Why Disney’s $1.5 Billion Stake In Epic Games Is A Smart Play

Forbes

The media giant’s hot drop into the realm of Fortnite could be a game-changer for the metaverse, movies and theme parks. It’s an IP world, after all.  After returning to his position as Disney CEO in late 2022, Bob Iger held a meeting with two top executives to talk about video games. It’s a sector the company had mostly avoided since 2016, when it shut down the Disney Interactive Studios division that was, at one point, losing some $200 million per year. But Iger’s aides came armed with demographics and other statistical trends showing that gaming had become too popular to ignore.  Read the full story on Forbes: https://www.forbes.com/sites/mattcraig/2024/02/11/why-disneys-15-billion-stake-in-epic-games-is-a-smart-play/?sh=3f65ffcf2f7c  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Here's your Forbes Daily Briefing for Monday, February 19th.

00:05 Today on Forbes, why Disney's $1.5 billion stake in Epic Games is a smart play.

00:14 After returning to his position as Disney CEO in late 2022, Bob Iger held a meeting

00:19 with two top executives to talk about video games.

00:23 It's a sector the company had mostly avoided since 2016, when it shut down the Disney Interactive

00:28 Studios division that was, at one point, losing some $200 million per year.

00:34 But Iger's aides came armed with demographics and other statistical trends showing that

00:38 gaming had become too popular to ignore.

00:42 On Disney's earnings call on February 7th, Iger said, "When I saw Gen Z and Gen Alpha

00:48 and even Millennials, and I saw the amount of time they were spending in terms of their

00:52 total media screen time on video games, it was stunning to me.

00:56 Equal to what they spend on TV and movies.

00:59 And the conclusion I reached was, we have to be there, and we have to be there as soon

01:03 as we possibly can, in a very compelling way."

01:07 That same day, Disney announced its big move.

01:10 The company would invest $1.5 billion into Fortnite developer Epic Games in exchange

01:16 for a small equity stake in the company and the promise of building out digital worlds

01:21 based on the company's intellectual property.

01:24 The terms of the deal were not made public, but the outlet The Information reports the

01:28 valuation of Epic dropped to $22.5 billion, down significantly from its peak of $31.5

01:35 billion in early 2022.

01:38 After the announcement, which was coupled with news of a new sports television venture

01:42 involving ESPN, Fox, and Warner Bros., Disney's stock rose by 11%.

01:48 Jason Chapman, founder and managing partner of the gaming investment firm Convoy Ventures,

01:54 says, "They are the kings of passive entertainment, and they're very good at parts, but they've

01:59 been less successful with interactive.

02:02 These worlds, if done successfully, could produce a heck of a lot more reusable entertainment

02:07 and engagement and monetization mechanics than a movie.

02:10 So I think it's probably a really good investment for Disney, which desperately needs to figure

02:15 this out because its audience is aging."

02:19 The relevance of Fortnite, a battle royale-style game that has 70 million active monthly users,

02:25 has been buffeted in recent years by collaborations with IP owners across pop culture.

02:30 Players can create in-game character, so-called "skins," out of sports stars, rappers, and

02:35 fictional characters, including from Disney's Marvel and Star Wars extended universes.

02:41 That licensing is likely to continue, and one could see how the IP could flow the other

02:45 direction into a Fortnite cinematic universe or a TV series in the future.

02:50 The new partnership, however, suggests much more than an IP exchange.

02:55 Epic Games CEO Tim Sweeney, estimated to be worth $4.1 billion, said in a statement the

03:01 plan is to "build a persistent, open, and interoperable ecosystem that will bring together

03:07 the Disney and Fortnite communities."

03:10 While Iger's public comments strategically avoided the buzzword "metaverse," his vision

03:15 of a "new persistent universe" in which people can "play, watch, shop, and engage" sounds

03:22 familiar.

03:23 His goal to build a "gigantic Disney World a la Fortnite" that could live next to Fortnite

03:28 and be completely interconnected with it is an enticing dream, but one that's not yet

03:33 technologically feasible.

03:36 Rather than develop a digital Disney World, the two companies could collaborate on multiple

03:40 game maps for some of Disney's signature properties.

03:43 They could, for instance, make a Pirates of the Caribbean map, or Toy Story map, and so

03:48 on, interconnected only in the sense that each can be selected by players from a shared

03:53 Fortnite menu.

03:54 But building each of these projects is labor-intensive and would require additional investments from

03:59 Disney to Epic, and also, likely, other third-party developers.

04:05 For full coverage, check out Matt Craig's piece on Forbes.com.

04:09 This is Kieran Meadows from Forbes.

04:12 Thanks for tuning in.

04:13 [music]

Category

Transcript

Recommended