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Disney’s investment in Epic Games signals company has to ‘be there’

Games industry analyst Michael Pachter of Wedbush said Disney has failed several times to develop its own games internally.

In 2017, Epic Games was among a handful of companies selected to participate in Walt Disney’s Accelerator incubation program, where the gaming company’s founder had ambitions to bring the entertainment giant’s well-known characters to his digital playground. .

Now, Disney is making a much bigger bet that will make this possible.

Disney CEO Bob Iger on Wednesday announced a $1.5 billion investment aimed at allowing consumers to interact with stories and characters from Disney, Marvel, Pixar and Star Wars in Epic’s Fortnite, where 100 million are gathered. of players each month. It was a recognition of the amount of free time that Generation Alpha, Generation Z and millennials spend on games.

“In terms of their total screen time on video games, it was surprising to me: equal to what they spend on television and movies,” Iger said during a call with analysts and investors after reporting quarterly results. “And the conclusion I came to was that we have to be there. And we have to be there as soon as possible in a very compelling way.”

The company’s shares rose on Thursday, the day after its earnings report, gaining more than 10% in what would be its best day in more than three years. Analysts at Wolfe Capital said in a research note that Iger had “adapted to accelerated industry changes” since his return in late 2022.

Epic CEO Tim Sweeney had long envisioned Disney characters populating Fortnite’s digital playground, according to two former executives.

“Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite,” Sweeney said in a statement, adding that Disney uses Epic’s real-time 3D graphics creation tool, Unreal Engine. .

Other companies, such as Lego, have forged similar partnerships with Epic.

Games industry analyst Michael Pachter of Wedbush said Disney has failed several times to develop its own games internally.

It struggled to make money even with popular titles like “Disney Infinity,” he said, referring to a game that incorporated a vast collection of Disney characters, who would come to life in the game’s virtual toy box.

Since shifting to a licensing business model in 2016, nine Disney game franchises, including Spider-Man and Kingdom Hearts, have generated more than $1 billion in revenue, Disney said.

Pachter called Disney’s investment in Epic Games “a really smart strategic move” that is consistent with the company’s focus on expanding brand awareness and protecting brand integrity.

“I think Disney is recognizing … that we’re really good at brands and exploiting those brands,” Pachter said. “And Epic is really good at hooking consumers, getting them involved and having fun.”

First published: February 8, 2024 | 22:21 IS

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