Epic Games is the developer of the popular video game Fortnite, but right now you can't play it on millions of mobile devices because Apple has banned it from its App Store. The two parties are still involved in a legal battle. But for now, Fortnite's ban stands.
That leaves Epic Games looking for new ways to monetize its intellectual property. And in this video from Motley Fool Backstage Pass, recorded on Oct. 11, Fool analyst Sanmeet Deo explains to contributor Jon Quast why Epic Games is pursuing scripted video content.
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Jon Quast: Sanmeet, I know we weren't planning on doing this yet, but maybe this is the organic place to talk about this. From what we're talking about, it was a loss for Epic, and they're still banned from the App Store, and they're still banned from the [Alphabet] Google Play Store. Now they are trying to find how do we grow our revenue under this new reality of being banned? You brought a great article to the table that they are exploring entertainment.
Sanmeet Deo: Yes, that's right. I was just trying to remember which article. No, absolutely.
Quast: Business Insider, I think.
Deo: Let me share this right here if you can see it. Epic Games may make Fortnite movie as part of entertainment expansion. They're considering launching an entertainment division like Jon said for scripted video programming. They've been talking a little bit already about a Fortnite movie to get into the entertainment business and also expand. But what's interesting here is they've also hired some people, some executives from Lucasfilm that have worked on Star Wars, that are in Disney and some others. But I don't get full subscription to this article here.
But that's very interesting, and that's again this broader theme that we've all talked about numerous times on our show, which we'll probably talk to endless degree [laughs] in the future, is this convergence of movies and games and how it's going both ways, whether it's a movie or a TV show that starts. Then like last week, we talked a little bit about Squid Game and how Squid Game became a little bit of a game on Roblox and how that trend is. And I've even seen some merchandise being sold on Etsy. I think it was, I saw a post of Squid Game paraphernalia on Etsy. That was interesting.
But now here, Fortnite becoming an Epic Games entertainment division to launch a movie. I can see TV shows and whatnot. Yeah, what do you guys think of that? Do you think that's a good strategy? How do you think that will play out with this battle that they're going to with Apple?
Quast: Like you point out, this goes both ways. It's really, think about it, an entertainment industry. We've been talking in recent episodes about Netflix, and they have this vast library of intellectual property that they have made into TV shows and movies that now they want to launch a gaming division to monetize that content in a new way with video games.
We also see this go the other way. What we're talking about right now and we can't invest in Epic Games, but it is an illustration of the process of, here's a company that has this video game intellectual property. Now they want to monetize it, and I think it was even said scripted TV as well as possibly a movie.
These are cross-platform opportunities to monetize a single piece of intellectual property, which is, on one hand, good. On the other hand, this doesn't guarantee success for the company or success for shareholders. That doesn't necessarily mean that. You still have to put forth good video game content if you're a company like Netflix that has this existing film products and vice versa. If you're a video game company, have this good video game, you need to put something good together on the big screen.
We've seen this play out, I think in a small way before with the company. I believe it is Mattel, if I'm not mistaken, [in fact, the speaker was mistaken. The company he intended to reference was Hasbro.] that owns the Transformers franchise and the Battleship franchise. They made some Transformer movies based on toys. A couple of the movies were good successes from the box office perspective. A couple of those in the franchise weren't. We also saw Battleship based on the game, a complete bomb, and it probably lost them money over the long term. It doesn't necessarily guarantee success, but it is a good strategy if you get it right.