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Epic Games, the creator of Fortnite, banked a $3 billion profit in 2018 – TechCrunch

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Epic Games had as good a year in 2018 as any company in tech. Fortnite became the world’s most popular game, growing the company’s valuation to $15 billion, but it has helped the company pile up cash, too. Epic grossed a $3 billion profit for this year fueled by the continued success of Fortnite, a source with knowledge of the business told TechCrunch.

Epic did not respond to a request for comment.

Fortnite, which is free to play but makes money selling digital items, has popularized the battle royale category — think Lord of the Flies meets Hunger Games — almost single-handedly, and it has been the standout title for the U.S.-based game publisher.

Founded way back in 1991, Epic hasn’t given revenue figures for its smash hit — which has 125 million players — but this new profit milestone, combined with other pieces of data, gives an idea of the success the company is seeing as a result of a prescient change in strategy made six years ago.

This past September, Epic commanded a valuation of nearly $15 billion, according to The Wall Street Journal, as marquee investors like KKR, Kleiner Perkins and Lightspeed piled on in a $1.25 billion round to grab a slice of the red-hot development firm. However, the investment cards haven’t always been stacked in Epic’s favor.

China’s Tencent, the maker of blockbuster chat app WeChat and a prolific games firm in its own right, became the first outside investor in Epic’s business back in 2012 when it injected $330 million in exchange for a 40 percent stake in the business.

Back then, Epic was best known for Unreal Engine, the third-party development platform that it still operates today, and top-selling titles like Gears of War.

Why would a proven company give up such a huge slice of its business? Executives believed that Epic, as it was, was living on borrowed time. They sensed a change in the way games were headed based on diminishing returns and growing budgets for console games, the increase of “live” games like League of Legends and the emerging role of smartphones.

Speaking to Polygon about the Tencent deal, Epic CEO Tim Sweeney explained that the investment money from Tencent allowed the company to go down the route of freemium games rather than big box titles. That’s a strategy Sweeney called “Epic 4.0.”

“We realized that the business really needed to change its approach quite significantly. We were seeing some of the best games in the industry being built and operated as live games over time rather than big retail releases. We recognized that the ideal role for Epic in the industry is to drive that, and so we began the transition of being a fairly narrow console developer focused on Xbox to being a multi-platform game developer and self publisher, and indie on a larger scale,” he explained.

Tencent, Sweeney added, has provided “an enormous amount of useful advice,” while the capital enabled Epic to “make this huge leap without the immediate fear of money.”

LOS ANGELES, CA – JUNE 12: Gamers ‘Ninja’ (L) and ‘Marshmello’ compete in the Epic Games Fortnite E3 Tournament at the Banc of California Stadium on June 12, 2018 in Los Angeles, California. (Photo by Christian Petersen/Getty Images)

Epic never had a problem making money — Sweeney told Polygon the first Gear of Wars release grossed $100 million on a $12 million development budget. But with Fortnite, the company has redefined modern gaming, both by making true cross-platform experiences possible and by pulling in vast amounts of money.

As a private company, Epic keeps its financials closely guarded. But digging beyond the $3 billion figure — which, to be clear, is annual profit not revenue — there are clues as to just how big a money-spinner Fortnite is. Certainly, there’s room to wonder whether analyst predictions this summer that Fortnite would gross $2 billion this year were too conservative.

The most recent data comes from November when Sensor Tower estimates that iOS users alone were spending $1.23 million per day. That helped the game bank $37 million in the month and take its total earnings within Apple’s iOS platform to more than $385 million.

But, as mentioned, Fortnite is a cross-platform title that supports PlayStation, Xbox, Switch, PC, Mac, Android and iOS. Aggregating revenue across those platforms isn’t easy, and the only real estimate comes from earlier this year when Super Data Research concluded that the game made $318 million in May across all platforms.

That is, of course, when Fortnite was fresh on iOS, non-existent on Android and with fewer overall players.

We can deduce from Sensor Tower’s November estimate that iOS pulled in $385 million over eight months — between April and November — which is around $48 million per month on average. Android is harder to calculate since Epic skipped Google’s Play Store by distributing its own launcher. While it quickly picked up 15 million Android users within the first month, tracking that spending off-platform is a huge challenge. Some estimates predicted that Google would miss out on around $50 million in lost earnings this year because in-app purchases on Android would not cross its services.

There are a few factors to add further uncertainty.

