While the discussion about the Metaverse has been centered recently around augmented & virtual reality devices thanks to the Apple Vision Pro launch, it shouldn’t be forgotten that the Metaverse is first and foremost a virtual world where we’ll spend in the future much of our online time to socialize, work and have fun.
The recently announced partnership between media giant Disney and Epic Games (which owns Fortnite) to create an “expansive and open games and entertainment universe” brings new blood to this notion of virtual world. As Disney already had a relationship with Epic to bring its Marvel and Star Wars characters to Fortnite and has already licensed many of its intellectual properties to other studios including Electronic Arts, the deal with Epic clearly transcends gaming.
And indeed, the companies make no secret that they aim to build “a new persistent universe that will offer a multitude of opportunities for consumers to play, watch, shop and engage with content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and more”. It’s then likely that Disney and Epic will come up at some point with a virtual world that interoperates with Fortnite and where users have the ability to hop from one “land” to another.
Confirming this view, both companies showed an illustration (pictured above) of this contemplated persistent universe that looks exactly like a physical theme park and matches our vision of the Metaverse: a multitude of thematic virtual worlds or lands connected to each other and in 3D environments.
It’s not the first time Disney dips its toes in virtual worlds as the company initially tried to develop its own Metaverse in 2022 to shut it down one year later. Disney’s new approach, which consists in bringing its IP to a pre-existing Metaverse platform (Fortnite), makes sense in our view as it allows to accelerate go-to-market (building a 3D world from scratch takes time) and gain access to a top-notch IT infrastructure, design tools and an already large active user base (tens of millions of users) while managing costs.
Disney is actually following in the footsteps of Lego which has also opened its own land in Fortnite. Overall, the trend of setting shop an existing virtual world instead of trying to build proprietary Metaverses is likely to gain steam and to benefit only a handful of gaming companies, whose strategic value is set to rise. We are notably thinking of Epic, obviously, in which Disney just invested $1.5 billion, and Roblox, which has already attracted on its platform a large number of brands.
Future monetization of these platforms will take various forms in our view, including commissions on payments, advertising (something Roblox is already working on) and revenue derived from design software and infrastructure usage.
Interestingly, these developments come at a time when the post-Covid slowdown is now over, with Roblox reporting Q4 daily active users up 22% to71.5 million, bookings growth accelerating to 25% and EBITDA coming in 38% ahead of expectations. The company also guided to 20% bookings growth through 2027 with 100-300bps of EBITDA margin expansion annually.
In conclusion, even if the Metaverse might not be the buzzword it was two or three years ago, it’s very well alive. Massive brands (Disney, Lego) are now deciding to go ahead with their virtual words with a more efficient and disciplined approach and a couple of gaming companies are expected to become the platforms of choice as they have taken the lead thanks to their proficiency in building 3D worlds.
