Disney invests $1.5 billion in ‘Fortnite’ creator Epic Games, its ‘biggest foray into the games space ever’

The Walt Disney Co. has announced plans to make a $1.5 billion equity investment into Epic Games, which will give the entertainment giant an equity stake in the creator of the Fortnite video game.

Disney CEO Bob Iger, appearing on CNBC Wednesday afternoon, called the initiative Disney’s “biggest foray into the games space ever.” The plan is to create a new “games and entertainment universe” that will live alongside (and be interoperable) with Fortnite, and will include characters from major franchises, including Star Wars, Marvel, Pixar and the Avatar films.

“It’s not only timely, but an important step when you look at the demographic trends and look at where Gen Alpha and Gen Z and even millennials are spending their time in media. It’s pretty dramatic in terms of the amount of time spent in games; in fact some demographics are equal to or greater than how people are spending their time on movies and television.”

Iger did not give a timeline for the launch of the project, telling CNBC it would take “not years—well, maybe a couple years. We’ll see.”

A video introducing the concept only says the new lands are coming “soon(ish).”

Disney stock was up 7% on the news in after-hours trading, as well as an earnings beat by the company.

Epic Games founder and CEO Tim Sweeney, in a statement, expressed his enthusiasm for the partnership.

“Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite,” he said. “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.”

Fortnite continues to draw a phenomenally large audience of players. In December of 2023, it topped the monthly active user charts for both the PlayStation 5 and Xbox. Some 36% of active PS5 players and 31% of active Xbox Series players played Fortnite at least once during December. That’s a 5% bump on Sony’s platform and a 3% increase on Microsoft’s.

Disney recognizes that younger generations are spending more time in the video game world, said Iger, which was part of the impetus behind this investment in Epic.

“It’s critical for us to continue to stay relevant and create ways that consumers can interact the way they want to with our storytelling and our characters,” he said.

Disney has dipped its toes in the video game waters several times in the past, but previously pulled back, laying off staff and then licensing its IP out to other publishers. The investment in Epic Games, especially one as large as Wednesday’s announcement, indicates Disney could finally be willing to become a real player in that industry.

The move comes as Disney continues to be hounded by activist investor Nelson Peltz, who has threatened to launch a proxy fight against the entertainment giant after being denied a seat on the company’s board of directors.

Iger downplayed those efforts in his talk with CNBC, saying, “The last thing we need right now is to be distracted . . . by an activist or activists that frankly have a completely different agenda and don’t understand our company, its assets, or even the essence of the Disney brand.”

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