Epic Games, Inc. is an American video game and software developer and publisher based in Cary, North Carolina. The company was founded by Tim Sweeney as Potomac Computer Systems in 1991, originally located in his parents’ house in Potomac, Maryland. Following his first commercial video game release, ZZT (1991), the company became Epic MegaGames, Inc. in early 1992 and brought on Mark Rein, who is the company’s vice president to date. Moving their headquarters to Cary in 1999, the studio’s name was simplified to Epic Games.
Epic Games develops the Unreal Engine, a commercially available game engine which also powers their internally developed video games, such as Fortnite and the Unreal, Gears of War and Infinity Blade series. In 2014, Unreal Engine was named the “most successful videogame engine” by Guinness World Records.[4]
Epic Games owns video game developers Chair Entertainment and Psyonix, as well as cloud-based software developer Cloudgine, and operates eponymous sub-studios in Seattle, England, Berlin, Yokohama and Seoul. While Sweeney remains the majority shareholder, Tencent acquired a 48.4% outstanding stake, equating to 40% of total Epic, in the company in 2012, as part of an agreement aimed at moving Epic towards a games as a service model. Following the release of the popular Fortnite Battle Royale in 2017, the company gained additional investments that enabled to expand its Unreal Engine offerings, establish esport events around Fortnite, and launch the Epic Games Store. As of August 2020, the company has a US$17.3 billion equity valuation.[5]
On August 13, 2020, Epic released a version of Fortnite that included a permanent discount on V-bucks across all platforms, but for those on iOS and Android devices, only if they purchased directly through Epic, bypassing Apple and Google’s storefronts. Both Apple and Google immediately delisted the game for violating the storefronts’ terms of service by including their own storefront, which led Epic to file lawsuits against both companies the same day, accusing them of antitrust behavior in how they operate their app stores.[6]
History
Potomac Computer Systems (1991–1992)
Potomac Computer Systems was founded by Tim Sweeney in 1991.[7] At the time, Sweeney was studying mechanical engineering and living in a dorm at the University of Maryland. He frequently visited his parents, who lived in nearby Potomac, Maryland, where his personal computer, used for both work and leisure, was situated.[7] Out of this location, Sweeney started Potomac Computer Systems as a computer consulting business, but later figured that it would be too much work he would have to put into keeping the business stable, and scrapped the idea.[7]
After finishing his game ZZT in October 1991, Sweeney opted to re-use the Potomac Computer Systems name to release the game to the public.[7] It was only with the unexpected success of ZZT, caused in most part by the easy modifiability of the game using Sweeney’s custom ZZT-oop programming language,[8] that made Sweeney consider turning Potomac Computer Systems into a video game company.[7] ZZT was sold through bulletin board systems, while all orders were fulfilled by Sweeney’s father, Paul Sweeney.[9] The game sold several thousand copies as of May 2009, and Paul Sweeney still lived at the former Potomac Computer Systems address at the time, fulfilling all orders that eventually came by mail.[7][9] The final copy of ZZT was shipped by Paul Sweeney in November 2013.[9]
Epic MegaGames (1992–1999)
Epic Games founder and CEO Tim Sweeney
In early 1992, Sweeney found himself and his new-found video game company in a business where larger studios, such as Apogee Software and id Software, were dominant, and he had to find a more serious name for his.[7] As such, Sweeney came up with “Epic MegaGames”, a name which incorporated “Epic” and “Mega” to make it sound like it represented a fairly large company (such as Apogee Software), although he was its only employee.[7] Sweeney soon underwent searching for a business partner, and eventually caught up with Mark Rein, who previously quit his job at id Software and moved to Toronto, Ontario.[8][7] Rein worked remotely from Toronto, and primarily handled sales, marketing and publishing deals; business development that Sweeney found to have significantly contributed to the company’s growth.[7] Some time this season, the company soon had 20 employees consisting of programmers, artists, designers and composers.[10] Among them was the 17-year old Cliff Bleszinski, who joined the company after submitting his game Dare to Dream to Sweeney.[11] The following year, they had over 30 employees.[12]
In 1996, Epic MegaGames produced a shareware isometric shooter called Fire Fight, developed by Polish studio Chaos Works. It was published by Electronic Arts.[13] By 1997, Epic MegaGames had 50 people working for them worldwide.[14] In 1998, Epic MegaGames released Unreal, a 3D first-person shooter co-developed with Digital Extremes, which expanded into a series of Unreal games. The company also began to license the core technology, the Unreal Engine, to other game developers.
