Epic Games CEO Tim Sweeney opened the Unreal Fest Seattle event today with an update on news that included a blistering criticism of monopolistic platform owners.
Sweeney is a big proponent of open platforms and the open metaverse. In fact, he will talk about that subject in a virtual talk at our GamesBeat Next 2024 event on October 28-29 in San Francisco. (You can use this code for a 25% discount: gbn24dean). And so Sweeney continues to pressure the major platforms to give more favorable terms to game developers.
He started out on that front by giving a price cut for users of Unreal Engine 5, Epic’s tools for making games. For those who release games first or simultaneously on the Epic Games Store, Epic is cutting its royalty rate from 5% to 3.5% for Unreal developers.
He noted that Epic is in better financial shape than it was a year ago, when Epic had to lay off a lot of staff. Sweeney said the company spent the last year rebuilding.
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“I’m happy to tell you now that the company is financially sound and that Fortnite and Epic Games Store hit new record records in concurrency and success,” he said.
Fortnite reached a peak last holiday season of 110 million monthly active users, and Sweeney said the Epic Games Store is seeing record success. He said the company has emphasized the shift toward large social games and the concept of the metaverse. The strategy includes unifying Unreal Engine 5’s high-end features with Unreal Editor for Fortnite (UEFN) to create Unreal Engine 6, aiming for easier, scalable game development.
He also noted the financial cushion that came from a $1.5 billion investment from Disney, which has teamed with Epic Games to create a Disney-based virtual world with all of Disney’s characters — interconnected with the world of Fortnite. He noted Epic’s small but important victory against Apple in court in the U.S. and in the regulatory arena in the European Union, enabling developers to promote alternative app stores without (too severe) penalties from Apple.
And he noted Epic’s legal victory against Google’s app store Google Play in Epic’s antitrust lawsuit (alongside the federal victory over Google in a search-related antitrust case). But he still had harsh words for Samsung and Google, noting a fresh antitrust lawsuit over their alleged collusion to block Fortnite’s return to the Samsung app store on Android smartphones.
Sweeney noted there is a generational change in the game industry, with established titles with familiar gameplay not doing as well with consumers, while players are gravitating to big games with more friends.
“This is all happening in the context of a game business. It’s rapidly changing in a way that we’ve only seen a few times in our lifetimes as game developers. It’s a generational change, and while the one of the manifestations we’re seeing right now is a lot of games are released with high budgets, and they’re not selling nearly as well as expected, whereas other games are going incredibly strong,” Sweeney said. “What we’re seeing the real trend here is the players are gravitating towards the really big games where they can play with more of their friends. And so this is a manifestation of Metcalfe’s Law,” about how the value of a network or social experience grows in proportion to the number of friends you can connect to.
“And in the world of gaming, that means that you and your friends getting together and playing games, chatting by voice, attending concerts and doing all other kinds of cool virtual things online,” he said. “And this trend — some people will call it the metaverse, and we’re not all in agreement on what this means. Some people, when they hear the word metaverse, they think of what Facebook is doing with VR and now AR. Some people use the metaverse to describe everything they don’t like about the current Fortnite season. But when you look at what’s happening in the world of Fortnite, it’s new and it’s exciting, and it’s something that never happened at this scale in the history of entertainment, with all an original story that’s evolving with original content and also all the world’s brands participating, dropping in, musicians, reaching users, Disney and Star Wars and others, all coming together to create a world class entertainment experience.”
This is the future of gaming, he said.
Back to growth
“The primary goal for this decade is to help all developers achieve” their growth goals, he said. “And our strategy for doing this over time is to share everything we’ve built with you so that you can do these same things. And this is not just a message to game developers. It’s also a message the entire real time industry.”
That means film and TV makers can use Unreal Engine for virtual production on a massive scale. So can architecture firms, automotive companies, fashion, music, enterprises and gaming, he said.
“The common thing all of this shares is that we all aim to reach the world with our stuff, and we’re all using the same tools to make this come together in an unprecedented skill. I think Fortnite is just one demonstration. Other games are doing similar things, but as this is adopted more widely by the entire world, we think it’s a growth opportunity for everybody, and we’re way out of the game industry’s current malaise,” Sweeney said.
Epic’s next journey is to create Unreal Engine 6. There’s Unreal Engine 5 for high-end game development in consoles, mobile games and PCs. And there is a new thread of development for user-generated content makers and smaller companies using Unreal Editor for Fortnite.
“Over the next few years, we’re going to be bringing these two development [threads] together,” he said.
That will lead to Unreal Engine 6 and foundations for gameplay programming that are easier to learn and more scalable.
He said Epic will help enable everybody to build a game once and then choose one platform or to ship it to all platforms and all the app stores at once.
On the metaverse, he said Epic is participating in standards bodies like the Metaverse Standards Forum and other groups to define standards applicable to all engines and all digital content creation tools.
“The ultimate aim of this effort is to achieve technical interoperability between games and game engines of all sorts, and to achieve economic interoperability in an open system,” he said. “The game developers can easily build experiences standalone or in Fortnite or anywhere. Purchases in one place are honored in other places, and the entire economy is an open economy where everybody can participate.”
He said that Epic and Disney are working together to build a “new Disney ecosystem that is Disney’s but is also fully connected to Fortnite, such that anything you get in one place can work in the other place, and your experiences aren’t disconnected, and you have the same friends, same items and the same the same social experience as you go.”
He said this partnership is just the first step towards an open system in which all companies and creators can participate together in the future as peers.
More litigation
He said one really important aspect to this effort is “Epic’s fight to open mobile platforms to competition because for a vibrant digital ecosystem to exist in the future, we need fair competition into these monopoly rent collectors now.”
He said the app stores focus on limiting what developers can do, imposing more restrictions to prevent things like the metaverse from happening, or to tax developers to the point where they’re extracting all of the profits from a game’s sales.
“We’re at a point now where game development is expensive. It’s low margin, and game companies are suffering. Apple and Google make way more profit from most games than the developers make themselves, while contributing nothing,” Sweeney said.
So Tim, tell us how you really feel.
He noted how he grew up programming an Apple computer to follow the Steve Wozniak vision for Apple, not the modern corporate vision of Apple. He misses the days when you could do anything with a computer, with not need to ask a corporation’s permission for anything. He noted that is why there is more innovation on Windows, Mac and Linux than on the mobile platforms. He referred to Apple and Google as gatekeepers.
“Among the fights we’ve taken on here, he noted the case with Apple is still an ongoing fight to open up payments so developers can process payments without Apple mediation and without Apple fees,” he said.
He noted the “massive victory” against Google in a jury trial late last year, when Google lost on all counts in antitrust litigation. He noted the European Union’s implementation of the Digital Markets Act, which enabled Fortnite to return to iOS in Europe.
And he said the United Kingdom and Japan have passed new laws, and there’s major legislation in many major developing countries all around the world.
“The world is changing for the better. There’s much more to do. We’re going to keep fighting on until there’s a victory,” he said.
I’ve asked Apple, Google and Samsung for comment.