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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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Microsoft promises Call of Duty for Nintendo consoles in surprise 10-year deal

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Aurich Lawson

Nintendo fans hoping that the ultra-popular Call of Duty series would eventually come to the Switch got an unexpected boost last night. That’s when Microsoft’s Xbox chief Phil Spencer announced that the company had reached “a 10-year commitment to bring Call of Duty to Nintendo following the merger of Microsoft and Activision Blizzard King.” The announcement comes alongside a similar announcement promising to keep Call of Duty on Steam for the same period of time.

If the “10-year commitment” part of those announcements sounds familiar, it’s probably because it’s the same length of time Microsoft has reportedly formally offered to keep the Call of Duty franchise on PlayStation consoles. That followed a September offer to keep Call of Duty on PlayStation for three additional years, which Sony called inadequate in public statements. But Spencer has gone much further in his public statements, saying in October that Microsoft would continue to ship a PlayStation Call of Duty “as long as there’s a PlayStation out there to ship to.”

Real ones remember.
Enlarge / Real ones remember.

The Nintendo announcement is significantly more surprising, though, considering that Call of Duty hasn’t appeared on a Nintendo console since Call of Duty Ghosts hit the Wii U in 2013. That game came one year after Call of Duty: Black Ops 2 became a surprise launch title for the ill-fated console.

Switching things up

From a business perspective, the bestselling Switch is a much more appealing target for Activision and/or Microsoft than the Wii U ever was. But the limited hardware power of the Switch makes Call of Duty something of an awkward fit for a series that’s always aimed for top-of-the-line presentation on modern consoles and PCs.

Then again, limited hardware power didn’t stop a series of scaled-down Call of Duty conversions for the Nintendo DS up through 2011’s Call of Duty: Modern Warfare – Defiance. Other developers have turned to streaming versions to get their high-end games available on the Switch, especially in Japan.

Modern FPS titles from Warface and Doom have seen low-res ports squeezed onto the Switch in recent years with mixed results. But persistent rumors of a more powerful “Switch 2” in the coming years would definitely make any potential Call of Duty ports less of a development lift.

<em>Doom</em> on the Nintendo Switch runs well below 1080p resolution but is still suitably creepy.
Enlarge / Doom on the Nintendo Switch runs well below 1080p resolution but is still suitably creepy.

The possibility of a Switch version of Call of Duty hasn’t exactly come out of nowhere for Microsoft. At an October Wall Street Journal Live event, Spencer said, “When I think about our plans, I’d love to see [Call of Duty] on Switch and playable on many different screens.” In practically the same breath, though, he said that “this opportunity is really about mobile” and the 3 billion potential customers who could play Call of Duty on a smartphone.

“Microsoft is committed to helping bring more games to more people—however they choose to play,” Spencer said in his Tuesday night announcement.

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Two months of Intel Arc driver updates begin to fix low performance in old games

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Enlarge / Intel is talking up big performance gains in some old, but noteworthy, games.

Intel

In the run-up to the launch of Intel’s Arc graphics cards, the company emphasized for months that the cards might not perform well in games that didn’t use newer graphics APIs like Vulkan and DirectX 12. The GPUs are actually quite price-competitive with aging midrangers like Nvidia’s GeForce RTX 3060 if you’re playing newer games, but performance in older games is mixed.

For Intel Arc owners attracted to the cards’ price, salvation may come in the form of continued driver updates. Since the October launch of the A770 and A750, Intel has released a handful of driver updates, each of which has fixed specific bugs or provided small performance improvements in individual games. But in today’s beta driver release (31.0.101.3959, for those keeping track), Intel is offering a “significant” boost in older DirectX9 titles, with frame rates that can improve by as much as 80 percent.

DirectX9 was the graphics API of choice in the Windows XP era, and the Windows XP era lasted for a very long time. The API is also used in still-popular multiplayer games like Counter-Strike: Global OffensiveLeague of LegendsTeam Fortress 2, and Starcraft II, making performance improvements in DirectX9 games particularly noteworthy.

Specific performance numbers. This isn't the difference between playable and unplayable, but they might be noticeable on monitors with super-high refresh rates.
Enlarge / Specific performance numbers. This isn’t the difference between playable and unplayable, but they might be noticeable on monitors with super-high refresh rates.

