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

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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 Valve — 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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Amazon to roll out tools to monitor factory workers and machines

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Amazon is rolling out cheap new tools that will allow factories everywhere to monitor their workers and machines, as the tech giant looks to boost its presence in the industrial sector.

Launched by Amazon’s cloud arm AWS, the new machine-learning-based services include hardware to monitor the health of heavy machinery and computer vision capable of detecting whether workers are complying with social distancing.

Amazon said it had created a two-inch, low-cost sensor—Monitron—that can be attached to equipment to monitor abnormal vibrations or temperatures and predict future faults.

AWS Panorama, meanwhile, is a service that uses computer vision to analyze footage gathered by cameras within facilities, automatically detecting safety and compliance issues such as workers not wearing PPE or vehicles being driven in unauthorized areas.

The new services, announced on Tuesday during the company’s annual cloud computing conference, represent a step up in the tech giant’s efforts to gather and crunch real-world data in areas it currently feels are underserved.

“If you look at manufacturing and industrial generally, it’s a space that has seen some innovations, but there’s a lot of pieces that haven’t been digitized and modernized,” said Matt Garman, AWS’s head of sales and marketing, speaking to the FT.

“Locked up in machines”

“There’s a ton of data in a factory, or manufacturing facility, or a supply chain. It’s just locked up in sensors, locked up in machines that a lot of companies could get a lot of value from.”

Amazon said it had installed 1,000 Monitron sensors at its fulfillment centers near the German city of Mönchengladbach, where they are used to monitor conveyor belts handling packages.

If successful, said analyst Brent Thill from Jefferies, the move would help Amazon cement its position as the dominant player in cloud computing, in the face of growing competition from Microsoft’s Azure and Google Cloud as well as a prolonged run of slowed segment growth.

“This idea of predictive analytics can go beyond a factory floor,” Mr. Thill said. “It can go into a car, on to a bridge, or on to an oil rig. It can cross fertilize a lot of different industries.”

A number of companies are already trialling AWS Panorama. Siemens Mobility said it would use the tech to monitor traffic flow in cities, though would not specify which. Deloitte said it was working with a major North America seaport to use the tool to monitor the movement of shipments.

“Easy for us to get worried”

However, Amazon’s own use of tools to monitor the productivity of employees has raised concerns among critics. Throughout the pandemic, the company has used computer vision to ensure employee compliance with social distancing guidelines.

Swami Sivasubramanian, AWS’s head of machine learning and AI, said none of the services announced would include “pre-packaged” facial recognition capabilities, and he said AWS would block clients who abused its terms of service on data privacy and surveillance.

“When you look at this technology, sometimes it’s very easy for us to get worried about how they can be abused,” he told the FT.

“But the same technology can be used to ensure worker safety. Are people walking in spaces where they shouldn’t be? Is there an oil spill? Are they not wearing hard hats? These are real-world problems.”

© 2020 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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Oracle vulnerability that executes malicious code is under active attack

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Attackers are targeting a recently patched Oracle WebLogic vulnerability that allows them to execute code of their choice, including malware that makes servers part of a botnet that steals passwords and other sensitive information.

WebLogic is a Java enterprise application that supports a variety of databases. WebLogic servers are a coveted prize for hackers, who often use them to mine cryptocurrency, install ransomware, or as an inroad to access other parts of a corporate network. Shodan, a service that scans the Internet for various hardware or software platforms, found about 3,000 servers running the middleware application.

CVE-2020-14882, as the vulnerability is tracked, is a critical vulnerability that Oracle patched in October. It allows attackers to execute malicious code over the Internet with little effort or skill and no authentication. Working exploit code became publicly available eight days after Oracle issued the patch.

According to Paul Kimayong, a researcher at Juniper Networks, hackers are actively using five different attack variations to exploit servers that remain vulnerable to CVE-2020-14882. Among the variations is one that installs the DarkIRC bot. Once infected, servers become part of a botnet that can install malware of its choice, mine cryptocurrency, steal passwords, and perform denial-of-service attacks. DarkIRC malware was available for purchase in underground markets for $75 in October, and it is likely still being sold now.

