It is a “time of both crisis and opportunity” for the games industry, Epic Games CEO Tim Sweeney said in his concluding remarks at today’s Unreal Fest address, where the Unreal Engine and Fortnite maker demonstrated new features coming to its development tools.
The kids are playing more games than ever and Fortnite is growing again, Sweeney said, but “a huge number of the new releases of major games are failing.”
“We’re seeing often hundreds of millions of dollars of dev cost, followed by tens of millions of dollars of revenue, and the dev costs are continuing to grow,” said Sweeney. “It feels to many like a tidal wave is sweeping over the AAA game business.”
Sweeney’s assessment of the problem echoed sentiments I heard repeatedly at the Game Developer’s Conference back in March: Gamers want social online experiences, but it’s extremely hard to break in and compete with the biggest platforms, like Roblox. Players go where their friends already are, and are more willing to buy in-game items in games they know will still be around in a year.
“One view of the future is that Roblox grows and eats gaming,” Sweeney said. “A lot of people are saying this online, but you know, what you have there is a centralized platform with a single gatekeeper that commoditizes all content, takes more than 70% of revenue, and has 450 million users on board, and so that’s a real challenge to game developers.”
Epic believes in a “much brighter” future for developers, said the CEO, in which they rally around Epic’s metaverse vision to collectively take on Roblox with a network of Unreal Engine games, “linking up our content, linking up our communities, and linking up our economies.”
“We’re going to need to build better games,” Sweeney said. “We’re going to need to build them more efficiently. We’re going to need to design up front and build for connected games, where all of our playerbases are connected socially and our economies are connected, so that players, instead of seeing these as isolated products, see them as part of a global ecosystem that all game developers participate in together.”
Rather than focusing on graphics tech, Epic is pitching the upcoming Unreal Engine 6 as an upgrade to efficiency (it’s getting generative AI integration) and interoperability. Make a game in Unreal Engine, and not only can you release it as a standalone executable, but also as a game within Fortnite, or within another Unreal Engine product.
The ecosystem Epic currently offers up is generous compared to the Roblox example. Unreal Engine is free to use for game developers, and Epic collects a 5% royalty only when a game surpasses $1 million in revenue. The Epic Games Store offers a similar deal, waving fees for the first $1 million in revenue, and after that taking a 12% cut.
Sweeney has also been a vocal critic of Steam’s 20-30% cut, as well as its requirement that games use its payment processor for in-game purchases, something he’s famously gone to battle with Apple over. Developers are free to bypass the Epic Games Store’s fee for in-game purchases by using their own payment processing solution.
A Roblox-sized network of games and players based on those terms—low fees, the freedom to publish across many platforms, and so on—does sound like a boon for developers of that kind of game. But the natural question I’m left with is: How do the games I like fit into this vision?
A “global ecosystem” of social experiences, where no one bats an eye if Darth Vader walks into a room next to Homer Simpson, would not seem appropriate for, say, The Witcher 4, which featured at the last Unreal Fest. Is the “tidal wave” of growing development costs really going to wash away the old-fashioned ‘make a big RPG and sell it’ model, turning even those games into hangout spaces optimized for brand partnerships and cosmetics sales?
Epic doesn’t seem to think so—it, after all, funded Alan Wake 2 and the new Fumito Ueda game—but based on today’s address, it’s not where it foresees its next billions coming from.