Disney's $1.5 Billion Epic Games Deal Meets a Complicated Reality After Mass Layoffs

Mar 24, 2026 in "The Walt Disney Company"

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Disney and Epic Games Universe Connected to Fortnite

Posted: Tuesday March 24, 2026 1:45pm ET by WDWMAGIC Staff

Epic Games CEO Tim Sweeney has sent a memo to employees confirming layoffs of more than 1,000 people, citing a significant drop in Fortnite engagement and a company spending "significantly more than we're making." The news puts fresh scrutiny on Disney's $1.5 billion investment in Epic - a deal that new Disney CEO Josh D'Amaro has publicly described as a "landmark platform partnership."

Disney and Epic Games Universe Connected to Fortnite

The memo

Fortnite's downturn began in 2025, and despite the game remaining one of the most commercially successful titles in the world, Epic hasn't been able to generate consistent momentum season over season.

The layoffs come alongside more than $500 million in identified cost savings across contracting, marketing, and open roles. Sweeney says the cuts put Epic "in a more stable place."

He pointed to a mix of industry-wide and Epic-specific challenges:

Slower growth, weaker consumer spending, and tougher cost economics across the games industry
Current-generation consoles selling below last-generation pace
Games competing for time against other forms of entertainment
Inconsistent Fortnite seasonal content
Fortnite's mobile presence still in early recovery stages

Sweeney also noted Epic is still in the early stages of recouping its investment in being what he called "the industry's vanguard."

"I should note that the layoffs aren't related to AI," Sweeney wrote. "To the extent it improves productivity, we want to have as many awesome developers developing great content and tech as we can."

What Epic says comes next

Despite the cuts, Sweeney framed this as a reset rather than a retreat. The roadmap, per the memo:

Fresh Fortnite seasonal content, gameplay, story, and live events
Accelerated developer tools as Epic transitions from Unreal Engine 5 and UEFN toward Unreal Engine 6
"Huge launch plans towards the end of the year" described as the start of the next generation of Epic

Sweeney drew parallels to past upheavals the company has survived -- the move from 2D to 3D in the 1990s, console development in the 2000s, and the shift to online gaming in 2012.

Affected employees will receive a severance package including at least four months of base pay, extended based on tenure, along with six months of Epic-paid healthcare coverage in the U.S., accelerated stock option vesting through January 2027, and an extended equity exercise window of up to two years.

Disney's $1.5 billion question

Disney committed $1.5 billion for an equity stake in Epic in February 2024, with the goal of building a persistent games and entertainment universe spanning Disney, Pixar, Marvel, Star Wars, Avatar, and more - all interoperating with Fortnite.

At the time, then-Chairman of Disney Experiences Josh D'Amaro called it "a monumental step in reaching consumers directly." Now CEO of The Walt Disney Company, D'Amaro's official bio singles out the Epic partnership as a defining achievement - describing it as a deal that "will redefine how fans play, create, and connect with Disney stories."

Today's news complicates that picture. Epic has cut more than 1,000 jobs and its own CEO has acknowledged Fortnite has been struggling since 2025.

To be fair, Disney's investment was always a long-term play. The persistent universe Epic described in 2024 is still in development, and Unreal Engine 6 - central to Epic's recovery plan - could eventually underpin it. But Disney shareholders and fans following the partnership closely will be watching for any indication of how the project is progressing amid Epic's financial reset.

A complicated start for D'Amaro

D'Amaro's early weeks as CEO have coincided with turbulence on two fronts he has no control over. The Abu Dhabi theme park resort - announced in May 2025 as Disney's seventh theme park destination and its first in the Middle East - now sits in a region under significant strain. The UAE has faced hundreds of missile and drone attacks from Iran since the outbreak of conflict between the US, Israel, and Iran earlier this year. Disney has made no public statement on the status of the Abu Dhabi project.

The Epic situation adds a second layer of uncertainty. Neither challenge reflects on D'Amaro's leadership directly - both are external circumstances that landed on his desk within days of taking the top job. But they do illustrate the complexity of the strategic bets Disney has made, and how quickly outside forces can change the picture.

Discuss on the Forums

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Pizza Moon25 days ago

Yeah if anything Disney seems to be moving towards less rigid control particularly for gaming, but even their films seem to be moving away from total HR approval to release, which is good, we’ll see by now much tho for their movies, but gaming they’ve already started shifting to where our culture actually is, and it’s a lot less Puritan than Disney’s output would have people believe. People, kids teens, adults just want to have fun in quality ways that feel naturally human without being talked down to or making ugly character designs, so Fortnite’s skins, combat, language-use during online play or with friends, and vibes in general is where our culture has been for ages. You can tell exactly how Kpop met the moment while a movie like Turning Red does not for this reason. Moving away from their vault limited Blu-ray release strategy, Deadpool in the MCU, and R-rated/TV-MA content on Disney+ were not always inevitable, always required a culture shift at Disney. They were always the right move, but it took courage to actually do it.

