The race to one billion metaverse users is on and Epic Games has one hell of a lead.
It seems like there are so many companies currently vying for metaverse supremacy. Between small startups and gaming mega-corporations, there surely won’t be space for everyone at this table. Believe the hype or not, the metaverse is a promising opportunity for all; for the everyday user, a unique chance to connect socially and experience entertainment in ways only previously imagined. For brands and businesses, a personalised experience to rival previous incarnations of the internet.
Among all the companies laying foundations for the metaverse, surely none can rival Epic Games. Over the past few years, Epic has been acquiring other industry leaders, with one goal in mind, slowly crafting their portfolio in order to build their vision of the metaverse. It’s hard and a little foolish to ignore what Epic are building, given their current profile and many recent announcements.
Journey’s Beginning
Formally Potomac Systems (1991-1992), then Epic MegaGames Inc (1992 – 1999), Epic Games have established themselves as a core part of the videogame landscape. Currently headed by original founder, Tim Sweeney, Epic Games are responsible for more than just the games they’ve made.
Nowadays, Epic is known as the developer behind smash-hit battle royale Fortnite, a game with over 350 million dedicated players – a game known to pioneer, join people together and even break the internet. Fortnite began creating and breaking records from its initial release in July 2017, but before taking over the battle royale genre, Epic Games were known for the seminal Gears of War series, Bulletstorm, Robo Recall, Shadow Complex and, of course, Unreal.
Unreal was one of Tim Sweeny’s first games, working closely with Steve Polge and Cliff Bleszinski. The game became a sell-out hit, a shooter in the vein of DOOM and Wolfenstein. More than that, Unreal birthed the Unreal Engine. First seen in 1998, the core programming engine on which the game was built became a must for game developers and, beyond games, TV and movie studios.
Since then, the Unreal engine has gone through several iterations, becoming faster, more powerful and more versatile. So popular is the Unreal Engine, that the Wikipedia page for ‘games which use Unreal Engine’ feels seemingly endless. In April of 2022 Epic Games finally unveiled and released Unreal Engine 5, the latest version of the software. As ever, it was released for free via GitHub.
Epic has established itself as a company which helps developers, as they waive their royalties for games made with Unreal until the developer reaches $1 million USD in revenue. The Unreal Engine is so versatile it can create desktop PC games, console titles, mobile must-plays and even virtual reality experiences. It seems the possibilities are endless, it has become the ideal industry tool and it is perfect for constructing a persistent online metaverse.
Sweeney’s vision
Speaking to Bloomberg in November 2021, Tim Sweeney stated that: “over the coming decades, the metaverse has the potential to become a multi-trillion-dollar part of the world economy”. Sweeney has always been a proponent of the metaverse vision. He has spent years discussing the concept, but of course, since the conference where Mark Zuckerberg switched Facebook to Meta, things have begun to heat up.
Continuing with Bloomberg, Sweeney believes: “It’s kind of a race to get to a billion users, whoever brings on a billion users first, would be the presumed leader in setting the standards.” Given that elsewhere Sweeney has gone on record as saying he believes that Fortnite is more than a videogame, “it’s a platform for entertainment” one could assume he already believes that Epic has established the groundwork of the metaverse. And, given that Fortnite already sees more than 350 million users, they’re not far off that magical “one billion” number.
We can’t, however, forget some of Sweeney’s other comments about the metaverse; such as “The metaverse is like the internet. No one company can own it.” And how companies like Apple and Microsoft are creating “walled gardens” where users are hemmed in by centralisation and rules dictated by the overseeing company.
At this point, it’s difficult to say whether Epic games, should they establish a successful metaverse first, would hand over the reins to the users and fully decentralise the platform. But before that even becomes a question, Epic first needs to build the metaverse and looking at the many acquisitions which have taken place over the past couple of years, they’re in the perfect position to do so.
Fortnite
It would be remiss to discuss Epic Games’ metaverse plans without directly examining Fortnite. Nobody, not even Epic Games, thought that Fortnite would be the hit it became. The battle royale which now boasts over 350 million players, started as a side game to a PvE (Player Vs Environment) title. Taking cues from PlayUnknown’s Battlegrounds, Fortnite instantly captured the attention of gamers and streamers worldwide, due to its more accessible visuals and the addition of creating builds and bases on the fly.