Epic Games (1999–present)
Unreal and personal computer gaming (1999–2006)
A statue of Unreal‘s Malcolm at Epic Games’ headquarters
In February 1999, Epic MegaGames announced that they had moved their headquarters to a new location in Cary, North Carolina, and would henceforth be known as simply Epic Games.[15] Rein explained that “Unreal was first created by developers who were scattered across the world, eventually, the team came together to finish the game and that’s when the real magic started. The move to North Carolina centralizes Epic, bringing all of the company’s talented developers under one roof.”[15] Furthermore, Sweeney stated that the “Mega” part of the name was dropped because they no longer wanted to pretend to be a big company, as was the original intention of the name when it was a one-man team.[7] The follow-up game, Unreal Tournament, shipped to critical acclaim the same year,[16] at which point the studio had 13 employees.[17]
The company launched the Make Something Unreal competition in 2004, aiming to reward video game developers who create mods using the Unreal game engine. Tripwire Interactive won US$80,000 in cash and computer hardware prizes over the course of the contest in the first contest in 2004.[18][19]
Gears of War and console gaming (2006–2012)
Around 2006, the personal computer video game market was struggling with copyright infringement in the form of software piracy, and it became difficult to make single-player games, elements which had been part of Epic’s business model to that point. The company decided to shift focus into developing on console systems, a move which Sweeney called the start of the third major iteration of the company, “Epic 3.0”.[20] In 2006, Epic released the Xbox 360 shooter Gears of War, which became a commercial success for the company, grossing about US$100 million off a US$12 million budget.[21][20] A year later, the company released Unreal Tournament 3 for PC and acquired a majority share in People Can Fly.[22][23]
In 2008, Epic Games acquired Utah based Chair Entertainment and released Gears of War 2,[24][25] selling over three million copies within the first month of its release.[26] Summer 2009 saw the launch of Chair Entertainment’s Shadow Complex, an adventure game inspired by the Metroid series.[27]
Epic Games released on September 1, 2010 Epic Citadel as a tech demo to demonstrate the Unreal Engine 3 running on Apple iOS, within Adobe Flash Player Stage3D and using HTML5 WebGL technologies. It was also released for Android on January 29, 2013. Epic Games worked on an iOS game, Infinity Blade,[28] which was released on December 9, 2010.[29] The third game in the series, Gears of War 3, came out in 2011.[30]
In 2011, Epic’s subsidiary Titan Studios was dissolved.[31] At the 2011 Spike Video Game Awards, Epic Games announced their new game Fortnite.[32]
In June 2012, Epic announced that it is opening up a new studio, Epic Baltimore, made up of members of 38 Studios‘ Big Huge Games.[33] Epic Baltimore was renamed to Impossible Studios in August 2012.[34] However, the studio ended up closing its doors in February 2013.[35][36]
Epic alongside People Can Fly made one last game in the Gears of War series that served as a prequel to the other games, Gears of War: Judgement, which was released in 2013. At this point, Epic had considered developing a fourth main title for Gears of War, but estimated that its budget would be at least US$100 million.[21] Additionally, they had suggested the idea of a multiplayer-only version of Gears of War that featured improved versions of maps based on user feedback, similar to the concept behind Unreal Tournament, but Microsoft rejected this idea. Epic recognized the troubles of being held to the business objectives of a publisher, and began to shift the company again.[20]
Games as a service and Tencent ownership (2012–2018)
An inside look at Epic Games, 2015
Coupled with their desire to move away from being beholden to a publisher, Epic Games observed that the video game industry was shifting to a games-as-a-service model (GaaS). Sweeney stated “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.”[20] In an attempt to gain more GaaS experience, they made an agreement with Chinese Tencent, who had several games under their banner (including Riot Games‘ League of Legends) operating successfully as games as a service.[37] In exchange for Tencent’s help, Tencent acquired approximately 48.4% of Epic then issued share capital, equating to 40% of total Epic – inclusive of both stock and employee stock options, for $330 million in June 2012. Tencent Holdings has the right to nominate directors to the board of Epic Games and thus counts as an associate of the Group.[2] However, Sweeney stated that Tencent otherwise has very little control on the creative output of Epic Games.[20] Sweeney considered the partial acquisition by Tencent as the start of “Epic 4.0”, the fourth major iteration of the company, allowing the company to be more agile in the gaming marketplace.[20][38]
Around this point, Epic had about 200 employees.[20] A number of high-profile staff left the company months after the Tencent deal was announced for various reasons. Some notable departures included:[39]
- Cliff Bleszinski, then the design director, announced he was leaving Epic Games in October 2012 after 20 years with the company. His official reason was “It’s time for a much needed break”.[40] Bleszinski later stated that he had become “jaded” about the gaming industry in the lead-up to Tencent’s involvement. After Tencent’s investment, Bleszinski attempted to renegotiate his contract, but failed to come to terms, making him think about retirement instead. He opted to stop coming into work, spending his time at his beach house, eventually leading Sweeney to come down and have a heart-to-heart discussion with Bleszinski on the new direction Epic was going, and asking him to make a firm decision regarding his commitment to Epic. Bleszinski opted to write his resignation letter the next day.[41] After about two years, Bleszinski started Boss Key Productions in 2014.
