One of the most popular games for kids over the past five years has been Roblox, a PC and mobile game from Roblox Corp (NYSE: RBLX). Could a competing metaverse game from one of the most popular kids’ toys of all-time take market share away?
What Happened: Epic Games, which is partially owned by Tencent Holdings (HK:0700) ADR (OTC: TCEHY), announced a partnership with well-known toy brand The LEGO Group to launch a metaverse experience.
“The two companies will team up to build an immersive, creatively inspiring and digital experience for kids of all ages to enjoy together,” Epic and Lego said.
They will work together to create a metaverse experience that is safe for kids and protects their privacy.
The new game from Epic and LEGO will give kids access to tools to create within the game, a move similar to Roblox.
“Kids enjoy playing in digital and physical worlds and move seamlessly between the two,” LEGO Group CEO Niels B. Christiansen said. “We believe there is huge potential for them to develop life-long skills such as creativity, collaboration and communication through digital experiences.”
The two companies will work together to create an experience combining their talents.
“The LEGO Group has captivated the imagination of children and adults through creative play for nearly a century, and we are excited to come together to build a space in the metaverse that’s fun, entertaining and made for kids and families,” Epic Games CEO Tim Sweeney said.
Epic Games also announced a new funding round of $2 billion from Sony Group Corp (NYSE: SONY) and KIRKBI, the family-owned holding company behind The LEGO Group. The funding will help support the growth of the metaverse for Epic Games.
Sony and KIRKBI each committed $1 billion in funding to Epic Games.
“As a creative entertainment company, we are thrilled to invest in Epic to deepen our relationship in the metaverse field, a space where creators and users share their time,” Sony CEO Kenichiro Yoshida said.
Sony previously invested $250 million for a 1.4% stake in Epic Games back in August 2020.
The new funding round values Epic Games at $31.5 billion, up significantly from the $17.3 billion valuation from the original Sony investment.
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Why It’s Important: Roblox has helped bridge the gap of video games and the metaverse to becoming one of the most popular games.
Roblox reported fourth quarter bookings of $770.1 million, up 20% year-over-year. Full year bookings of $2.7 billion were up 45% year-over-year. Roblox ended the fourth quarter with 49.5 million daily active users, up 33% year-over-year. Daily active users spent an average of $15.57 in the fourth quarter.
Lego is one of the biggest brands in the world and has built a loyal following across several demographics. Add into the mix Epic Games, the company behind “Fortnite,” which was extremely popular with kids and found a way to monetize one of the biggest free-to-play games of all time. Putting these two together and the Lego metaverse experience could be a win for all parties involved.
Details are scarce on if this will be a game or an online metaverse experience.
Lego had had success licensing out its brand for video games with Star Wars and Harry Potter Lego games from Warner Bros. Interactive Entertainment, a unit of Warner Bros. Discovery (NASDAQ: WBD).
If this is a game and proves popular it could put pressure on Roblox to license or acquire additional content to continue its large market share in the space.
Another battle could come down to which company integrates NFTs into their metaverse experience with Roblox having a huge opportunity and Epic Games, the ability to launch with NFTs from the start.
The new partnership with LEGO and funding round could also be a win for Tencent Holdings, which owned 40% of Epic Games in 2020 and has seen its value of its stake rise significantly for a position it bought for $330 million.
Price Action per Benzinga Pro: After market hours (Good Friday holiday), Roblox shares were trading at $42.25, down 0.26% versus a 52-week range of $36.04 to $141.59. Tencent shares traded at $46.84, down 0.017%, versus a 52-week range of $37.92 to $82.28.
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