Now, after years of dominating the gaming space, Fortnite has evolved beyond being ‘just another shooter’. Fortnite is now a platform for entertainment, which just happens to be a battle royale shooter. In the past couple of years, Fortnite has played host to Star Wars, Marvel comics takeovers, musical concerts, art galleries, short film festivals, and collaborations with fashion brands like Balenciaga and Nike.
Users utilise the digital V-Bucks currency to buy skins so they can look like tennis players or soccer superstars; they can buy passes which unlock comic book heroes. Millions of players turn up every season for live, interactive events which further an ongoing storyline spanning not just the game, but real-world crossovers.
Fortnite Valuable Statistics – supplied by Levvel.com
- By 2018, Fortnite had amassed 125 million players, this count then doubled by 2019. Player count now stands at 350 million.
- Fortnite brought in $5.1 billion in revenue in 2020 alone.
- The US player base currently takes up 27.52% of all active players, with Brazil taking second place with 8.08% and the UK taking 5%.
- The Marvel comics Galactus crossover event of Season Five saw 15.3 million concurrent users take part.
- Over the past year (2021-2022) Fortnite has held the top spot of the most-watched videogame on streaming platform, Twitch (supplied by Sullygnome.com)
- In 2020, 77% of players bought V-Bucks in-game to spend on the Item Store.
SuperAwesome
Before the acquisition, SuperAwesome had positioned itself as a way to keep kids safe while they’re online. Their infrastructure platform helped more than 300 companies – including Disney, Hasbro and LEGO – bring their products safely to children. SuperAwesome became the leading ad platform for brands to reach younger audiences. According to the SupserAwesome landing page, its technology helped reach over “half a billion under-16s across North America, Europe, LATAM and APAC.”
The focus was to bring children online and give them the platform everyone else had but within a safe environment. Of course, this plays into Epic Games’ primary audience, as many of the millions of Fortnite players are under the age of sixteen. Utilising SuperAwesome’s technology also gives creators and developers an opportunity to monetise their creations and experiences on the future metaverse platform.
SuperAwesome’s most recent focus fell on the metaverse and how they could aid companies in safely onboarding kids into an online world where they could socialise, play and discover. Epic hasn’t disclosed anything about what SuperAwesome will do now they find themselves under the Epic umbrella, but we can have an educated guess. In an interview with GamesBeat, Epic’s Todd Rowe said: “If you think about the internet, it was fundamentally designed by adults for adults, now we have an internet with … kids under 16.”
Rowe continues: “The ecosystem has been building out with more and more privacy laws for children, Epic is very focused on privacy with everything that they do. Epic has no plans to put ads into Fortnite.” It’s unlikely that we’ll see the tools used to establish changes within Fortnite beyond keeping kids safe during large-scale interactive events, but these monetisation tools will now, in theory, be available to any developer using Unreal Engine, which could very well be the building blocks of the metaverse.
Sketchfab
In July 2021, Epic Games acquired New York-based Sketchfab. Sketchfab is still operating as a separate brand, however, the purchase significantly bolsters the assets and tools available to Unreal Engine users. The Sketchfab marketplace offers creators a way to create and build 3D assets to be sold to other creators for everything from game creation, to movie making.
While there wasn’t much of a shakeup after the Epic buyout, users of Sketchfab did see a drop in subscription prices, and store fees dropped from 30% to just 12%. But why did Epic swoop in on this young startup? Sketchfab founder and CEO, Alban Denoyel said in the announcement: “joining Epic will enable us to accelerate the development of Sketchfab and our powerful online toolset.”
Most important was the last line of Denoyal’s announcement: “We are proud to work alongside Epic to build the metaverse and enable creators to take their work even further.” Establishing any part of the visual interface in the metaverse will require a lot of 3D models and what do Sketchfab have by the million? 3D models; but, more importantly, a catalogue of creators building them.
Harmonix
Even if you have no idea who Harmonix are, there’s a very strong chance you have played one of their games. Particularly if you took part in the ‘plastic peripheral’ era of gaming, which saw us all strumming on guitar controllers across the world. Harmonix created the Guitar Hero and Rock Band franchises which brought the idea of playing instruments to the gaming sphere. If you saw footage from these games, you’ll have noticed that they verged on the spectacular; creating venues, 3D bandmates and pyrotechnic displays to rival Coachella.