- President Mike Capps announced his retirement in December 2013, and cited the reasons as the arrival of a baby boy he was having with his wife and his plans to be a stay-at-home dad.[42] He subsequently announced his departure of his advisory role as well as his affiliation with the company in March 2013.[43]
- Rod Fergusson, who had been a lead developer for the Gears of War series, left Epic in August 2012. Fergusson stated that he had seen the direction that the Tencent acquisition would have taken the company, and was not interested in the free-to-play style of games but instead wanted to continue developing a “AAA, big-narrative, big-story, big-impact game”.[44] Fergusson briefly joined Irrational Games, owned by 2K Games, to help complete BioShock Infinite. While there, Fergusson talked with 2K about potentially continuing the Gears of War series, leading to talks between 2K Games, Epic, and Microsoft.[20] As a result, Microsoft acquired the rights to Gears of War on January 27, 2014, eventually assigned those to Microsoft Game Studios; Fergusson moved to Black Tusk Studios, owned by Microsoft Game Studios, to take on lead development for a new Gears title, with the studio being rebranded as The Coalition. The first game since the acquisition, Gears of War 4, was released in October 2016.[45][46]
- Adrian Chmielarz, the founder of People Can Fly and who joined Epic when his studio was acquired earlier in 2012, decided to leave after Tencent’s acquisition, stating that he and other former People Can Fly members did not believe the free-to-play, games as a service direction fit their own personal vision or direction they wanted to go. Chmielarz and these others left Epic in late 2012 to form The Astronauts.[41]
- Lee Perry, a lead designer on both Unreal and Gears of War series, who felt that Epic has started to grow too large to maintain a role as an eccentric game developer. Coupled with the studio’s need for more management to support the games as a service model, Perry felt that their creative freedom would become limited. He and five other senior people left Epic to form a new studio, Bitmonster.[41]
Epic continued on its goal to deliver games as a service following these departures. Fortnite was to serve as their testbed for living games, but with the shifts in staff, as well as shifting its engine from Unreal Engine 3 to 4, its release suffered some setback. Epic started additional projects; the free-to-play and community-developed Unreal Tournament, first announced in 2014,[47][48] and the free-to-play multiplayer online battle arena game Paragon, launched in 2016 for Microsoft Windows and PlayStation 4.[49] Epic also released a remastered version of Shadow Complex for newer consoles and computers in 2015,[50][51] and their first foray into virtual reality with the release of Robo Recall for the Oculus Rift.[52][53]
The investment infusion from Tencent allowed Epic Games to relicense the Unreal Engine 4 engine in March 2015 to be free for all users to develop with, with Epic taking 5% royalties on games developed with the engine.[54]
In June 2015, Epic agreed to allow Epic Games Poland’s departure from the company and sold its shares in the studio; the studio reverted to their former name, People Can Fly. The Bulletstorm IP was retained by People Can Fly who has since launched a remastered version called Bulletstorm: Full Clip Edition on April 7, 2017, published by Gearbox Software.[55][56]
Fortnite success (2018–present)
Epic’s Fortnite exhibition space at E3 2018
By July 2017, Fortnite was finally in a state for public play. Epic launched the title through a paid early access then, with a full free-to-play release expected in 2018.[57] Following on the popularity of PlayerUnknown’s Battlegrounds, a battle royale game released earlier in 2017, Epic developed a variant of Fortnite called Fortnite Battle Royale, which was released in September 2017 as a free-to-play title across computer, console, and mobile platforms. Fortnite Battle Royale quickly gained an audience, amassing over 125 million players by May 2018 with estimates of having earned over US$1 billion by July 2018 through microtransactions, including its battle pass system. Epic Games, which had been valued at around US$825 million at the time of Tencent’s acquisition, was estimated to be worth US$4.5 billion in July 2018 due to Fortnite Battle Royale, and expected to surpass US$8.5 billion by the end of 2018 with projected growth of the game.[58] Player count continued to expand when Epic broke new ground by convincing Sony to change its stance on cross-platform play allowing players on any device to compete with each other in Fortnite Battle Royale.[59] Fortnite has drawn nearly 250 million players as of March 2019.[60]