Fortnite spending tends to spike around the release of new seasons — updated versions of the game — since users are encouraged to buy specific packages at the start. The latest, Season 7, dropped early this month with a range of tweaks for the Christmas period. Given the increased velocity at which Fortnite is picking up players and the appeal of the festive period, this could have been its biggest revenue generator to date, but there’s not yet any indicator of how it performed.

More broadly, Fortnite has undoubtedly lost out on revenue in China, which froze new game licenses nine months ago, thereby preventing any publishers from monetizing new titles over that period.

Tencent, which publishes Fortnite in China, did release the game in the country but it hasn’t been able to draw revenue from it yet. The Chinese government announced last week that it is close to approving its first batch of new titles, but it isn’t clear which games are included and when the process will be done.

Already, the effects have been felt.

Games are forecast to generate nearly $40 billion in revenue in China this year, according to market researcher Newzoo. However, the industry saw its slowest growth over the last 10 years as it grew 5.4 percent year-over-year during the first half of 2018, according to a report by Beijing-based research firm GPC and China’s official gaming association CNG.

Fortnite and PUBG — another battle royale title backed by Tencent — have perhaps suffered the most since they are universally popular worldwide but unable to monetize in China. It seems almost certain that those two titles will receive a major marketing push if, as and when they receive the license and, if Epic can keep the game competitive as Sweeney believed it could back in 2012, then it could go on and make even more money in 2019.

Epic Games is taking on Steam with its own digital game store, which includes higher take-home revenue rates for developers.

But Epic isn’t relying solely on Fortnite.

A more low-key but significant launch this month was the opening of the Epic Games store, which is aimed squarely at Steam, the leader in digital game sales.

While Fortnite is its most prolific release, Epic also makes money from other games, Unreal Engine and a recently launched online game store that rivals Steam. Epic’s big differentiator for the store is that it gives developers 88 percent of their revenue, as opposed to Value — the firm behind Steam — which keeps 30 percent, although it has added varying rates for more successful titles. Customers are promised a free title every two weeks.

Either way, Epic is betting that it can do a lot more than Fortnite, which could mean that its profit margin will be even higher come this time next year.

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Cuphead expansion pack review: As good as DLC gets

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Enlarge / In the new expansion pack The Delicious Last Course, Miss Chalice makes three.

Studio MDHR

Some people will look at an expansion pack like Cuphead: The Delicious Last Course and make up their minds after a single glance. This $8 add-on’s beautiful brutality follows the same path as the original 2017 game Cuphead, a notoriously tough descendant of the Mega Man school of game design. Maybe you love playing games that are as beautiful as they are difficult. Maybe you don’t.

I’m here to talk about Last Course because I might be a lot like you. I’m not Last Course‘s target audience. I never beat the original Cuphead. I have contended that a tough game like this is easier for me to watch than it is to play. But when I saw the expansion’s hands-on demo at this month’s Summer Game Fest Play Days, I shrugged my shoulders, grabbed a gamepad, and gave it a shot. Might as well occupy myself between other scheduled game demos, I thought.

And then I fell in love. For whatever reason, the demo I played, and my subsequent completion of Last Course‘s “normal” difficulty content, grabbed me and wouldn’t let go—which is why I’m compelled to recommend picking it up.

Another island getaway—with useful new abilities

Miss Chalice can only join the battle when she tricks one of the original main characters to chomp on a magical cookie. This temporarily sends someone else to a ghost realm so that she can join in. The trio goes on a quest to bring her back to life for good, no tricky cookies required.
Enlarge / Miss Chalice can only join the battle when she tricks one of the original main characters to chomp on a magical cookie. This temporarily sends someone else to a ghost realm so that she can join in. The trio goes on a quest to bring her back to life for good, no tricky cookies required.

Studio MDHR

Like many other classic “expansion packs,” Last Course requires owning the original game (which is conveniently on sale at most digital download storefronts between this article’s publication date and July 7) and bolts new content onto Cuphead‘s 2D action foundation. The original game divided its 18 boss battles across three “islands” of content, and Last Course adds, among other things, six bosses on a brand-new island.

Miss Chalice's double-jump ability will be useful to get away from those pesky gnomes gathering at her feet.
Enlarge / Miss Chalice’s double-jump ability will be useful to get away from those pesky gnomes gathering at her feet.