In the announcement post from the Harmonix blog dated 23rd November 2021, the company stated “we have aspired to redefine what a music game can be.” Up until very recently, Harmonix has carried on supporting their games; Rock Band keeps getting DLC tracks, FUSER and Rivals have been getting frequent updates and events, and they will continue to do so. You’ll notice that Epic rarely pulls the creators away from their creations.
But, once again, that word crept into the announcement with: “Now we’ll be working with Epic to once again challenge expectations as we bring our unique musical gaming experience to the metaverse.”
Epic are already well known for its music experiences within Fortnite, hosting a variety of acts including Ariana Grande, Travis Scott, Tones and I and Marshmallow. It’s not a stretch to imagine that Harmonix will aid Epic not only in staging these events, creating arenas and assets for the musical acts, but they could also bring a new level of interactivity.
Previously users have only been able to run, jump and perform scripted emotes during the performances, but with Harmonix’ expertise, we could see millions of users playing along to the songs using their controllers. These concerts have not only interested the pre-installed user base of Fortnite but each event has the potential to bring on new users who are fans of the musical act. Apply this to the metaverse and you have a gateway for potentially billions of users who want to attend a concert from the comfort of home.
Houseparty
A much older acquisition – well, old in terms of the recent buying spree – was Houseparty. Houseparty was a video-based app which allowed for easier video communication. Much like Zoom and Skype, Houseparty saw a boom in users during the Covid-19 pandemic as everyone stayed home. Houseparty was particularly popular due to its focus on friends and family; if a user was showing as online, they were free to video call. It was reminiscent of AIM and MSN chatrooms from the late-90s boom.
Epic Games bought Houseparty for $35 million in the hope that their expertise and technology could be applied to Fortnite, and “across the Epic Games family”. The Houseparty team got to work on bringing new features to Fortnite and left the old app and community behind. As reported by The Washington Post in September 2021, Houseparty closed its app announcing the team will work on “creating new ways to have meaningful and authentic social interactions at metaverse scale”.
While Houseparty did continue ‘Fortnite support’ for a time and users could pair their gameplay with the app to video chat their teammates, the function was soon shut down. However, given that communication is so integral to a metaverse platform, the Houseparty team are primed to create interesting and safe ways for users to stay in touch in this new world.
Digital Life
We can’t forget the tools Epic Games are publishing, often for free, which will enable creators to build the metaverse. It’s not just the extensive suite within Unreal Engine 5, but the tools developed internally and with teams from past acquisitions.
After buying out Capturing Reality, a company who developed photogrammatic software, Epic Games released its RealityScan app; this app is a free program which allows any smartphone to transform digital images into fully-rendered 3D models. The app was a collaboration between the team from Capturing Reality and Quixel, both now working under the Epic umbrella. Currently, in a limited beta, RealityScan is “yielding 3D scans with unparalleled accuracy and mesh quality at speeds many times faster than competing software.”
Then we have MetaHuman, which launched recently and had the internet abuzz, with many loading up the software to try it out. Perhaps the strongest tool outside of Unreal Engine 5, MetaHuman is a free cloud-based app which allows anyone to create photorealistic digital humans. If it sounds a bit ‘uncanny valley’ that’s because it is; but it’s a radically powerful tool for any would-be metaverse creator.
The key to this tool is the ability to import the MetaHuman data into Unreal Engine 5 creating anything from videogames to short films. MetaHuman couldn’t exist without companies which Epic Games has acquired over the years; the work of both 3Lateral and Cubic Motion, this app can unleash the potential of any creator. What can’t be stressed enough is that Epic Games publishes this software for free, further enabling bedroom creators of the future – those with the imagination to create something spectacular.
LEGO
On April 7th 2022, Epic Games and the LEGO Group announced the biggest metaverse news yet. The pair will be partnering to create a “metaverse, safe and fun for children and families” teaming up to “build an immersive, creatively inspiring and engaging experience”. Doesn’t give too much away, does it? But let’s look at this partnership plainly.
