(2019-02-23) Fortnite Is The Future But Probably Not For The Reasons You Think

Fortnite Is the Future, but Probably Not for the Reasons You Think. Most of the existing narratives around Fortnite success are overhyped – even if they’re critical to its long-term evolution.

Hype #1: Revenue

SuperData estimated Fortnite was pulling in $318MM per month.

Computer Games generating billions of dollars per year have been around for a decade – it’s just that few of them have been big in the West. 2012’s Puzzle Dragon and 2013’s Monster Strike each grossed more than $7B to date, with League of Legends not far behind

Hype #2: Business Model

All revenue comes from the sale of purely cosmetic items

But, again, lucrative “free-to-play” games have been around for more than a decade

Fortnite is a far more expensive game to develop and operate – and generates materially less revenue from far more total players – than some of its free-to-play peers, such as Honor of Kings or Fate/Grand Order

Hype #3: Cross-Platform Availability

not just all major consoles, but mobile devices too.... can play one another

Fortnite is far from the first game to be available across multiple platforms with identical functionality. What’s unique is that Fortnite’s popularity forced the entire industry to support cross-play and extended availability, not just across all mobile devices, or across all console/PC hardware, but across both – without any compromises in functionality.

Hype #4: Popularity

Fortnite likely represents the largest persistent media event in human history. As of today, the game has likely had more than six consecutive months with at least one million concurrent active users

Hype #5: Origin Story

While Fortnite’s creator, Epic Games, has a history of developing and publishing games, game creation is more of an R&D and marketing investment behind the company’s core business: licensing its Unreal game engine to third parties

Fortnite was always designed for flexibility. While Epic wanted to preserve the live-or-die urgency of shooters such as Counter-Strike or Call of Duty, it also wanted to unite and underpin this sensibility with the sandbox nature of Minecraft.

Taking Stock

At the same time, Fortnite’s achievements are collectively significant – especially when matched with Epic’s broader assets and ambitions. And it might foretell the future of not just Fortnite and video gaming, but of entertainment at large

Fortnite and the Challenges of Longevity

it’s important to address its primarily challenge and most common criticism: its popularity can’t and won’t last.

the most enduring names in gaming haven’t really endured in the traditional sense. Instead, they’re constantly being re-interpreted and re-deployed in new gaming genres and formats in order to remain relevant.

Consider Warcraft (WoW), for example

This process bears little in common with the traditional Hollywood definition of franchise reinvention, where a given IP (such as James Bond) sees only stylistic and narrative evolution/changes over time.

Warcraft has shown that IP gives a hit game the opportunity to continually sustain itself (and sector domination) through reinvention.

Accordingly, it’s important to emphasize how story, or even IP, really, doesn’t exist in Fortnite.

There are no characters, barely any objectives that don’t reset after 20 odd minutes of play, and no real explanation for what’s happening or why.

As a result, many believe that Fortnite’s popularity simply can’t endure

But this read is too narrow.

More than a Fortnite

Jim Barskdale famously said that there were only two core business models: bundling (bringing together multiple products and/or services into a single package), and unbundling

Fortnite: Battle Royale, at its start, was essentially an unbundle – not just of Fortnite: Save the World, but of gaming overall.

But over the past year, Fortnite has shown an ability to rebundle much of the gaming industry at large

Every few weeks, Fortnite also adds (or removes) new interaction models

The Fortnite team is able to closely monitor how any change is adopted, its impact on total play time, game duration, performance, and so on. All to make sure it “works” – or alternatively, to keep the game from ever feeling “static” or “solved”.

this expansiveness threatens a wide variety of games. Why buy a dedicated dog fighting game, for example, when you can already play one in Fortnite (and already do so with your friends)

While there will always be a new game format or hit game, Fortnite is uniquely capable of becoming that game, or expanding into it (and it’s worth highlighting that Epic’s Unreal business depends on its ability to build/support all types of gameplay).

