Games

Epic Games & The Road To A $28.7 Billion Valuation

How Epic Games got to $28.7 billion in total value

The stocks market has valued Epic Games, the company behind the hit game Fortnite and the Unreal engine, at around $28.7 billion during the earlier part of the year. Not to mention they achieved this as a mostly independent developer throughout this journey.

The news of the company’s latest valuation was released as they prepare to engage in what may be another epic encounter against Apple regarding a disagreement over App Store fees, resulting in Apple’s removal of Fortnite from their platform.

Under the leadership of Tim Sweeney – who is the founder, CEO, and controlling shareholder – the Cary, North Carolina-based game developer has faced many obstacles over the course of its 25 years in the field. However, Epic Games has since proven its ability to successfully adapt to suit the changing environment.

As Sweeney puts it, Epic Games have had to evolve 4 times in order to remain competitive. To him, the company started at 1.0. Then progressed to 2.0, 3.0, and then its most recent evolution – Epic’s transition to its 4.0 phase.

Epic 1.0

This epic journey began in 1991. When Sweeney used his parent’s house in Potomac, Maryland, as his base of operations. Then founding the company Potomac Computer Systems. This was the pre-epic phase. The company’s big break came from the unexpected commercial success of ZZT, a game that could easily be modified through Sweeney’s ZZT-oop programming language. At the time, Sweeney distributed ZZT Bulletin Board Systems.

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In 1992, Sweeney decided that gaming was the right direction. Which led to the decision to change the company’s name to Epic Mega Games. From there on, the company focused on releasing shareware games like Epic Pinball and Jill of the Jungle – a period that lasted until 1998.

Epic 2.0

From there, Epic MegaGames began its metamorphosis with the release of Unreal in 1998 – a first-person shooter that denoted a major shift from 2D to 3D gaming.

The following year saw another name change, this time the company chose to remove the Mega from its name and called themselves Epic games – also shifting its base of operations to Cary, North Carolina. During the same year, Epic Games partnered with Digital Extremes and GT Interactive on the development and distribution of Unreal Tournament – a multiplayer-focused follow-up to Unreal.

It would not be very long before Epic Games would have to adapt again.

Epic 3.0

Starting with the release of Gears of War in 2006, Epic Games began its 3.0 phase that would see the company redirecting most of its resources away from the PC market and catering more to the console market.

This led to the Unreal Engine and the Unreal Tournament franchise finding success on consoles as well. They followed by other commercial successes like Infinity Blade in 2010 and Bulletstorm in 2011 – in the same year announcing Fortnite, arguably the company’s most successful titles.

One of the most significant events of the Epic 3.0 era happened in June of 2012. This is when Chinese tech giant, Tencent, acquired a 40% stake in the company through a $330 million investment. This fell in line with Sweeney’s vision of moving the company towards a GaaS (Games as a Services) business model.

“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.” Sweeney started at the time.

However, Sweeney also points out that Tencent’s stake in Epic Games does not give them any suffrage in the development of the games.

“Epic Games is incorporated and has a board of directors that make[s] major financial decisions about the company but doesn’t involve itself in the design or product development of games,” further stating that “Their expertise is how to operate these games on the large scale and to really appeal to customers, and we found that their values are very similar to ours and that we had a great deal we could learn from them.”

Epic 4.0 & Beyond

The transition to its current form began in 2014. In this phase, Epic Games is shifting away from consoles and campaign-oriented “boxed” games. Going back to PC as the company dives deeper into Gaas and digital distribution.

They cemented this decision when they announced Fortnite would be a free-to-play title. They followed with the Unreal Engine also becoming free to use. While those who intend to use it for profit will have to pay royalties.

Epic Games has remained largely successful in its four different forms. Even with the most recent 4.0 vision taking the company to entirely new highs. The $28.7 billion is a major accomplishment. Especially for a company that chose to remain independent for the majority of its existence.

Moving forward, Epic Games looks to expand its reach by focusing on Virtual Reality and meta-verses. What could stop them from becoming a dominant force in both spaces.

 

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Joel Bonga

A part time cryptocurrency trader, mostly a hodler, and Blockchain/crypto freelance writer. Plus an occasional contributor at BIZZNERD.
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