Other exploit variants install the following other payloads:

  • Cobalt Strike
  • Perlbot
  • Meterpreter
  • Mirai

The attacks are only the latest to target this easy-to-exploit vulnerability. A day after the exploit code was posted online, researchers from Sans and Rapid 7 said they were seeing hackers attempting to opportunistically exploit CVE-2020-14882. At the time, however, the attackers weren’t actually trying to exploit the vulnerability to install malware but instead only to test if a server was vulnerable.

CVE-2020-14882 affects WebLogic versions 10.3.6.0.0, 12.1.3.0.0, 12.2.1.3.0, 12.2.1.4.0, and 14.1.1.0.0. Anyone using one of these versions should immediately install the patch Oracle issued in October. People should also patch CVE-2020-14750, a separate but related vulnerability that Oracle fixed in an emergency update two weeks after issuing a patch for CVE-2020-14882.

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Does Tor provide more benefit or harm? New paper says it depends

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The Tor anonymity network has generated controversy almost constantly since its inception almost two decades ago. Supporters say it’s a vital service for protecting online privacy and circumventing censorship, particularly in countries with poor human rights records. Critics, meanwhile, argue that Tor shields criminals distributing child-abuse images, trafficking in illegal drugs, and engaging in other illicit activities.

Researchers on Monday unveiled new estimates that attempt to measure the potential harms and benefits of Tor. They found that, worldwide, almost 7 percent of Tor users connect to hidden services, which the researchers contend are disproportionately more likely to offer illicit services or content compared with normal Internet sites. Connections to hidden services were significantly higher in countries rated as more politically “free” relative to those that are “partially free” or “not free.”

Licit versus illicit

Specifically, the fraction of Tor users globally accessing hidden sites is 6.7, a relatively small proportion. Those users, however, aren’t evenly distributed geographically. In countries with regimes rated “not free” by this scoring from an organization called Freedom House, access to hidden services was just 4.8 percent. In “free” countries, the proportion jumped to 7.8 percent.

Here’s a graph of the breakdown:

More politically “free” countries have higher proportions of Hidden Services traffic than is present in either “partially free” or “not free” nations. Each point indicates the average daily percentage of anonymous services accessed in a given country. The white regions represent the kernel density distributions for each ordinal category of political freedom (“free,” “partially free,” and “not free”
Enlarge / More politically “free” countries have higher proportions of Hidden Services traffic than is present in either “partially free” or “not free” nations. Each point indicates the average daily percentage of anonymous services accessed in a given country. The white regions represent the kernel density distributions for each ordinal category of political freedom (“free,” “partially free,” and “not free”

In a paper, the researchers wrote:

The Tor anonymity network can be used for both licit and illicit purposes. Our results provide a clear, if probabilistic, estimation of the extent to which users of Tor engage in either form of activity. Generally, users of Tor in politically “free” countries are significantly more likely to be using the network in likely illicit ways. A host of additional questions remain, given the anonymous nature of Tor and other similar systems such as I2P and Freenet. Our results narrowly suggest, however, users of Tor in more repressive “not free” regimes tend to be far more likely to venture via the Tor network to Clear Web content and so are comparatively less likely to be engaged in activities that would be widely deemed malicious.

The estimates are based on a sample comprising 1 percent of Tor entry nodes, which the researchers monitored from December 31, 2018, to August 18, 2019, with an interruption to data collection from May 4 to May 13. By analyzing directory lookups and other unique signatures in the traffic, the researchers distinguished when a Tor client was visiting normal Internet websites or anonymous (or Dark Web) services.

The researchers—from Virginia Tech in Blacksburg, Virginia; Skidmore College in Saratoga Springs, New York; and Cyber Espion in Portsmouth, United Kingdom—acknowledged that the estimates aren’t perfect, In part, that’s because the estimates are based on the unprovable assumption that the overwhelming majority of Dark Web sites provide illicit content or services.