Studio MDHR

It also introduces a third playable character, named Miss Chalice, and she appears when you equip a Chalice-specific “charm” on either existing character (Cuphead or Mugman). She comes with four points of health by default (compared to three points for the other characters) and three unique abilities: an invincible dodge-roll, a double-jump, and a parry dash. (The latter gives players a larger “hitbox” when attempting the game’s crucial parry maneuver, making it easier to counter enemies’ specially colored attacks.) Since she must be activated as a charm, Miss Chalice can’t equip other charms in the game, and in two-player co-op sessions, only one person can turn their character into Miss Chalice.

As I made clear earlier, I’m not a Cuphead pro, so I was delighted by the new, novice-friendly character when I first tested the game at Summer Game Fest. All of her special abilities are tuned for higher maneuverability to help you contend with the chaos that is an average Cuphead boss battle, and in addition to her extra point of health, she also has a custom “super attack” option that doesn’t do any damage. Instead, it gives her an additional, temporary point of health, and this can be regenerated during long, brutal boss fights. Once she’s unlocked, she’s available in the original campaign’s levels as well, which makes her a nifty entry point for anyone like me who never beat the original campaign.

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Thanks to fans, the weirdest official Doom game is now playable on Windows

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Enlarge / A seemingly lost turn-based version of Doom RPG is now fully playable on modern Windows PCs, thanks to efforts from the Doom reverse-engineering community.

id Software

The creators of the Doom series have presented plenty of official and unofficial historical retrospectives, but these often leave out the weirdest official Doom game ever made: Doom RPG.

Even id Software’s official “Year of Doom” museum at E3 2019 left this 2005 game unchronicled. That’s a shame, because it was a phenomenal example of id once again proving itself a master of technically impressive gaming on a power-limited platform. And platforms don’t get more limited on a power or compatibility basis than the pre-iPhone wave of candy bar handsets, which Doom RPG has been locked to since its original mid-’00s launch. You may think that “turn-based Doom” sounds weird, but Doom RPG stood out as a clever and fun series twist to the first-person shooter formula.

Its abandonment to ancient phones changes today thanks to the reverse-engineering efforts of GEC.inc, a Costa Rica-based collective of at least three developers. On Wednesday, the group released a Windows port of the game based on their work on the original game’s BREW version (a Qualcomm-developed API meant for its wave of mobile phones from 2001 and beyond).

Time for T9

Forget the clunky world of ancient mobile phone platform emulation. <em>Doom RPG</em> feels way better in this week's new native port.
Enlarge / Forget the clunky world of ancient mobile phone platform emulation. Doom RPG feels way better in this week’s new native port.

id Software

GEC.inc’s freely downloadable Windows port has no copyrighted assets and won’t work without the game’s original files. (The same typically goes for other major community efforts that revolve around the reverse-engineering of classic games.) That’s where this whole thing gets tricky, as legitimate access to the game in 2022 is incredibly unlikely. Access requires owning a compatible mid-’00s phone on which the game was purchased, likely via an ancient game-sales marketplace that no longer exists, then extracting the game’s original files from that phone—and that’s assuming its original hardware is functioning and hasn’t been damaged by, say, a slowly expanding lithium-ion battery. id Software has never re-released the game outside of its original platforms (BREW, J2ME), arguably because EA Mobile got a stake in the game after acquiring original publisher Jamdat Mobile.

Whether you’re among the very few to have a preserved, working phone with a purchased copy of the game’s BREW port or you figure out another way to somehow access Doom RPG, you can dump the original game’s data into GEC.inc’s custom asset-translation executable. Ars Technica can confirm that this process is painless and leads to near-instant gameplay on Windows.

The port’s interface is admittedly barebones, made up of menus that require a keyboard to pick through, and its incompatibility with mice and touchpads is startling at first. It’s a hard crash back to the early ’00s to remember that, yes, this game was designed for T9 button arrays by default. Thankfully, the port plays nicely enough with Windows to make it easy to bind an Xinput gamepad via its default menus if you prefer a gamepad (or something like Steam Deck) over the usual WASD options.

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Meta sparks anger by charging for VR apps

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Enlarge / BURLINGAME, CALIFORNIA – MAY 04: Meta employee Ryan Carter (L) helps a member of the media with an Oculus virtual reality headset demonstration during a media preview of the new Meta Store on May 04, 2022 in Burlingame, California. Meta is set to open its first physical retail store on May 9. (Photo by Justin Sullivan/Getty Images)

Meta is facing a growing backlash for the charges imposed on apps created for its virtual reality headsets, as developers complain about the commercial terms set around futuristic devices that the company hopes will help create a multibillion-dollar consumer market.

