Epic Games Says It’s Still Building a Disney Universe Inside Fortnite Despite Layoffs

Epic Games remains committed to its collaboration with Disney to build a games and entertainment universe inside Fortnite despite cutting $500 million in costs and laying off over 1,000 employees due in part to a downturn in engagement, TheWrap has learned.

First announced back in 2024 alongside Disney’s $1.5 billion stake in the company, the new universe is expected to offer consumers the ability to play, watch, shop and engage with content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and more.

The experience, which will be powered by Unreal Engine, will also allow users to create their own stories and experiences, share content with each other and express their fandom in a “distinctly Disney way.” Last week, Epic launched new development tools that allow creators to build their own Star Wars-themed experiences inside Fortnite.

“We’re committed to building a games and entertainment universe with Disney,” Epic Games president Adam Sussman told TheWrap on Thursday. “The vision is unchanged, and we are excited by our progress.”

During Disney’s annual shareholder meeting last week, CEO Josh D’Amaro confirmed that he had reviewed the progress being made on the project and was “blown away by the possibilities.”

In his memo to staff on Tuesday, Epic Games CEO Tim Sweeney said that the company would be kicking off its next generation with “huge launch plans towards the end of the year,” though it’s unclear if that’s in reference to the Disney project.

An Epic Games spokesperson declined to comment on the project’s timing, while Disney did not immediately return TheWrap’s request for comment.

The project comes as Disney and Epic have engaged hundreds of millions of players through Fortnite content integrations, season collaborations, in-game activations and live events, including Marvel’s “Nexus War with Galactus,” which drew more than 15.3 million concurrent players.

Unreal Engine is also used to produce assets and content across the Disney portfolio, including in the development of video games like “Kingdom Hearts 3” and “Star Wars Jedi: Survivor,” cinematic editing and animation for film and streaming, and the creation of more than 15 Disney Parks attractions, such as Millennium Falcon: Smugglers Run at Star Wars: Galaxy’s Edge.

It also comes as Disney is folding its games and digital entertainment unit into the Disney Entertainment division led by newly appointed chairman Debra OConnell. The unit’s executive vice president, Sean Shoptaw, who also oversees the collaboration with Epic, will report directly to Disney’s chief creative officer Dana Walden.

At the time of the original announcement of the Fortnite universe, Disney noted that its mobile games had 1.5 billion global installs and that nine Disney game franchises each grossed more than $1 billion in sales.

The layoffs come as Fornite led the U.S. in monthly active users for February across both PlayStation and Xbox, with 35% and 31% of actives playing, respectively, according to Circana’s Player Engagement Tracker. However, the research firm’s analyst Mat Piscatella noted that the average U.S. Fornite player engaged with the game for an average of 16 hours during the month on PlayStation and 15 hours on Xbox, down from 21 hours and 19 hours, respectively, during the same period a year ago.

In the memo, Sweeney acknowledged that Fornite’s engagement downturn started in 2025 and that it is spending “significantly more” than it’s making.

“Despite Fortnite remaining one of the most successful games in the world, we’ve had challenges delivering consistent Fortnite magic with every season,” he explained. “We’re only in the early stages of returning to mobile and optimizing Fortnite for the world’s billions of smartphones; and in being the industry’s vanguard we have taken a lot of bullets in a battle which is only in the early days of paying off for ourselves and all developers.”

Moving forward, Epic is prioritizing building “awesome” Fortnite experiences with fresh seasonal content, gameplay, story and live events, and accelerating developer tools with greater stability and capability as it evolves from Unreal Engine 5 and UEFN to Unreal Engine 6. More details about its future plans will be shared during a meeting with staff on Thursday.

“This isn’t our first time being here. Epic survived upheavals in 1990s with the move from 2D to 3D with Unreal 1; in the 2000s building console games with Gears of War; and in 2012 moving to online gaming with Paragon and Fortnite. Each time, we rebuilt our foundations and earned a renewed leadership position,” Sweeney said. “Market conditions today are the most extreme we’ve seen since those early days, with massive upheaval in the industry accompanied by massive opportunity for the companies that come out as winners on the other side. That’s what we’re aiming to do for our players, and we aim to bring other like-minded developers in the industry along on the journey to build an increasingly open and vibrant future of entertainment together.”

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