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How a 2012 Decision Helped ‘Fortnite’ Make Epic Games a Billion Dollar Company

The surging success of “Fortnite” and its monumentally popular battle royale mode helped transform the already successful game developer and game engine creator Epic Games into a company worth $5 billion to $8 billion, according to the Bloomberg Billionaires Index.

While Bloomberg doesn’t identify how it came up with that number, it does cite analysts who seem to back it up. It also notes that Tencent owns 40% of the company, but that founder and president Tim Sweeney is the controlling shareholder.

While “Fortnite’s” impact on Epic Games can’t be underrated — references to the game have shown up everywhere from the World Cup, to the worlds of music and movies — the true driver of the company’s success was a decision it made in 2012 to shift away from big, boxed, marketing-driven titles and pricey games to a more agile company that gives away a bulk of its content.

In a case of the chicken or the egg, the decision to shift to what was known internally as Epic 4.0 was driven in part by the years-long development of “Fortnite,” which began as a small indie title inside the studio, and lessons learned there, Sweeney said back in 2016.

The realization that “Fortnite” would do much better as a free-to-play, evolving game led Sweeney to realize he had to change the direction of the company. “I would describe it as seeing the writing on the wall,” Sweeney said. “There was an increasing realization that the old model wasn’t working anymore and that the new model was looking increasingly like the way to go.”

“It boiled down to a decision: What do we do with our company? Do we enter into a new generation of publisher agreement and continue the way we were?” he says. “We ruled that out fairly soon after ‘Gears of War 3’ was released. We realized that the business really needed to change its approach quite significantly. We were seeing some of the best games in the industry being built and operated as live games over time rather than big retail releases. We recognized that the ideal role for Epic in the industry is to drive that, and so we began the transition of being a fairly narrow console developer focused on Xbox to being a multi-platform game developer and self-publisher, and indie on a larger scale.”

To get the money to change directions so drastically, Epic cut a deal with Tencent, selling it about 48% of the company’s outstanding shares, or roughly 40% of Epic, for $330 million.

That injection of cash allowed Epic to make some major changes, including dropping the monthly charge for its game engine and giving it away to anyone who wanted to use it. To balance that out, Epic took a royalty cut from anything created with its engine. The result immediately led to the company’s biggest profits for the engine in its history.

Going into this new phase, Epic refocused most of its game development efforts on three titles: “Paragon,” “Unreal Tournament,” and “Fortnite.”

And of the three gambles, it was “Fortnite” that hit biggest.

The decision to keep “Fortnite” in pre-release development for nearly five years before releasing it and the willingness to test out a new mode with battle royale both sprung from Epic’s 2012 decision to become a more agile company. The company is expected to make $2 billion off the game this year, according to analysts.

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