After years of multi-million dollar mergers and acquisitions, the video game industry is beginning to show signs of a hangover. The last test? The company that created the popular game Fortnite, Epic Games, has announced today that it will lay off 16% of its workforce, around 830 workers.
In a statement, the founder and current president of Epic Games, Tim Sweeney, justified the layoffs by explaining that they are necessary to keep the company afloat. “Over the last few years we’ve spent more money than we’ve made trying to grow Fortnite,” he says. The plans, however, have not gone as expected.
Fortnite, a combat game in which 100 players fight to become the last survivor on the map, was launched in 2017 and in a few years it became a global phenomenon. The game, designed to be played with other people over the network, is free, but Epic sells virtual accessories to decorate the characters and weapons, which are its main source of income.
In recent years, and given the popularity of the game, the company has managed to reach lucrative agreements with big brands, such as Marvel or Star Wars, which in turn have kept players interested in this type of virtual accessories. Nearly 300 million people around the world play at least one game of Fortnite every month.
But the formula has begun to show signs of exhaustion and the growth of the game, after the pandemic, was stagnant. Epic has tried to position the game as a social platform in which players, in addition to participating in these battles, can attend virtual concerts or exhibitions, a kind of metaverse but without virtual reality headsets.
The strategy, at the moment, does not seem to be giving the expected results. “Although Fortnite is growing again, it is doing so primarily through community-generated content, which has less margin for us,” explains Sweeney.
The company has other historical franchises of great importance in the world of electronic entertainment, such as Unreal or Gears of War. It is also the owner of an important virtual video game store, the Epic Store, and develops Unreal Engine, a graphics engine that other companies use to create their own games. None of them, however, have the weight of Fortnite within the industry.
The game is so relevant that, in August 2020, Epic decided to bet that it would have enough muscle to force Apple and Google’s hand in the digital distribution market.
Epic tried to bypass the AppStore and Play Store rules regarding purchases of virtual items within games to avoid paying the 30% that these companies charge as a commission on any transaction. It was immediately kicked out of stores, losing an important source of income.
The decision precipitated one of the most important judicial processes in recent US history. Finally, the courts agreed with their rivals by not considering Apple or Google as monopolies within the electronic entertainment sector. Epic has appealed this decision and is waiting for the US Supreme Court to rule.
The layoffs are part of a series of decisions that the company has made to cut expenses, and which according to several analysts, is motivated by an attempt to attract new investors. The company, for example, has announced the sale of Bandcamp, a music store it bought in 2022, to Songtradr. It will also separate SuperAwesome, a development and marketing studio focused on children’s experiences, from its structure, making it an independent company.