Mr. Engagement25 days ago

I don't know, they allow Disney characters to shoot, bomb, and sword fight in Fortnite. This week, Buzz Lightyear and Zurg skins are in the shop. I think they're relaxing their grip on what their characters are allowed to do in games. Also, Disney is trying to figure out (and monetize, of course) user-generated content. They're already incorporating user-generated games/lands/worlds built using Fortnite's Creator Portal for users and Unreal Fortnite Editor for game devs.

tanc25 days ago

They had a perfectly good old engine but abandoned it for UE. It’s really unfortunate because the old PS2 ran the games absolutely beautifully on PS4. The old engine really shined in HD. I just wish they churned out content faster. You don’t need state of the art graphics for KH, but that’s gaming nowadays. I also imagine Disney is a huge influence. Back then, the games felt a lot more free in expression. Now they are essentially rewatching Disney films, whereas before they took a lot of liberties in the stories. Birth by Sleep and KH1 have some cool tie ins that probably would never happen in modern KH.

Mr. Engagement25 days ago

Since Kingdom Hearts 3 was built using Epic's Unreal Engine (and the upcoming 4 is, too), I'd imagine Disney's buy-in could speed up development. I think we may see KH actually move into Fortnite. Not just a Sora skin, but literally as a game mode.

Pizza Moon25 days ago

AI will help with that. So much of the gaming industry is just tedious work that can be automated. Will help with bloated budgets too. Gonna be fun to see.

tanc25 days ago

I’m a massive Kingdom Hearts fan and I think the saddest thing is how long those games are taking to make now. Waiting 10 years for 1 game is just getting ridiculous at this point. There’s many variables to it but the first 10 years for the series were such a peak time.

VJ28 days ago

the relevant portion of the article: The company is pinning a resurgence on games it’s been developing with Walt Disney Co., which agreed to invest $1.5 billion in Epic two years ago. Epic is on track to launch the first game in its new Disney partnership in November, according to four current and former employees. It will be a shooting game along the lines of Embark Studios’ hit Arc Raiders, but with Disney characters battling enemies until they can reach an extraction point, according to the people. So far, internal reviewers have expressed concerns that the game mechanics are not very original, but some of the employees are optimistic that Epic will get it right by the launch date. The Disney deal will reap at least two more games, the people said. Early versions of the second title received middling internal reviews, according to two of the people. Resources for the third game were reallocated to the first two after reports that Disney was disappointed by Epic’s release timeline. Liz Markman, the senior director of global communications at Epic, said Bloomberg’s reporting is “not reflective of the ambitions of the Disney collaboration. We are building a new games and entertainment universe of Disney experiences.” Markman said “Epic’s timelines are aggressive and always have been. We've heavily moved developers onto projects with releases approaching, while smaller prototyping teams are working on further-off projects.” A Disney spokesperson said “we remain focused on our long-term collaboration with Epic which continues to have strong momentum and our work to build a transformational games and entertainment universe remains unchanged.” Epic laid off several employees working on the unannounced titles, spurring concerns from three former workers that people assigned to work on the Disney collaboration will be asked to adhere to an unrealistic schedule – part of a pattern that seven current and former employees believe may have contributed to challenges at the company. Epic routinely released products in what some employees called “Version 0.5,” the people said, suggesting they were only half ready.

Tha Realest28 days ago

Uh oh.

Mr. Engagement28 days ago

https://www.bloomberg.com/news/articles/2026-04-10/epic-games-pins-fortnite-comeback-on-disney-partnership This Bloomberg article says Epic is developing an extraction shooter for Disney, and that Epic is pinning their future on the partnership.

Pizza Moon28 days ago

AI is here to stay, so get used to it, and there is a difference between using AI as a tool and just being lazy and basically automating your own thoughts instead of coming up with your own. If people can’t see the difference God help us.

Mr. EngagementApr 06, 2026

@UNCgolf mentioned this, but free-to-use has been the key to the widespread adoption and usage of UE (now on 5.5). And it's being used to design MUCH more than video games (in the conventional sense)! Taking a cut of sales has been a good model for Epic, and would be a boon for Disney's plans for user-generated content.

AylaApr 06, 2026

It's too bad you can't differentiate between search engines and AI.

JoelApr 06, 2026

Your poorly specified (not to mention grammatically incorrect) question didn't even get a real answer. What actually are the top 20 games based on that jumble of metrics, and exactly how many used UE? "Many of them"? "A substantial share"? Thanks, I could have produced that answer myself without revving up a GPU. Also, some of the "salient facts" are just wrong. Gears 5 and Hellblade are not top 20 games of the past 10 years no matter how you slice it. Bioshock Infinite was released in 2013. Batman: Arkham Knight came out in 2015, and the only top 20 list that the '23 Switch version could ever hope to land on is Top 20 Crappiest Ports. Using search engines to find properly sourced information for your post is not equivalent to blindly relaying LLM-generated content without fact-checking or additional personal commentary. If doing so isn't against this forum's rule on AI usage, then the rule should probably be rewritten or removed. I would, but first I need to ask Gemini how penguins deal with snitches.

MisterPenguinApr 06, 2026

There were no thoughts or experiences. I was listing salient facts. And I labeled it as coming from an A.I. and not my own personal thoughts. People in the movie threads post facts from Box Office sites all the time apart from their own personal opinions. I repost the weekly top 10 streamers from Nielsen. If I used Wikipedia to look up facts and posted them... it would be the same thing. In fact, if anyone used any search engine, including Google, to look up facts and repost them here... they'd be using A.I. You're welcome to report me so you and @Ayla can be schooled that you didn't catch me in a gotcha.