Fortnight Developer Epic Ploughing Profits Into Games Development Platform

Epic Games, the developer behind the smash hit video game Fortnite has decided to make hay while the sun is shining by ploughing the profits it is generating into further developing its Unreal Engine platform. The platform offers third-party game developers a tool kit that allows them to build highly-realistic virtual characters and digital worlds. The platform can be used for free but Epic Games retains the rights to 5% of the royalties generated by any game built on it.

While Fortnite’s popularity has dipped from its peak level of autumn last year (2018), the freemium shooter game, which has a last-player-standing “battle royale” style of gameplay, still generates tens of millions of dollars every month by players spending on add-ons such as new costumes and accessories for their characters. However, that income has been falling quarter-to-quarter for the past year.

Now, instead of attempting to develop another game as popular as Fortnite itself, Epic has decided to reinvest its profits in expanding and improving the Unreal Engine’s toolkit. The hope is that future breakout gaming titles created by third-party developers will be built on the platform, giving Epic a steady stream of royalties.

To that end, Epic has been on an acquisition spree over the course of 2019. The company, which counts Chinese gaming and tech giant Tencent among its major investors and shareholders, has purchased gaming technology companies including 3Lateral, Quixel, Agog Labs and Twinmotion.

3Lateral is a digital character design and animation company whose CV includes work on Grand Theft Auto V. Quixel owns an extensive library of photorealistic assets that have been used in films such as Marvel’s Black Panther and the live action Lion King remake. While Twinmotion is used by designers and architects to create 3D visualisations of buildings or landscapes and Agog Labs automates parts of the game development process. Technologies and other resources of all four will be integrated into the Unreal Engine platform’s tool kit.

Gaming industry analysts are generally positive on the direction Epic has chosen to take, with George Jijiashvili, an analyst at the tech consultancy Ovum, commenting for the Financial Times:

“Propelled by Fortnite’s massive financial success, Epic Games has successfully re-established itself as a force to be reckoned with and is shaking up the entire gaming industry.”

Unreal Engine is actually twenty years old and was first created by Epic Games long before the developer’s more recent success with Fortnite. It, and competitors such as London-based Unreal and San Francisco’s Unity Technologies, are making the kind of technologies used by the big gaming and Hollywood studios available to a much wider market of smaller game developers.

Earlier this year Epic’s chief technology officer Kim Libreri, a visual effects veteran who counts The Matrix among his film credits, detailed how the Unreal Engine toolkit would soon allow games and film-makers to create virtual characters and digital worlds barely distinguishable from real life:

“We want to make it that for normal game creators or normal people making interactive experiences, we take the mystery out of it . . . That’s our big project for the next couple of years. It’s becoming pretty obvious that in the next 10 years, the virtual world and the real world will merge into one. You won’t really be able to tell the difference between one and the other.”

Piers Harding-Rolls, a gaming industry analyst at market researchers IHS Markit further commented on Epic’s business model pivot:

“Epic’s evolution during the past 18 months or so has been pretty significant. It has built a direct-to-consumer business, is seeking to compete with incumbent storefronts in PC and mobile and wants to disrupt the distribution model for digital content.”

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