The media giant’s significant entry into the world of Fortnite could potentially revolutionize the metaverse, movies, and theme parks. Considering everything, it’s a world of intellectual property, after all.
By Matt Craig, Forbes Staff
After assuming his role as Disney CEO again in late 2022, Bob Iger convened a meeting with two top company executives to discuss video games. It’s a field the company had mostly shunned since 2016, when it closed the Disney Interactive Studios division that was experiencing annual losses of around $200 million. However, Iger’s associates arrived with demographic data and other statistics indicating that gaming had become too popular to overlook.
“When I saw Gen Z and Gen Alpha and even millennials, and I saw the amount of time they were spending in terms of their total media screen time on video games, it was stunning to me, equal to what they spend on TV and movies,” Iger said on Disney’s earnings call on February 7. “And the conclusion I reached was we have to be there, and we have to be there as soon as we possibly can, in a very compelling way.”
That same day, Disney revealed its substantial move—the company would allocate $1.5 billion to Epic Games, the developer of Fortnite, in exchange for a small ownership stake and the commitment to develop digital worlds based on the company’s intellectual property. The specifics of the deal were not disclosed, but The Information reports the valuation of Epic declined to $22.5 billion, down significantly from its peak of $31.5 billion in early 2022. Following the announcement, coupled with news of a new sports television venture involving ESPN, Fox and Warner Bros., Disney’s stock surged by 11%.
“They are the kings of passive entertainment, and they’re very good at parks, but they’ve been less successful with interactive,” says Jason Chapman, founder and managing partner of gaming investment firm Konvoy Ventures. “These worlds, if done successfully, could produce a heck of a lot more reusable entertainment and engagement and monetization mechanics than a movie. So I think it’s probably a really good investment for Disney, which desperately needs to figure this out because its audience is aging.”
The significance of Fortnite—a battle royal-style game with 70 million active monthly users—has been bolstered in recent years by collaborations with IP owners across pop culture. Players can create in-game character “skins” from sports stars, rappers, and fictional characters, including from Disney’s Marvel and Star Wars extended universes. That licensing is likely to continue, and one could envision how the intellectual property could transition the other way into a Fortnite cinematic universe or a TV series in the future.
However, the new partnership suggests much more than an intellectual property exchange. Epic Games CEO Tim Sweeney, estimated to be worth $4.1 billion, announced that the plan is to “construct a persistent, open and interoperable ecosystem that will bring together the Disney and Fortnite communities.” While Iger’s public comments tactfully sidestepped the buzzword “metaverse,” his vision of a “new persistent universe,” in which people can “play, watch, shop and engage,” sounds familiar. His ambition to create a “gigantic Disney World a la Fortnite that could exist alongside Fortnite and be entirely interconnected with it” is an appealing dream, but one that’s not yet technologically feasible.
A more tangible outcome in the short term is something similar to Lego Fortnite, a game experience that Epic published on the Fortnite Creative marketplace in collaboration with Lego Group, whose parent company Kirkbi invested $1 billion into Epic in April 2022. The Lego “map”—as Epic calls new game builds—was a huge hit when it was released in December, peaking at more than 2.4 million concurrent players. However, sustaining high player counts has proven far more difficult on the platform, where popularity changes as quickly as a viral trend on TikTok. One month after release, Lego Fortnite was averaging around 100,000 players. This week, some two months after launch, that average is closer to 40,000, still among the 10 most popular games on the service but a fraction of what Fortnite’s core Battle Royale modes achieve at any given time.
Instead of creating a digital Disney World, the two companies could join forces on multiple game maps for some of Disney’s renowned properties. For example, it could produce a Pirates of the Caribbean map, a Toy Story map and so on, linked only in the sense that players can select each from a shared Fortnite menu. But development for each of these projects is labor intensive and would require additional investments from Disney to Epic and also, likely, other third-party developers. After all, a single game can take many months to develop. Lego Fortnite, for example, launched more than a year and a half after the announcement of Kirkbi’s investment.
Chapman says it’s unlikely that any Disney entertainment experiences on Fortnite could be launched before mid-2025, and considering how young the in-game monetization tools still are, he predicts it will be years after that before the company sees any significant return on investment.
Meanwhile, the massive financial boost allows Epic to continue pursuing its metaverse aspirations. The company laid off more than 800 employees in September while transitioning FortniteFortnite-sized hit happens on its platform, regardless of whether it’s designed by Epic, by everyday gamers, or now, by Disney.
“Our ultimate ambition remains the same, that it is to build a digital ecosystem that is metaverse scaled,” Sax Persson, Epic’s executive vice president of the Fortnite Ecosystem, told Forbes in November. “And Fortnite is the logical place for us to start, but it is to build to a billion people. It’s not to stay with a Fortnite size. It’s to get much, much bigger.”
The challenge Fortnite has not yet solved is how to shed its reputation as a shoot-em-up battle royale. Maps like Lego Fortnite or Rocket Racing, another IP-based collaboration that debuted to big numbers in December only to settle below 20,000 players this month, prove the ongoing difficulty in sustaining different genres, especially those without guns. Epic’s ultimate success in this metaverse arms race with other platforms such as Roblox and Minecraft may well depend on whether Disney’s lineup of beloved characters and millions of fans across the world can break the mold.
“Epic as a company today is way overexposed in risk to Fortnite,” Chapman says. “It’s just one game, and there’s so few games that last that long…I think they’re scared, they should be scared, because the 8-year olds of today aren’t going to find the Fortnite IP interesting in six years. This is the best bet Epic has at de-risking itself from its current offering, and it gets to do it with a group that has dominated IP content for the last century.”