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[Author's Note: I am taking a personal day, so this is a shorter essay.]
Disney now finds itself confronting two challenges to its tightly held control over its celebrated library of valuable intellectual property. The first may be a nuisance, at best: Mickey Mouse— specifically, Walt Disney’s 1928 “Steamboat Willie” version—is now in the public domain. People can creatively reuse only that version but in a way that misleads consumers into thinking the work is produced or sponsored by Disney (e.g., they may only refer to any work with “Mickey”). They cannot do anything with the more pear-shaped, 3-D version that people around the world have come to know and love.
The second is a bit trickier: It is opening the door to user-generated content with Disney IP with its recent partnership and $1.5 billion equity stake in Epic Games. The agreement will create a “ new persistent universe” powered by Unreal Engine where “players, gamers and fans will be able to 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. The experience will be interoperating with Fortnite. A map of the proposed experience shown at the end of a teaser video released with the announcement looked “like a theme park” to some observers.
Both outcomes seem to circumvent the internal corporate bureaucracy that previously killed bets on Maker Studios ($675 million) and its Disney Interactive division. But whereas Disney now has less creative control over “Steamboat Willie” Mickey, it still has control over its IP within the Unreal Engine… to an extent. We know very little about what the final product will look like, or how the partnership will work.
What will users pay for?
Key Takeaway
In some ways, "Steamboat Willie" Mickey in the public domain suggests there is a better business case to put Disney IP in the hands of its fans—as Generative AI inevitably will do—than to bet on fans making purchases within a virtual theme park.
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If the past is precedent, there is reason to believe that this execution will not be smooth sailing. As CNBC reported back in 2016:
“Stakeholders in various divisions have often been unwilling to trust game developers with the properties or characters and, in turn, have micromanaged the game-making process or insisted on last-minute changes, unaware of the time those demands required. That, in turn stretched development times (raising costs) and often resulted in a less-than-optimal title.”
That does not change overnight, and Disney’s investment in Epic will give it an estimated 7% stake in the company, according to The Information. So, it will have more than a creative say in how its IP will be used within Unreal Engine and Fortnite. But, Epic founder Tim Sweeney is the controlling shareholder and is unlikely to cede control. It is not clear how Disney’s approach to micro-management of games will change once it is an investor but not the actual developer.
But, what will be the business model?
The fascinating aspect to the fair use cases of “Steamboat Willie” Mickey is that the IP will be monetized in infinite ways—both foreseeable (videos) and unforeseeable—once it is in the hands of millions of creators. With generative AI, there will be infinitely more use cases. There is similar, back-of-the-napkin math of some percentage of around 500 million registered users of Fortnite engaging with all of Disney’s library of IP. But, that all starts with a value proposition that consumers will want to engage with and spend money on.
Maybe that is a virtual Disney theme park. As Disney’s Bob Chapek told The Los Angeles Times back in September 2022: “Ninety percent of our consumers around the world will never have a chance to experience our Disney parks.” The objective would be “to give people the ability to experience digitally, something that’s akin to a physical experience that they necessarily can’t be at that place in that time”, as Chapek told Deadline.
That sounds compelling, but it has yet to be built. The "new persistent universe" being built with Epic Games may indeed be that. That model may be a theme park admissions model or a mix in-app purchases and "passes" for earning exclusive rewards through gameplay progression. Or it could look like Lego Fortnite, though likely without the "survival" aspect to the game:
Players are given a large, procedurally generated map to explore — Epic says that it’s 19 times larger than the battle royale island, which just got a refresh — and you can play in a creative mode, where you build whatever you like, or a survival mode, where skeletons, wolves, and other baddies come out, and you also have to worry about things like hunger and deal with
Unlike the fair use cases of “Steamboat Willie” Mickey, (in)famously risk-averse Disney management will have a say in what is built with Epic. Epic will, too: It recently blocked some outfits from child-friendly experiences, and then reversed the decisions. For this reason, there will be fewer avenues to monetize IP within the Epic Games ecosystem than for "Steamboat Willie" Mickey because only Epic game engineers and Disney executives will imagining those outcomes.
Creators FTW
More opportunities for fans to create delight on their own terms will keep the brand relevant. That is one part of the rationale of the partnership in Epic. In some ways, "Steamboat Willie" Mickey in the public domain suggests there is a better business case to put Disney IP in the hands of its fans (with more parameters than "Steamboat Willie" Mickey will have) and figuring out the business model than to bet on fans making purchases within a virtual theme park.
Epic will enable some of that. The Verge reported, "Epic-developed games inside of Fortnite — Lego included — is that they will also eventually trickle down to creators, thus expanding the game’s overall ecosystem."
But can Disney be open to those outcomes? It should be, but it likely will not be.