Disney has a plan for winning over younger generations: video games

Disney is looking to capitalize on the love that younger generations have for video games with its newly-announced Epic Games deal.

The entertainment giant has found millennials, Generation Z and Generation Alpha tend to spend a "significant amount" of their screen time on playing video games, CEO Bob Iger said on Wednesday evening’s earnings call. 

That trend, he said, made him conclude Disney has "to be there as soon as we possibly can in a very compelling way" and ultimately closed the deal with the video game developer behind the wildly-popular "Fortnite."

As part of the collaboration, they will build an "entertainment universe" that interoperates with "Fortnite." It will "offer a multitude of opportunities for consumers to play, watch, shop and engage with content, characters and stories" from Disney and its brands like Pixar, Marvel, Star Wars and Avatar, the companies said.

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Overall, the "universe" will give Disney a "tremendous opportunity to not only meet more consumers where they are, but to allow more audiences to cultivate a bond with Disney’s iconic brands and franchises," Iger told analysts and investors. 

The entertainment giant is buying a stake in Epic Games worth $1.5 billion too. 

"Just as we take our IP from our movies and our television and have them expressed in our parks, this is a great way to do it in games," Disney’s CEO also said. "And for us, it’s a way to have skin in the game with them with the investment of $1.5 billion, strengthen the partnership because we have skin in the game, but also build a world where we’re actually not creating too much risk for the company."

Ticker	Security	Last	Change	Change %
DIS	THE WALT DISNEY CO.	113.54	-1.54	-1.34%

The new Epic Games deal drew commentary from analysts, with TD Cowen’s Doug Creutz calling the deal "intriguing" in a research note.

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"Given Epic’s trailer listing the experience as coming ‘soon(ish),’ we suspect it could arrive as soon as late 2024, and very likely by 2025. This approach is consistent with Disney’s strategy of licensing its IP to top game development companies rather than trying to do it in-house (or spending lots of money on gaming M&A)," he also said.

The companies simply described the project as "multiyear."

Disney has pursued video games "in a number of different directions," with the strategy of licensing bringing it the most success, according to Iger. The pivot to that strategy occurred about eight years ago.

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It also has previously teamed up with Epic Games by utilizing its technology for video games, animation and theme park attraction development, Disney said Wednesday. Some of its characters and IP have appeared in "Fortnite" in various ways in the past.

The "Fortnite" video game first became available in 2017. Since then, it has grown to have over 350 million accounts and over 100 million active players.