Facebook’s parent has pledged to spend $10 billion a year over the next decade on the “metaverse,” a much-hyped concept denoting an immersive virtual world filled with avatars.

The investment is spurred by a desire to own the next computing platform and avoid being trapped by rules set by Big Tech rivals, as it has been by Apple and Google with their respective mobile app stores.

Apple is expected to enter the market by releasing a set of augmented reality glasses as early as this year, while Microsoft is developing services using its HoloLens virtual reality headset.

But several developers told the Financial Times of their frustration that Meta, which is seen as having an early lead in a nascent market, has insisted on a charging model for its VR app store similar to what exists today on smartphones. This is despite Meta chief Mark Zuckerberg being strongly critical in the past of charging policies on existing mobile app stores.

“Don’t confuse marketing with reality—it’s good marketing to pick on Apple. But it doesn’t mean Meta won’t do the exact same thing,” said Seth Siegel, global head of AI and cyber security at Infosys Consulting. “There is no impetus for them to be better.”

The “Quest Store” for Meta’s Quest 2, by far the most popular VR headset on the market, takes a 30 percent cut from digital purchases and charges 15-30 percent on subscriptions, similar to the fees charged by Apple and Android.

“Undoubtedly there are services provided—they build amazing hardware and provide store services,” said Daniel Sproll, chief executive of Realities.io, an immersive realities start-up behind the VR game Puzzling Places.

“But the problem is that it feels like everybody agreed on this 30 percent and that’s what we’re stuck with. It doesn’t feel like there’s any competition. The Chinese companies coming out with headsets are the same. Why would they change it?”

Meta defended its policies, pointing out that unlike iPhone owners, Quest users can install apps outside its official store through SideQuest, a third-party app store, or make use of App Lab, its less restricted, more experimental app store.

“We want to foster choice and competition in the VR ecosystem,” Meta said. “And it’s working—our efforts have produced a material financial return for developers: as we announced earlier this year, over $1 billion has been spent on games and apps in the Meta Quest Store.”

Developers welcome these alternatives but say their impact is limited. SideQuest has been downloaded just 396,000 times, versus 19 million for the Oculus app, according to Sensor Tower. App Lab, meanwhile, still takes a 30 percent cut of purchases.

Zuckerberg has previously complained of Apple’s “monopoly rents” and called out its “unique stranglehold as a gatekeeper on what gets on phones,” in reference to the App Store’s approval and curation processes.

That led Apple to accuse Meta of “hypocrisy” when the Oculus headset maker announced in April that Horizon Worlds, its “social VR experience,” would charge a 17.5 percent “platform fee” on top of its 30 percent tax on digital purchases.

Apple added: “It goes to show that while they seek to use Apple’s platform for free, they happily take from the creators and small businesses that use their own.”

Until Apple and others enter the VR market in a more concerted manner, developers also say Meta has the ability to play kingmaker with apps by fast-tracking some and delaying others.

Some titles are relegated to its experimental App Lab store, while a few of the best titles—the fitness games BeatSaber and Supernatural, for instance—have been acquired by Meta.

Another point of friction with developers is Meta’s shift on how “open” its VR app store will be.

Chris Pruett, Meta’s content ecosystem director, has said the VR team engaged in “a knockdown, drag-out debate, for years” over whether the app store should allow developers to upload their content with relatively few restrictions, or whether apps should be “curated” by the company with far more checks—similar to Apple’s approach to its mobile app store.

Pruett said Meta found that lax standards resulted in too many users being frustrated by low-quality content, so the company has opted to play more of a gatekeeper role. But developers said the resulting barriers could lack transparency.

“Getting something on the Quest store is painful,” said Lyron Bentovim, chief executive of the Glimpse Group, an immersive experiences group. “It’s significantly worse than getting on Apple or Android stores.”

Rooom, a Metaverse platform for 3D events, made it to the Quest store after nine months of back and forth, whereas the same process with Apple took less than two weeks, said chief information officer Sebastian Gottschlich.

Devon Copley, chief executive of Avatour, a virtual meeting company, said he had posted questions to the indie developer message board for support that “just go completely unanswered.”

Developer relations at Meta was “completely AWOL,” Copley said. “It’s really frustrating because the hardware development is amazing, the hardware platform is fantastic, and they’re doing great things. But their developer engagement is a travesty.”

© 2022 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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