Fortnite‘s commercial success enabled Epic to make several changes to its other product offerings. In July 2018, it reduced the 30% revenue cut that it took for assets sold on the Unreal Engine Marketplace from 30% to 12%.[61] Epic launched the Epic Games Store digital storefront to compete with services like Steam and GOG.com, not only taking a 12% cut of revenue compared to the industry standard of 30%, but also eliminated the 5% cut for games using the Unreal engine sold via the storefront.[62] However the company also refocused its development efforts to provide more support for Unreal and Fortnite by ending support for Paragon[63] and Unreal Tournament.[64]
The financial success of Fortnite brought additional investment into Epic Games. Epic Games was one of eleven companies selected to be part of the Disney Accelerator program in 2017, providing Epic equity investment and access to some of Disney’s executives, and potential opportunity to work with Disney in the future. Disney had selected both Epic and aXiomatic as potential leads in the growing esports arena.[65]
Epic’s has used its windfall to support its products. In January 2019, following a dispute between Improbable and Unity Technologies over changes to the acceptable uses of the Unity game engine, Epic announced it was partnering with Improbable to launch a US$25 million fund to help bring developers they believe affected by these changes towards solutions that are more open and would have fewer service compatibilities.[66] Epic launched a US$100 million prize pool in February 2019 for Fortnite-related esports activities that it plans to run from 2019 onward.[67] To expand its esports initiatives, Epic Games hired Nate Nanzer from Blizzard Entertainment and their commissioner of the Overwatch League in May 2019.[68] At the 2019 Game Developers Conference, Epic announced it was launching a US$100 million MegaGrants initiative, allowing anyone to apply for up to US$500,000 in funding to support game development using the Unreal Engine or for any project, even if not directly games-related, that would benefit the Unreal Engine.[69] One of the first major funded entities under this was the Blender Foundation in July 2019, having received US$1.2 million from the MegaGrants funding, to help them to improve and professionalize their Blender tools for 3D art creation.[70]
Epic Games was given the British Academy of Film and Television Arts Special Award in June 2019 for its past and continuing developments for the Unreal Engine,[71] a software which also earned it the Engineering Excellence Award from the Hollywood Professional Association.[72]
Epic announced in March 2020 it was establishing a new multi-platform publishing label, Epic Games Publishing. Alongside this, the label had announced three deals with developers Remedy Entertainment, Playdead and GenDesign in which Epic would fully fund development and publishing (including employee salaries, quality assurance, localization, and marketing) of one or more games from each studio, but leaving full creative control and IP rights to the studio, and sharing profits, following Epic’s recouping of its investment, 50/50 with the studio.[73][74]
Unreal Engine 5 was announced in mid-May 2020, with plans for a late-2021 release. Alongside this announcement, Epic released its Epic Online Services, a free SDK toolset for online matchmaking and other similar cross-platform play support features based on its Fortnite. Epic further waived all Unreal license fees retroactively for games up through the first US$1 million in revenue, regardless of how they were published, retroactively starting from January 1, 2020.[75]
Bloomberg reported that Epic was nearing a US$17 billion valuation in June 2020 once it had completed a new US$750 million investing round from its previous investors and newcomings T. Rowe Price Group Inc. and Baillie Gifford.[76] The company partnered with Christopher Nolan and Warner Bros. to acquire distribution rights for Inception, Batman Begins and The Prestige as part of “Movie Nite” on Fortnite’s “Party Royale” island. The film livestreams were based on a user’s country.[77]
Across July and August, Epic raised an additional US$1.78 billion in capital investment, bringing the company’s post-money equity valuation to US$17.3 billion.[5][78] This included a US$250 million investment from Sony, approximately a 1.4% stake in the company. The deal continues the two companies’ technology collaboration after they had worked together on the development of Unreal Engine 5, but does not commit Epic to any exclusivity to the Sony PlayStation platform.[79][80] Sweeney said that Sony had started talking with Epic about investing following the demonstration of the Unreal Engine 5 in May 2020.[81] Sweeney remains the controlling shareholder with these additional investments.[78]
