What just happened? Disney is making its largest-ever investment in the gaming space by taking a $1.5 billion equity stake in Epic Games. The deal will also see the creation of an "expansive and open games and entertainment universe" that will interoperate with Fortnite. Disney explained that consumers will be able to play, watch, shop and engage with content, characters, and stories from Disney, Pixar, Marvel, Star Wars, Avatar, and more.

Disney revealed the collaboration with Epic in the entertainment giant's Q1 FY24 Earnings Call. It said that this new experience will be built on Epic's Unreal Engine, and will let players "create their own stories and experiences, express their fandom in a distinctly Disney way, and share content with each other in ways that they love."

"Disney was one of the first companies to believe in the potential of bringing their worlds together with ours in Fortnite, and they use Unreal Engine across their portfolio," said Tim Sweeney, CEO and Founder, Epic Games. "Now we're collaborating on something entirely new to build a persistent, open and interoperable ecosystem that will bring together the Disney and Fortnite communities."

Epic is no stranger to these sorts of collaborations. The company received a $2 billion investment in 2022 from Sony and KIRKBI, the investment company operated by the Kirk Kristiansen family, which founded the Lego Group. It led to the launch of Lego Fortnite.

Disney has worked with Epic on Fortnite collaborations in the past, including several Marvel and Star Wars skins that appear in the game, and live events such as the Fortnite Nexus War. The new Disney experience, which is set to be a "multi-year project," will build on the companies' previous collaborative efforts and likely launch from within Fortnite, much like Lego Fortnite, Rocket Racing, and Fortnite Festival.

The Fortnite brand has come a long way since starting life as a PvE co-op game over a decade ago, expanding into the kind of genre-spanning metaverse that Mark Zuckerberg wishes he could imitate.

In separate Disney news, the company's Disney Plus streaming service lost around 1.3 million subscribers in the final quarter of 2023, falling from 112.6 million to 111.3 million. The decline came just as the service's ad-free tier went up from $10.99 per month to $13.99 per month.

The good news for the company was that it cut its streaming losses by $300 million, Hulu gained 1.2 million subs, and it expects between 5.5 and 6 million Disney Plus Core subscriber net additions in Q2 2024. It has also started cracking down on password sharers, threatening to limit or restrict the accounts of those who break the new rules.