Fortnite has become a daily social square – a digital mall or virtual afterschool meetup that spans neighborhoods, cities, countries and continents. This role is powered by Fortnite’s free availability, robust voice chat, cross-platform functionality, and collaborative gameplay. Accordingly, examples abound of kids, adults and families simply hanging out or catching up on Fortnite while they play.

Fortnite wasn’t designed to be a Second Life-style experience, or even a digital “third place“; it became one organically. What’s more, it is drastically out-monetizing dedicated social squares such as Facebook, Snapchat and Instagram – even combined.

Fortnite isn’t IP in the traditional sense. But it is a platform. And accordingly, the gameplay is less important than the engagement.

Epic’s Loot Lake

While most major developers own their own engines, Epic is unique in that its primary business (at least, historically) was in licensing its engine to 3rd parties. Epic’s Unreal Engine 4 is one of the most capable and mass-deployed engines in the world

It’s also rapidly being expanded into other experiences. For example, Fox Sports’ NASCAR studio is now entirely rendered live in Unreal, the engine is increasingly used in online or AR-enhanced virtual tours, in architectural modeling, and so on

Second – and in only a year – Epic has also built up another great and particularly hard to establish advantage: some 200MM+ registered user accounts

Third, Epic benefits from substantial annual cash generation. And late in 2018, the company raised an additional $1.25B in investor capital.

As a result, it’s likely that Epic is planning significant investments in its “next thing”

1v99

Unreal faces four challenges going forward – three of which are marketplace specific, with one existential

First, Unreal is far from the market standard.

Second, another independent engine, Unity, remains far more broadly deployed – especially in mobile.

Third is the threat posed by the shift to cloud-based gaming, which allows a developer/publisher to automatically deploy their games across multiple (if not most) platforms through a single cloud-based streaming solution

Amazon, for example, which has been been developing its own engine, Lumberyard, specifically for AWS, also has a forthcoming cloud gaming service which will undoubtedly integrate into Prime and Twitch.

fourth, Epic won’t own most of the end-user software infrastructure

Loading…

In August 2018, Epic announced plans to distribute Fortnite on Android devices outside the Google Play store (thereby avoiding its 30% commission).

Epic announced the launch of its own direct-to-consumer digital store (AppStore)) three months after its decision to circumvent the Google Play Store – one with a mere 12% royalty (or inclusive of Epic’s 5% Unreal licensing fee, if used).

become a new, ecosystem-centric platform…a goal consistent with an enduring obsession of Sweeney’s: the Metaverse.

The Metaverse

the foundational elements will go well beyond “gaming”. Specifically, we’d see in-game economies (e.g. trading, bartering and buying items) become more of an industry where humans will literally “work”.

To this end, a crucial difference between a vibrant game, including Fortnite, and the Metaverse is that the latter “should not simply be a means for the developer to suck money out of the users. It should be a bi-directional thing where users participate. Some pay, some sell, some buy, and there’s a real economy….in which everybody can be rewarded for participating in many different ways”

To Sweeney, the Metaverse represents the “next version” of the Internet – a matter of when, not if.

Epic, Fortnite and The Metaverse

it’s clear that Sweeney wants to build an open Metaverse before someone else builds a closed one.

Zuckerberg, of course, wants that platform to be controlled by Facebook

This is what Sweeney fears, and what motivates him to have Epic lead as quickly as possible.

Why Fortnite Is Uniquely Positioned to Be the Start of the Metaverse

To be successful, any social network needs to start from a place of value or utility to its users – rather than the goal of being a social network

Beyond its existing social square, Epic and Fortnite have several advantages as they pursue this Metaverse.

First is the extent of Fortnite’s massive reach

It’s also worth highlighting that Fortnite’s monetization is itself based on identity – or more specifically, how one chooses to portray one’s self in the digital world via skins and avatars, tracked via the Epic Account.

Finally, Fortnite’s underpinning in Unreal allows Epic to add new functions and capabilities and integrate 3rd party games that are based on the engine – and as Epic’s cloud service roadmap denotes, they will be able to support Unity and other engines as well

forging connections across and between numerous platforms, content and experiences: allowing a player to literally walk through a door as a Fortnite character and be in another world...