Unity CFO Says Peter Jackson’s Weta Digital Will Help Activate Metaverse

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The original ring from the movie “The Lord of the Rings”.

Michael Urban / DDP / AFP via Getty Images


Unity software

The latest earnings report was overshadowed by a roughly $ 1.63 billion cash and stock deal for filmmaker Peter Jackson’s Weta Digital. Although stocks initially slipped in after-hours trading, investors clearly warmed to the outlook on Wednesday.

Unity stock (ticker: U) closed 2.8% higher at $ 176.45 on Wednesday. This is a rebound from an after-hours decline and gives Unity stock its first record close since December 22, 2020.

Unity, which is known for its popular tools for video game developers, said it is acquiring Weta Digital so it can offer the technology used to make Hollywood hits like Jackson’s. The Lord of the Rings trilogy and James Cameron Avatar. CFO Luis Felipe Visoso said Barron the deal will be transformational for Unity, helping the company grow beyond its success with developers and attract artists.

The deal, which involves cash and stocks, is expected to be finalized in the fourth quarter. Weta’s visual effects teams will work at a stand-alone company called WetaFX, majority owned by Jackson. But Unity expects WetaFX to be a big customer for Unity. Credit Suisse analyst Stephen Ju compared the deal to a sale-leaseback agreement.

Visoso said Barron the company will strive to incorporate the tools into its own offerings, noting that for years they have been developed and used in-house by Jackson’s studio. He says the deal will give artists access to exclusive and sophisticated tools, while expanding Unity’s market by around $ 10 billion.

Artists will also have access to unidentifiable graphic resources that will serve as a starting point. Engines like Unity provide a foundation so that developers don’t need to invent things like game physics or standard objects like buses.

“I don’t think everyone will become Peter Jackson immediately,” he said. “I mean, if you give me paint, I won’t be Picasso, I guarantee it.” But if you give me paint, I’ll do a better job than with pencils.

Early Wall Street reviews are positive. After the post, Oppenheimer analyst Martin Yang raised his Unity share price target to $ 185 from $ 125 and maintained an outperformance rating.

“We consider Unity’s acquisition of Weta Digital to be one of the most strategically important transactions it has ever completed,” Yang wrote. “The growth potential of Weta as an independent company [software as a service] company, its potential ability to help Unity reach new customers and markets, and the underlying demand for immersive digital content gives us confidence in its long-term growth potential.

Credit Suisse’s Ju raised its price target to $ 185 from $ 160 on the news, noting that the deal with Weta can help Unity expand beyond games and significantly grow its total market.

There is another reason to be excited about what Unity is doing. Facebook parent


Meta-platforms

(FB) has sparked a frenzy among investors looking to bet on players who could play a significant role in the next evolution of the internet, now called the metaverse. Unity was among the companies mentioned by Meta CEO Mark Zuckerberg who will help him build it with his tools. Visoso said the Weta deal will play into such aspirations.

“[Weta’s tools] is really going to enable a lot of the metaverse, ”Vioso said,“ because the metaverse will be increasingly 3D, more visual, more immersive, and more engaging. And we think it’s great.

Write to Connor Smith at [email protected]


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