Intel

Because these are pretty old games we’re talking about, these performance improvements aren’t necessary to hit 60 frames per second on the A770 (though the improvements also apply to the entry-level Arc A380 GPU, which might need the extra help. These increases will mostly benefit competitive players, for whom super-high frame rates and low response times are critical. Some of the increases from the new driver are minor, but at 1080p, Intel says Stellaris and Starcraft II frame rates improved by around 50 percent, while League of Legends improved by 37 percent and CS: Go went up by 80 percent.

Intel had previously said it was using a Microsoft-provided translation layer to support DirectX9 games. With these improvements, the company says it’s introducing a “hybrid” approach, using the D3D9On12 layer “when a better experience can be delivered” and a native implementation when it benefits performance. This makes some sense—Intel can use translation for any given 15-year-old DirectX9 PC game while providing a more optimized native implementation for the DirectX9 games that lots of people are still actually playing.

Intel will decide when to switch individual titles over to the native DirectX9 implementation rather than the translated one and will deliver those changes via driver updates along with other improvements.

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Diablo IV preview: Embracing the series’ dark past and open-world future

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Enlarge / Stop, drop, and roll!

It’s not a stretch to say that the Diablo series is one of the most influential role-playing game franchises of all time. As one of the early action-focused loot games, it offered a deeply compelling and satisfying take on the classic concept of the dungeon crawl. Its many sequels advanced its foundations of rewarding character growth and addictive loot collection. The Diablo games are still well-loved today, but other titles have picked up the baton and taken the genre in new directions.

So with the upcoming Diablo IV, developer Blizzard is seeking to reinvent the classic action RPG, taking the series’ first steps into a dark open world filled to the brim with gruesome violence. While staying true to the game’s isometric action-RPG and dark fantasy roots, Diablo IV brings a more ambitious and freeform adventure, with many new ways to customize your hero as you adventure across the land.

I was able to play over 12 hours of Diablo IV’s opening act in an early beta preview of the game, which showcased its expansive open world and gave a sample of how much power a budding adventurer can attain. It’s already apparent that Diablo IV is less about providing a series of linear dungeon crawls and more about opening the player to a wider world filled with monsters to fight and loot to collect.

Embracing a dark past

Several decades after the defeat of Malthael in Diablo III, things have not improved in the world of Sanctuary. With humanity falling into despair, a desperate group of adventurers seeking loot and power summons the malevolent arch-demon Lilith, who embarks on a brutal campaign to retake the ruined world. With the land poised to plunge even further into darkness, a Barbarian, a Rogue, a Sorceress, a Druid, and a Necromancer take their first steps into Sanctuary. They team up to amass power and infamy, all in pursuit of gaining the strength to defeat Lilith and her army throughout the world of Sanctuary.

According to Diablo IV director Joe Shely, the development team felt it needed a more consistent and striking tone for their trip back to Sanctuary. “[Diablo IV] is much closer to the horror and fantasy roots than recent interactions of the IP,” Shely said during a pre-game presentation. “We want the world of Sanctuary to be scary, challenging, and engaging, but we also want it to be a place worth fighting for. The main theme of the game is ‘hatred.’ Hate will consume Sanctuary and the hearts of our characters, and we will explore its lore and its dire consequences.”

The dark tone of <em>Diablo IV</em> extends to the color palette in scenes like this.
Enlarge / The dark tone of Diablo IV extends to the color palette in scenes like this.

From the game’s opening hours, it was clear that Diablo IV is the series’ darkest and most violent entry. The bloody opening act—filled with undead monsters, human sacrifices, and lots and lots of blood—effectively sets the mood for this grim adventure. If Diablo III was akin to Peter Jackson’s director’s cut of the Lord of the Rings trilogy, Diablo IV is much more in the vein of the dark gothic horror of Bram Stoker’s Dracula.

This dark atmosphere will be familiar to anyone who remembers the first two Diablo games and their vision of a dark, gothic fantasy world. But Diablo IV’s take on the genre feels more brutal and grotesque. The violence and bleak atmosphere of the game can be a lot to take in at times, but it all connects to the more significant vision of a ruined world.

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