Acquisitions
Epic announced in October 2018 that it had acquired US$1.25 billion in investment from seven firms: KKR, ICONIQ Capital, Smash Ventures, aXiomatic, Vulcan Capital, Kleiner Perkins, and Lightspeed Venture Partners. The firms join Tencent, Disney, and Endeavor as minority shareholders in Epic.[82][83] With the investment, Epic Games was estimated to have a nearly US$15 billion valuation in October 2018.[84]
Besides expanding support for Fortnite and the Epic Games Store, these investments allowed Epic to acquire additional firms. In January 2018, it was announced that Epic had acquired Cloudgine, a developer of cloud-based gaming software.[85] The company also announced the acquisition of Kamu, a firm that offered anti-cheat software called Easy Anti-Cheat, in October 2018.[86] A year later, in January 2019, Epic acquired 3Lateral and Agog Labs. 3Lateral is known for its “digital human” creations, using a combination of digital technology, motion capture, and other tools to create photo-realistic human subjects in real time. Epic plans to add some of 3Lateral’s features to the Unreal Engine.[87] Agog had developed SkookumScript, a platform for scripting events in video games; on announcement of this acquisition, Agog stated they will stop development of SkookumScript to work more on Unreal Engine scripting support.[88]
Epic acquired Psyonix, the developer of Rocket League, in May 2019. Epic and Psyonix have had a past history, as Psyonix was originally founded a few miles from Epic’s headquarters and had contributed to Epic’s Unreal Tournament.[89] Epic acquired the Twinmotion visualization tool used in architectural design in May 2019 from Abvent, and which they plan to expand and incorporate into their Unreal Engine offerings.[90] Epic acquired Life on Air, the developers behind Houseparty, a social networking service, in June 2019. The monetary terms of the acquisition were not disclosed.[91]
In November 2019, Epic acquired Quixel, the world’s largest photogrammetry asset library which makes 3D models of objects based on real-world high-definition photography. Epic plans to open Quixel’s existing library of models to users of Unreal Engine, while the Quixel staff will continue to build out its assets within Epic.[92] The company acquired Cubic Motion, a studio that provides highly detailed digital facial animations for both films and video games, in March 2020.[93]
Epic acquired SuperAwesome, a firm that has developed services to support children-safe games and services around games, in September 2020, as to incorporate these elements more into Epic’s portfolio.[94]
Products
Video games
Main article: List of games by Epic Games
Epic Games is known for games such as ZZT developed by founder Tim Sweeney, various shareware titles including Jazz Jackrabbit and Epic Pinball, the Unreal video game series, which is used as a showcase for its Unreal Engine, the Gears of War series which is now owned by The Coalition and Xbox Game Studios, Infinity Blade, Shadow Complex, Bulletstorm, and Fortnite.
Unreal Engine
Main article: Unreal Engine
Epic is the proprietor of four successful game engines in the video game industry. Each Unreal Engine has a complete feature set of graphical rendering, sound processing, and physics that can be widely adapted to fit the specific needs of a game developer that does not want to code its own engine from scratch. The four engines Epic has created are the Unreal Engine 1, Unreal Engine 2 (including its 2.5 and 2.X releases), Unreal Engine 3, and Unreal Engine 4. Epic has also announced Unreal Engine 5 that will be available in mid-2021. Epic also provides support to the Unreal marketplace, a digital storefront for creators to sell Unreal assets to other developers.
Epic Games Store
Main article: Epic Games Store
Epic announced its own Epic Games Store, an open digital storefront for games, on December 4, 2018, which launched a few days later with The Game Awards 2018 presentation. Differing from Valve‘s Steam storefront, which takes 30% of revenues (30/70 revenue-sharing agreement) from the sale of a game, the Epic Game Store will take 12%, as well as foregoing the 5% for games developed in the Unreal Engine, anticipating that these lower revenue-sharing agreements will draw developers to it.[95][96]
Epic Online Services
Epic Online Services is a free SDK based on Epic’s Fortnite code that allows developers to implement cross-platform play features in their games, including matchmaking, friends lists, leaderboards, and achievements, with support for Windows, macOS, PlayStation 4, Xbox One, Nintendo Switch, iOS, and Android systems. It was first released for all in May 2020.[75]
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