On the one hand, we have the LEGO Group, a toy synonymous with building from the imagination and implementing media brands, like gaming giant Nintendo, through new build sets. Then we have Epic Games, creator of Fortnite, a game about building and battling in an ever-evolving world, often featuring massive brand partnerships with the likes of Disney. Match made in heaven, right?
Details are understandably thin on the ground, but if we look at the official announcement blog post, we can leverage some information as to how this metaverse project might play out. Niels B Christiansen, CEO of the LEGO Group said, “Kids enjoy playing in digital and physical worlds and move seamlessly between the two.”
The LEGO Group has already tried to capitalise on this idea once before, with the short-lived LEGO Dimensions videogame. The series allowed players to explore the worlds of Batman, Doctor Who, The Simpsons, and more, by placing real-world LEGO figurines on a portal which brought them to life in-game.
Could we be looking at a similar implementation within the metaverse project? LEGO isn’t going to move ‘digital only’ and they could utilise QR codes or codes inside boxes of LEGO to add characters into their metaverse or even, into Fortnite.
Tim Sweeney was rather cryptic with his words on the partnership saying: “The LEGO Group has captivated the imagination of children and adults through creative play for nearly a century…” The focus here must be on the history of the LEGO Group. Further on in the announcement we see a mention of ensuring “this next iteration of the internet is designed from the outset with the wellbeing of kids in mind.”
This, of course, loops back around to SuperAwesome and their goals within Epic Games; to create a safe, online space for children to use. An admirable goal and one which should be paramount moving forward. However, let’s not overlook the money on the table and both the revenue and opportunities which can come from these two powerhouses working together. These are companies who regularly collaborate with Disney, Marvel, DC Comics, Adidas, Harry Potter, even Swedish furniture labyrinth IKEA.
The possibilities for collaborations are, like the imagination, endless.
Epic Game Store
The Epic Game Store hasn’t been around for long. It launched on 6th December 2018 as a platform to rival Steam, which has been servicing PC gamers for years. It took some time to establish Epic Game Store as a genuine alternative, Epic utilised exclusive game launches, as well as offering weekly free games in order to create user accounts – when Epic offered Star Wars Battlefront 2 for free in January 2021, over 19 million people logged in to obtain a copy, crashing the servers.
Much like in other aspects of their business, Epic has attempted to position itself as a leader who cares about creators and the community. Much like the revenue shares for those using Unreal Engine or listing 3D assets on Sketchfab, the commission percentages were internally scrutinised. The Epic Games Store uses revenue guarantees for developers should their game underperform on release.
For most sales, Epic takes a 12% share of the revenue generated, with the rest going directly to the developer. However, for any game using the Unreal Engine, Epic forgoes the 5% revenue-based fee for those games. After other fees and services, Epic’s profitability is around 5% of gross revenue.
Why does all this matter? Because Epic is attempting, with these rules and the above acquisitions, to establish a creator-based economy and appeal to, or lure, developers of varying sizes over to the Epic Games team. Any metaverse will require users to create content for others, whether they’re professional or bedroom creators. By establishing these friendlier creators’ revenue percentages, Epic is more likely to bring in those who will build everything from player avatars to fully interactive experiences.
Investments
At this point, it’s worth pulling up some financial details. Epic Games is owned by Chinese multinational technology and entertainment conglomerate, Tencent. Tencent is currently one of the largest games developers and publishers in the world; they’ve held a 40% stake in Epic Games since 2012, while CEO Tim Sweeney holds the remaining 60%. In 2020, Epic managed to generate $5.1 billion while raising $1 billion through a funding round in April 2021 and a further $2 billion in April 2022. This values the company at roughly $31.5 billion.
More important than the monetary amounts however are the companies investing, as this gives us a good indication of their intent. For example, the latest round of investments saw both Sony and Kirkbi (the owners of the LEGO Group) invest $1 billion dollars each, specifically to “build the future of digital entertainment”.
In the blog post update, which detailed the newest investment figures, Epic Games noted: “Today Epic Games announced a $2 billion round of funding to advance the company’s vision to build the metaverse and support its continued growth.” While we can speculate and pose thoughts about the acquisitions, this blog post calls out the investment as metaverse funding. Of course, with the secrecy of Epic Games, we won’t know for some time how the money will be used, but it shows that not only are Epic going ‘all in’ but so are Sony.
