Disney’s $1.5B stake in Epic smells a lot like another metaverse play

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Walt Disney Co. is buying a $1.5 billion fairness stake in Epic Video games to construct what it’s calling a “persistent universe” — lower than a 12 months after shuttering its metaverse division.

In a Feb. 7 statement, Disney stated the multiyear undertaking — topic to regulatory approval — can be a recreation expertise that interoperates with Epic’s flagship game Fortnite. The undertaking will likely be a “video games and leisure universe,” permitting customers to “play, watch, store and have interaction with content material, characters and tales” from Disney’s belongings.

Epic Games founder and CEO Tim Sweeney stated the 2 will “construct a persistent, open and interoperable ecosystem,” whereas Disney CEO Bob Iger stated it “marks Disney’s largest entry ever into the world of video games.”

Disney added that “gamers, players, and followers will have the ability to create their very own tales and experiences.” Epic’s recreation engine, Unreal Engine, will energy the so-called universe, however no particulars have been shared on a launch date for the metaverse-like undertaking.

Disney’s transfer comes lower than a 12 months after it razed its metaverse division in March 2023, slicing round 50 workers in a bid to slash working bills. A 12 months earlier than that, it was approved for a patent for a “virtual-world simulator in a real-world venue.”

Epic’s Sweeney has lengthy been bullish on the metaverse and has poked fun at the notion that the “metaverse is lifeless,” citing the 600 million month-to-month energetic customers throughout a number of metaverses in Might final 12 months.

Nonetheless, 4 months later in September, Epic slashed its headcount by 16% — round 830 workers — saying unrealistic expectations of metaverse-inspired income induced it to spend “far more” cash than it might afford.

Epic has collaborated on related tasks earlier than. In April 2022, it got $2 billion from Sony and LEGO Group holding firm KIRKBI to construct a metaverse — which eventuated into the open-world survival recreation LEGO Fortnite.

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The partnership announcement comes on the identical day as Disney’s first-quarter 2024 earnings after a sequence of huge field workplace and streaming flops final 12 months.

Disney pulled in $23.6 billion in income for the quarter ending Dec. 30, 2023, narrowly beating estimates by Wall Road analysts at Zacks. Nonetheless, its income development remained flat because it posted $23.5 billion for a similar quarter a 12 months in the past.

Disney stated it could pay a dividend of 45 cents a share, a 50% enhance in comparison with its final paid in January. Its share value closed flat on the day at round $99 however jumped practically 7% to over $105 in after-hours buying and selling on Feb. 7, per Google Finance.

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