Epic Games, the leading private video game publisher based in Cary, has not always made a secret of its valuation.

When the company raised $1.78 billion in the summer of 2020, it announced its new valuation of $17.3 billion. The next year, Epic secured another billion dollars and announced it was then worth $28.7 billion. And in April 2022, Epic celebrated a valuation of $31.5 billion after receiving investments from Sony and Lego’s parent company.

At the time, Epic was one of the most valuable private companies in the world. This three-decade-long rise was fueled by industry successes Unreal and the Unreal Engine, Gears of War, and the 2017 blockbuster Fortnite, which reached 100 million users in November.

But after receiving a large investment last week, the Triangle-based company is keeping quiet about its value.

On February 7, Disney announced that it would acquire a $1.5 billion stake in Epic, with the goal of combining the two companies’ intellectual property and technologies in a virtual “persistent universe.” When asked how the two companies value Epic, company spokeswoman Elka Looks replied in an email: “We do not disclose that.” A Disney spokesperson also declined to comment.

In an article published a day after the partnership was announced, The Information quoted “a person familiar with the matter” as saying both sides valued Epic at $22.5 billion, a 28.5 percent drop from two years ago. Both Epic and Disney told The News & Observer they would not comment on the report.

If true, the $22.5 billion valuation is still higher than Epic’s 2020 valuation. And even now, Epic is worth significantly more than it was 12 years ago, when Chinese technology company Tencent acquired about 40% of the company for $330 million.

A decline of almost 30% in less than 24 months is stark, albeit understandable, said Joost van Dreunen, a professor at New York University and author of the 2020 book “One Up: Creativity, Competition, and the Global Business of Video Games.”

“The enthusiasm at the height of the pandemic has since waned somewhat,” he said. “It is now a sobering market that is less focused on growth and more focused on profit and value creation.”

What Epic and Disney see in each other

Last fall, Epic Games laid off about 16 percent of its workforce — more than 800 employees, including 170 in the Triangle region. The high costs of building a metaverse, a shared virtual space where users can play games, shop, attend concerts and more, contributed to those cuts, said CEO and co-founder Tim Sweeney.

As Epic looks to evolve Fortnite from a game into a more comprehensive experience, van Dreunen says a collaboration with Disney – which owns Marvel, Pixar and Star Wars – could put the younger Cary-based company in a better position for longer-term success.

“The difficult thing about the online gaming world is acquiring and retaining users,” he said. “A strong brand like Disney strengthens Fortnite and Epic Games. It signals quality in the digital entertainment space.”

This isn’t the first collaboration between Epic and Disney. Disney has previously invested in Epic on a smaller scale, and Fortnite players have been able to purchase Marvel outfits, known as skins in the game. In 2022, the companies also released a Marvel-Fortnite comic crossover.

Van Dreunen explained what Disney wants to achieve with the partnership, with a view to Fortnite’s main target group.

“The collaboration between traditional media like Disney and this novel, immersive Fortnite experience goes a long way in reaching the younger audience in particular that traditional media is desperately seeking across the board,” he said.

In a statement last week, Disney CEO Bob Iger called the investment “Disney’s biggest entry into gaming ever.”

Who owns Epic shares now?

Once the Disney deal is finalized (it still needs regulatory approval), Sweeney will remain the company’s majority shareholder, but Epic declined to say what percentage he will own.

Other shareholders are:

• Mark Rein, Epic’s other co-founder, owned 4% of the company in 2021, according to Forbes. Rein is currently a vice president at Epic.

• After its last investment in 2022, Sony owned around 5% of the company. Kirkbi, Lego’s parent company, invested $1 billion at the same time.

• According to The Information’s report, Disney will own a 9% stake in Epic.

• Other Epic investors in recent years include T. Rowe Price, Fidelity, the Ontario Teachers’ Pension Plan Board, BlackRock managed funds and Carolina Panthers owner David Tepper.

The largest investor, however, is the Chinese technology company Tencent. In 2012, it acquired a minority stake in Epic, which at the time was reportedly 40 percent of the company.

NC Reality Check is an N&O series that holds the powerful to account and highlights public issues affecting the Triangle or North Carolina. Have a suggestion for a future story? Email [email protected]

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