone maker over the business practices of Apple's App Store in 2020. Apple largely prevailed in the legal battle.

Earlier this month, Sweeney also criticised Apple's proposed changes to its App Store policies in the European Union to comply with the upcoming Digital Markets Act (DMA).