On February 7, The Walt Disney Company announced they were investing $1.5 billion in Epic Games as part of a multiyear project to create open games and an entertainment universe.  DFC expects this to be a core driver of one of the biggest new growth areas for the video game industry.


The $1.5 billion investment from Disney is the latest in a long line of companies investing in Epic.  China giant Tencent owns a 40% stake in Epic from a 2012 investment.  More recently in April 2022, Sony and KIRKBI (the holding company for the Lego Group) had each invested $1 billion in Epic for a 3% stake (through a previous investment Sony had acquired a 1.4% stake).

The Information reported that Disney’s investment gives them a 9% stake in Epic.  This would value Epic at $22.5 billion, down from the $31.5 billion valuation in April 2022.

Lego and Disney have been working on events and selling virtual items in Fortnite for awhile

However, the Disney investment is a more strategic investment designed to significantly grow Epic’s business.  It is a big win for the Unreal Engine as Disney will use the game engine in development of not only video games but animation for films and in Disney Park attractions.

More importantly, the main goal of the strategic investment is to create “an all-new games and entertainment universe that will further expand the reach of beloved Disney stories and experiences.”

This strategy ties right into what DFC Intelligence believes is a major growth opportunity in cloud games and the metaverse.

Cloud Game Market to Reach $27 Billion

In the recent DFC Intelligence forecasts, the global market for cloud games is expected to reach $27 billion by 2027.  However, unlike many observers DFC does not believe the majority of this growth will come from multi-game subscription services like Microsoft’s Game Pass or Amazon Luna.

DFC Intelligence forecasts that by 2027, 85% of cloud game revenue, or $23 billion, will come from add-on content and subscription to individual games.  In many cases these will be games that require a client download.

cloud games
This chart focuses on player spending. Advertising spending is also expected to be a major growth area

The Disney/Epic partnership is a perfect example of how this trend is likely to play out.  In terms of the IP involved, this partnership could be the biggest growth driver in the space.

Epic Events

DFC has been covering the growth of major events inside individual games for several years now.  These events can attract millions of participants who will spend money on virtual merchandise and other items.

For several years, Epic has been a leader at brand integration in video games via Fortnite.  The company also has a long history of working with Disney back to when Epic was selected to join the Disney Accelerator program in 2017.

For the 2018 launch of the Marvel movie Avengers: Infinity War, Disney did a tie-in promotion with Fortnite.  Players tried to collect six Infinity Stones to build the Infinity Gauntlet, a key feature of the movie.  The Infinity Gauntlet allowed Fortnite players to become supervillain Thanos for a period of time.

The 2020 Nexus War with Galactus event drew 15.3 million concurrent players

For the end of Fortnite Season 4 on December 1 2020, Disney and Epic combined for a huge world boss battle against Marvel villain Galactus.  Galactus had trillions of hit points and Fortnite players around the world teamed up to take him down in what was termed the largest boss battle in video game history.

At 15.3 million concurrent players the Galactus battle was a record for a Fortnite event beating the 12.3 million concurrent attendees for the virtual Travis Scott concert earlier in the year.  Another 3.4 million viewers watched the Galactus event on Twitch or YouTube.

Obviously, Disney is pleased with results.  These type of promotions were a major driver behind a larger Epic investment.  More importantly it is a strong indicator that large scale events and promotions in video games have tremendous potential.

Lego Fortnite launched in December 2023 with new events and products rolling out throughout 2024

Lego is another key investor in Epic and in December they launched Lego Fortnite.  Lego Fortnite is a special Fortnite world where users can build with Lego blocks and characters.  Once again this is powered by the Unreal Engine

Fortnite is Just the Start

Of course, not all games have the audience of Fortnite and not all brands have the strength of Disney/Marvel/Star Wars or Lego.  Fortnite is a leader in large scale events and the Disney and Lego investments are a big IP win for Epic.  However, the growth of cloud delivery, generative AI technology, and growing awareness of the potential will allow similar promotions to work across many products both small and large.

Right now, along with Fortnite, Roblox and Minecraft are two of the biggest games for metaverse style events and promotions.  Last year DFC did an interview with Moonrock Labs a company that specializes in helping brands do promotions in these games.

The idea that games can be supported by advertising has been around for years but has limited success.  Now large brands are seeing identifiable results and a high ROI.  As these integrations grow more sophisticated, they will increasingly be able to be applied to smaller scale games and brands.

The big news is that investment in this space continues at a high rate, even as the metaverse term seems to have lost some appeal.  Many observers harped on the fact that Facebook parent Meta announced a $4.65 billion loss in the recent quarter for its metaverse focused Reality Labs division.  However, investors were not concerned.  After reporting that loss, Meta had the biggest one-day stock market gain in Wall Street history.