Walt Disney Co. is investing $1.5 billion in Epic Games to create a "persistent universe," less than a year after shutting down its metaverse division. Disney announced that the multi-year project, pending regulatory approval, will interact with Epic's flagship game, Fortnite, creating a "universe of games and entertainment" for users. Epic Games founder and CEO Tim Sweeney spoke of creating a "sustainable, open, and interactive ecosystem," while Disney CEO Bob Iger called it "Disney's biggest foray into the gaming world." Epic's game engine, Unreal Engine, will power this universe, though details and launch date remain undisclosed.
This announcement followed the closure of Disney's metaverse division in March 2023, leading to about 50 layoffs as part of efforts to reduce operational expenses. Despite this, Disney was approved for a patent on a "virtual world simulator in a real-world venue" a year before the closure. Sweeney has long been optimistic about the metaverse, dismissing the idea of its "death" and citing 600 million active users per month across various metaverses.
However, four months after this statement, in September, Epic cut its staff by 16%, about 830 people, due to "unrealistic revenue expectations" inspired by the metaverse, leading to overspending. Previously, Epic collaborated on similar projects, receiving $2 billion from Sony and the LEGO Group holding company KIRKBI in April 2022 to create a metaverse, leading to the development of the open-world survival game LEGO Fortnite.
The partnership announcement coincided with Disney's first-quarter 2024 earnings report following a series of major box office hits and streaming failures last year. Disney's revenue for the quarter ending December 30, 2023, was $23.6 billion, barely beating analyst estimates. Disney also announced a dividend payment of 45 cents per share, a 50% increase from the last payout. Disney's stock price closed unchanged on the day of the announcement but rose nearly 7% to over $105 after market close.