The paper, however, argues that the findings can be useful for policymakers who are trying to gauge the benefits of Tor relative to the harms it creates. The researchers view the results through the lenses of the 2015 paper titled The Dark Web Dilemma: Tor, Anonymity and Online Policing and On Liberty, the essay published by English philosopher John Stuart Mill in 1859.

Dark Web dilemma

The researchers in Monday’s paper wrote:

These results have a number of consequences for research and policy. First, the results suggest that anonymity-granting technologies such as Tor present a clear public policy challenge and include clear political context and geographical components. This policy challenge is referred to in the literature as the “Dark Web dilemma.” At the root of the dilemma is the so-called “harm principle” proposed in On Liberty by John Stuart Mill. In this principle, it is morally permissible to undertake any action so long as it does not cause someone else harm.

The challenge of the Tor anonymity network, as intimated by its dual use nature, is that maximal policy solutions all promise to cause harm to some party. Leaving the Tor network up and free from law enforcement investigation is likely to lead to direct and indirect harms that result from the system being used by those engaged in child exploitation, drug exchange, and the sale of firearms, although these harms are of course highly heterogeneous in terms of their potential negative social impacts and some, such as personal drug use, might also have predominantly individual costs in some cases.

Conversely, simply working to shut down Tor would cause harm to dissidents and human rights activists, particularly, our results suggest, in more repressive, less politically free regimes where technological protections are often needed the most.

Our results showing the uneven distribution of likely licit and illicit users of Tor across countries also suggest that there may be a looming public policy conflagration on the horizon. The Tor network, for example, runs on ∼6,000–6,500 volunteer nodes. While these nodes are distributed across a number of countries, it is plausible that many of these infrastructural points cluster in politically free liberal democratic countries. Additionally, the Tor Project, which manages the code behind the network, is an incorporated not for profit in the United States and traces both its intellectual origins and a large portion of its financial resources to the US government.

In other words, much of the physical and protocol infrastructure of the Tor anonymity network is clustered disproportionately in free regimes, especially the United States. Linking this trend with a strict interpretation of our current results suggests that the harms from the Tor anonymity network cluster in free countries hosting the infrastructure of Tor and that the benefits cluster in disproportionately highly repressive regimes.

A “flawed” assumption

It didn’t take long for people behind the Tor Project to question the findings and the assumptions that led to them. In an email, Isabela Bagueros, executive director of the Tor Project, wrote:

The authors of this research paper have chosen to categorize all .onion sites and all traffic to these sites as “illicit” and all traffic on the “Clear Web” as ‘licit.’

This assumption is flawed. Many popular websites, tools, and services use onion services to offer privacy and censorship-circumvention benefits to their users. For example, Facebook offers an onion service. Global news organizations, including The New York Times, BBC, Deutsche Welle, Mada Masr, and Buzzfeed, offer onion services.

Whistleblowing platforms, filesharing tools, messaging apps, VPNs, browsers, email services, and free software projects also use onion services to offer privacy protections to their users, including Riseup, OnionShare, SecureDrop, GlobaLeaks, ProtonMail, Debian, Mullvad VPN, Ricochet Refresh, Briar, and Qubes OS.

(For even more examples, and quotes from website admins that use onion services on why they use Tor: https://blog.torproject.org/more-onions-end-of-campaign)

Writing off traffic to these widely-used sites and services as “illicit” is a generalization that demonizes people and organizations who choose technology that allows them to protect their privacy and circumvent censorship. In a world of increasing surveillance capitalism and internet censorship, online privacy is necessary for many of us to exercise our human rights to freely access information, share our ideas, and communicate with one another. Incorrectly identifying all onion service traffic as “illicit” harms the fight to protect encryption and benefits the powers that be that are trying to weaken or entirely outlaw strong privacy technology.

Secondly, we look forward to hearing the researchers describe their methodology in more detail, so the scientific community has the possibility to assess whether their approach is accurate and safe. The copy of the paper provided does not outline their methodology, so there is no way for the Tor Project or other researchers to assess the accuracy of their findings.

The paper is unlikely to convert Tor supporters to critics or vice versa. It does, however, provide a timely estimate of overall Tor usage and geographic breakdown that will be of interest to many policymakers.

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