Overview:
• With 200 million users the world’s most viral video game Fortnite is Epic’s cash cow today.
• It’s Unreal Engine, which powers Fortnite and many other games, is a key to the Cary, North Carolina-based company’s recent $15 billion valuation.
• Unreal Engine has 7 million users from the game design and enterprise community.
• Unreal Engine is positioned to take Epic into other sectors, such as manufacturing and madicine.
Today, the Epic Game company, behind the Fortnite video game has been generated at almost $15 billion. The game is considered a cross between Minecraft and The Hunger Games has proved the most popular since its release last year by Epic Games. The game is free to download; the company makes money by charging players for costumes and other embellishments in virtual in-game currency.
The Epic Game, Cary, North Carolina-based Company founded in 1991 in CEO Tim Sweeney’s basement. It has been a force in gaming and computer graphics for many years. With 200 million users Epic Games’ Fortnite has generated revenue reported at $1 billion.
Unreal Engine has 7 million users from the game design and enterprise community. It is positioned to take Epic into many sectors, from architecture to medicine and car manufacturing.
However, an explosively popular game like Fortnite can’t grow a user base forever. Fortnite players have brought in an approximately $1 billion through so-called in-game microtransactions, where players pay for cosmetic upgrades, according to Nielsen company SuperData.
But the most viral game is producing so much cash it is allowing Epic to push into areas that may in the fullness of time become as important to its long-term value.
The role of Epic Games’ Unreal Engine in gaming:
Game engines like Unreal are the software that particularly uses to build creations and tools. These tools help render graphics and control actions in a game’s environment such as collisions. Originally, Epic Games created the engine for its Unreal series, and then spun those development tools out into Unreal Engine.
Fortnite has been proved the great marketing tool yet for Unreal Engine’s technological developments, especially the cross-platform capacity which allows the game to run on smart phones to high-end PCs. A key competitive advantage from Fortnite’s scale and success is how Unreal designers can use feedback to enhance the capabilities of the engine.
The Unreal Engine is considered a big reason for generating $1.25 billion from venture and private equity leaders Kleiner Perkins and KKR. It has changed Fortnite into a household name will become critical to technology across many areas of the economy, from architecture to car manufacturing and medical research.
According to Jud Waite, senior analyst at CB Insights. “In a way, the Unreal Engine is to Epic Games what AWS is to Amazon. Both companies monetize the proprietary structure used to support their core businesses. Over time, these infrastructure offerings have become core businesses of their own.”
How Epic Games generates valuation from other sectors
No doubt, venturing beyond gaming isn’t new for Epic. Nowadays, Epic is not generating money directly from charging other companies in order to use the Unreal Engine, it is free of cost.
Despite of more than 7 million people currently license Unreal Engine 4 for both gaming and enterprise use, according to Epic data. However, Epic collects a 5 percent cut of all gross revenue on applications, created using the engine once they make $3,000 per quarter.
For example, Epic is getting money from Fortnite’s main competitor, PlayerUnknown’s Battlegrounds, created by South Korea’s Bluehole using the Unreal Engine. Although Epic declined to name studios with which it has custom deals. But the company has some arrangements with game studios that may pay a customs fee rather than the royalty agreement.
Architecture firm HKS used a previous iteration of the Unreal Engine in 2007 to produce a virtual environment of the new Dallas Cowboys stadium that clients could virtually walk through.
But Epic’s reach is spreading as the technology advances and more industries incorporate high quality graphics. Since the inception of the latest version, Unreal Engine 4, the company has grown an enterprise team that deals architectural visualization and other non-gaming markets. Many of Epic employees are now dedicated to supporting non-gaming markets.
The corporate use of virtual reality
In order to adopt the expensive virtual reality, hardware consumers have been slow. However, enterprise applications in the corporate world are high. This virtual reality space is the main area to see for Epic and its important game engine competitor Unity Technologies. “They’re the ones powering that technology – it’s clearly a good opportunity,” said Carter Rogers, principal analyst at SuperData.
A specific interesting new sector for Epic is medical research. Pharmaceutical research firm C4X Discovery based in England recently starting using Unreal Engine technology to visualize and manipulate 3-D molecules in virtual reality, with the potential to let scientists collaborate remotely in the virtual environment.
Epic makes money from the effort of its enterprise. When customers go for paid support services that include onsite visits and access to a community of developers within Epic, who developed the Unreal Engine and third-party developers who use the engine and are experts. But most enterprise users of the Unreal Engine prefer free version, and that makes sense at a time when industry-wide monetization of augmented reality and virtual reality solutions remains elusive.
Epic’s position is that visual content will continue to move in the VR direction. But it is still the early days for the enterprise market. Epic needs to focus on building out features and proving that a pipeline of technology within the Unreal Engine. The company needs to give foundational learning for companies interested in presenting their clients in a VR environment.
Car manufacturers like McLaren, Audi, and BMW recently participated in an Unreal Engine enterprise technology event Epic held in Germany.
Epic CEO Tim Sweeney predicts that by the end of 2019 enterprise users of Unreal Engine will overtake game users. And ultimately, he thinks industry-specific and entertainment uses will converge as part of a bigger digital industry. “The thing that really interests me is seeing visual assets crossover between different media,” he said, giving as an example a model created in an architectural firm that could be dropped into an entertainment experience.
