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Disney's Commitment To Epic Games Indicates That The Business Must "Be There"

Disney's Commitment To Epic Games Indicates That The Business Must "Be There"
Among a small group of businesses chosen to take part in Walt Disney's Accelerator incubator programme in 2017, Epic Games' founder hoped to integrate the popular characters from the entertainment conglomerate into his virtual playground.
Disney is now placing a far larger wager that will enable this.
On Wednesday, Disney CEO Bob Iger revealed a $1.5 billion investment intended to enable users to engage with narratives and characters from Disney, Marvel, Pixar, and Star Wars on Epic's Fortnite, a game that attracts 100 million players every month. It was a recognition of the amount of free time that millennials, Generation Z, and Generation Alpha spend gaming.
"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 during a call with analysts and investors after reporting quarterly results. "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."
The day following the company's earnings release, on Thursday, shares of the stock shot up, rising over 13% in what would be their biggest day in over three years.
"Gaming is becoming a critical part of the entertainment world, particularly for the younger demo, and this positions Disney to play some catch-up in this important area," said Douglas Arthur of Huber Research Partners.
According to two former executives, Epic CEO Tim Sweeney had long dreamed of Disney characters filling Fortnite's virtual playground.
Walt Disney employs Epic's real-time 3D graphics development engine, Unreal Engine, according to a statement released by Sweeney. "Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite,"
Similar alliances have been formed between Epic and other businesses like Lego.
Wedbush's Michael Pachter, an industry analyst for the video game business, claimed that Disney had repeatedly failed to create its own games internally. Even with well-known games like "Disney Infinity," which included a vast cast of Disney characters that would come to life in the virtual toy box version of the game, he claimed it struggled to turn a profit.
Nine Disney gaming properties, including Spider-Man and Kingdom Hearts, have brought in more than $1 billion in income since the company switched to a licencing business model in 2016, according to Disney.
Disney's purchase in Epic Games, according to Pachter, is "a really smart strategic" move that is in line with the business's strategy of raising brand recognition and preserving brand integrity.
"Disney, I think, is acknowledging ... we are really good at brands and exploitation of those brands," said Pachter. "And Epic is really good at hooking consumers and getting them engaged and having fun."

Christopher J. Mitchell

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