It should be noted that in the April 2021 investment round, Sony only put $200 million in, with the sentiment still being focused on the metaverse. As Tim Sweeney remarked at the time: “We are grateful to our new and existing investors who support our vision for Epic and the Metaverse.”
Think back to Mark Zuckerberg changing the Facebook company name to Meta, which positioned the company as an industry leader for the metaverse concept. This happened in October 2021, yet Epic Games’ CEO was announcing his plans six months prior. While the world looked at Zuckerberg and Meta, they forgot to keep an eye on Sweeney and what he’s already built.
While Sweeney was gung-ho with his views on the metaverse after the initial Sony investment, the term wasn’t mentioned directly by Sony; Kenichiro Yoshida, chairman, president and CEO of Sony Group Corporation said at the time: “Epic continues to deliver revolutionary experiences through their array of cutting edge technologies that support creators in gaming and across the digital entertainment industry… I strongly believe that this aligns with our purpose to fill the world with emotion, through the power of creativity and technology.”
Despite the many investments and the positive steps forward in creating a stable foundation for metaverse plans, Tencent’s stock – where Epic Games find itself – is at a major low right now. There could be many reasons behind this slump, but a key factor to monitor is the current sweep of crackdowns against the internet industry within China.
Chinese internet censorship is among the most comprehensive in the world. Both Twitter and Facebook have been banned in China since 2009, so the idea of an open internet platform, constructed by a key player from Tencent’s portfolio could be counter to Beijing’s views. As explored by TechCrunch in November 2021, Tencent commented Beijing is: “not fundamentally averse to the development of metaverse,” as long as the user experience is “provided under the regulatory framework.”
From an earnings call by Tencent in November 2021, CEO Pony Ma said: “Anything that makes the virtual world more real and the real world richer with virtual experiences can become part of the metaverse.” It seems the view will be a slow build, utilising the technology available, but the positive growth in the stock market may only come when those regulatory measures for the metaverse have been put in place.
Journey’s End
If you were to open an Epic account today with a view to play Fortnite, once you’ve entered the Fortnite lobby/menu, you would find a metaverse seedling. In one corner, there are user-created game types, in another, more user-created content in the form of worlds which can be explored. If we take a look over the history of the battle royale game, taking in the past year, we can see collaborations with artists, social justice charities, movie production companies, comic book creators, musicians and sports stars.
Fortnite’s overarching storyline occasionally leaks out into comic books from Marvel and DC, bringing the two mediums closer than ever; while toy manufacturers design action figures based around the game’s most popular skins. Sometimes the lobby advertises a band or DJ who will be performing within an interactive space and the item shop, which trades in digital currency V-Bucks, advertises skins to make your character stand out or look like your favourite celebrity.
Yes, Tim Sweeney and Epic Games are forgetting his comments about ‘walled gardens’ considering Fortnite is a centralised product with its own currency, but there’s no doubting the scope of this already established metaverse aspiration. When taking the Epic Games acquisitions into account, the building blocks are being laid constantly; there are plans to protect kids who want to explore the metaverse or create new content; there’s a huge catalogue of 3D assets for people to use; the video and chat communication is fully fleshed out; on top of this, creeping into every aspect, is the Unreal Engine.
It’s also worth noting that Epic Games has spent the past two years breaking down barriers within gaming’s infrastructure – if it weren’t for Fortnite, the idea of cross-platform play and cross-platform progression would be stuck in the past. Before Epic Games pushed and urged Sony, Microsoft and Nintendo, there was little cooperation between the platforms. Now, however, if you buy a skin for Fortnite on your Xbox, it’s also on your Switch and PC versions of the game. This action can be viewed as the first small steps towards that decentralisation the metaverse so desperately needs.
There is still a long way to go, of course, but the blueprint, and more importantly, the funds and infrastructure are there. Epic has all the tools they need to forge ahead and create the metaverse foundations, leaving others to build upwards. We’ve already seen how Fortnite established a platform for community creators to craft new and exciting experiences; these same builders will be the ones to flesh out the metaverse by adding character and flair.
While Epic’s rivals are dipping their toes in the muddy waters of the metaverse and making waves for the wrong reasons, Epic Games has dived in, got back out, built a boat and is mapping uncharted seas. The race to one billion users is on, and Epic has a hell of a head start.
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