How Epic Games Makes Money?
the numbers behind the esports behemoth
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How Epic Games Makes Money?
Founded by Tim Sweeney in 1991 and based in North Carolina, Epic Games is a software company that develops, publishes, and distributes video games.
Tencent Holdings (also known as “The Apple of China”) became the first outside investor in Epic Games in 2012 when they bought over forty-eight percent stake in the business for 330 million USD.
Epic Games was worth 17.3 billion USD after a 1.78 billion USD funding deal in its last valuation.
I’m sure you’ve heard about Fortnite – the world’s most popular battle royale game with over 350 million players. Well, Fortnite is an Epic Games production.
Besides Fortnite, Epic owns the Unreal Engine software, which powers many of the world’s top games, and industries such as film, architecture, automotive, manufacturing, and simulation use it.
Today, Epic is a leading interactive entertainment company and provider of 3D engine technology.
If you’re interested in game development, creation, and design of virtual animations, check out this video about Epic Games’ Unreal Engine (spoiler alert: it is surreal):
Fortnite made 2.4 billion USD in revenues in 2018 and 1.8 billion USD in 2019 — and the videogame accounts for over 40% of Epic Game’s annual revenues.
The most surprising fact of them all is that Fortnite itself is a free game!
An Epic Business Model
Epic provides an end-to-end digital ecosystem for developers and creators to build, distribute, and operate video games.
Their business model has three primary revenue sources: Fortnite, Unreal Engine, and Game Store.
Fortnite
Fortnite has various monetization strategies.
The videogame is free, but they offer in-game purchases such as outfits, skins, and accessories paid with real money. Ironically, none of the assets can give you a competitive advantage in the game, but millions of people still buy them!
Additionally, Fortnite hosts paid events, engages in numerous sponsorships, sells merch, and offers an alternative paid version of the game.
An Unreal Engine
Epic doesn’t charge other companies to use the Unreal Engine — it is free. Epic takes a 5 percent cut of all gross revenue on applications created using the Engine.
More than 7 million people currently use the license of Unreal Engine.
Lastly, Epic also generates revenues from its Game Store — a virtual store that hosts and distributes videogames made by third parties — where Epic takes a 12% share per sale to cover the store's operating costs and still make a profit.
Due to the pandemic, the video game industry has experienced a significant increase in demand as consumers look for alternative forms of interactive entertainment. From this, I’d expect Epic Games to get some benefit from it in the short run but more substantially in the long run.