Disney X Fortnite vs. Roblox
Roblox Q4 2023 Earnings Notes by Jo Redfern
Happy Kidscreen Comedown everyone! It was great to see and meet many of you in San Diego. Huge thanks to anyone who took the time to say they enjoy the newsletter. I tap this out solo from my home office, so the in-person hyping was much appreciated. This time around, Jo Redfern is back as a co-writer to lift all the key headlines from Roblox earnings.
It was a big news week in the media industry overall, with Disney and Roblox earnings calls hitting on the same day. Was this strategic? You might think so. Disney took the moment to announce a $1.5 billion stake in Epic Games, the force behind key Roblox competitor Fortnite. We’ll get into that in a minute but first let’s start with some of the main takeaways.
Key Headlines:
Roblox just keep growing. 60 billion hours engaged, up 22% YoY. That’s 6.8 million years users spent on the platform in 2023. Revenues also saw a healthy increase, though the company is still far from profitable, posting a net loss of $1.2 billion. Their focus on ad revenues after the rollout of the immersive ads and portals shows that they’re looking to reduce this through 2024. If anyone wondered whether Roblox might move into subscriptions any time soon, it looks like a no. The focus and future source of revenue growth will come as they:
“scale our brand-related microtransaction and advertising business”
When considering audience activity, daily active users (DAUs) on the platform are also up, over 21% YoY. It’s key to remember that although there’s dominance in the US, there is still strong spread of the platform across many geographies. A question raised at Kidscreen was whether brands grown in Europe would have a chance to compete on Roblox. The answer is undoubtedly yes, there is a sizeable European userbase which is worth tapping, even if awareness of the platform on a country by country basis is lower.
In the Shareholder letter, Roblox stated that growth is being driven by two mutually reinforcing network effects: content and social.
“Great content attracts large audiences and a lot of engagement. In 2023, we had more experiences with daily audiences of greater than one million than we have ever had.”
For kids brand owners this is an opportunity to increase time spent with their characters and worlds. Studies show that the dwell time on Roblox outperforms that on YouTube. For IP with a consumer products play this represents a compelling way to generate demand. I posted about this recently and Nathaniel Southworth, Managing Director of KAP TOYS and expert in the toy industry responded:
“We sell hello kitty toys and the Roblox stats for the 2 and a bit years hello kitty cafe has existed blow your mind! We’re talking centuries of time spent playing this game and interacting with this 50 year old brand - mind blown 🤯- huge link to consumer product purchase…!”
From an age demo point of view, Roblox continue to nurture over 13s, which they need to do from a monetization point of view. Under 13s keep coming, however; still at 41% of all DAUs. It’s important to continue to support quality experiences aimed at this group.
Roblox ignore them at their peril, unless of course they intentionally want to lose them so that monetizing them becomes someone else’s problem… i.e. Disney’s on Fortnite.
Disney X Fortnite vs. Roblox
It was certainly an aggressive play to announce the Disney–Epic deal on the same day as Roblox earnings. There’s lots that makes sense for Disney with Fortnite. The platform is safer (see below as an example), and in general Unreal Engine offers superior visual quality, although there are some stunning experiences being developed for Roblox.
In terms of younger audiences, Roblox are low-code and allow UGC far more readily for younger demos than Fortnite, which struggles with this due to its complexity. This gives Roblox an edge as we know that young people are inherent creators. It positions Roblox more squarely across the social media space, which, per above, is something that’s driving user growth.
Recently the highly buzzed Lego Fortnite activation landed, but indicators suggest that this hasn’t been the huge success that it first appeared to be. Complaints about limited gameplay and builds and a lack of updates have plagued its first couple of months. In terms of the latter, a key takeaway from the Roblox panel at Kidscreen is that you need a full content plan for activations on these gaming platforms. Dropping a game on is not enough; ongoing updates need to be bounteous and plentiful. Ignore this and it can impact success, even if you are a global behemoth brand like Lego. Thatcher Mines recently unpacked some of this here and here.
So the question is, will Roblox choose to double down on their Gen A demos to make it hard for Disney and Epic? Roblox hold a starting advantage; it’s likely that any Disney World/Disneyland launch on Fortnite will be 18 months away. I hope Roblox don’t give up on the younger demo on the assumption that Disney/Fortnite will pick them up. There is so much they uniquely have to offer this audience.