Epic Games CEO Tim Sweeney says the company began running into financial problems "about 10 weeks ago."
A week after laying off almost 900 employees, Epic Games announced that it's increasing the price to use Unreal Engine—just not for the game development community.
The news came from Epic Games CEO Tim Sweeney himself in a presentation at Unreal Fest 2023. In a video captured by Fortnite Creative developer Immature (and spotted by Game World Observer), Sweeney explains that developers using Unreal Engine in the film, TV, automotive, and other industries can expect to start paying a per-seat licensing fee.
He claimed that the pricing model will not be "unusually expensive or unusually inexpensive," and that its pricing structure will be similar to subscription services like Maya or Photoshop. Sweeney said he wanted to announce these changes now in the name of "transparency."
He also shed some light on the business decisions that led to the company making unexpectedly significant business shifts in the last week. Apparently Epic Games began running into "financial problems" about 10 weeks ago, meaning that the company was facing some sort of financial downturn from late July through September.
Evidently, all of Epic Games' business had been "heavily funded by Fortnite" in the last six years, and different parts of the company became "disconnected" from their revenue streams. It adds some context to previous comments made by Sweeney about the impact of declined Fortnite revenue—if the company's signature game had started to not turn a profit, other parts of Epic Games may not have easily been able to make up for declining revenue.
Developers worried about the state of the Epic Games Store should take some relief from Sweeney's speech as well. He stated that the company will continue to develop and support the storefront, saying it is the "cure to the disease" supposedly infecting the video game industry.
Sweeney didn't mention Unity by name in his speech but he did allude to "other engine's royalties" being discussed in the game industry. Unity is of course the only other game engine maker to recently adopt a revenue-sharing fee, in a series of announcements that went over poorly with its development community.
Because Epic is not changing the amount of royalties it collects for games made on Unreal Engine (it only takes five percent of revenue after developers earn over $1 million in revenue), this week's announcements will not likely drive away developers who rely on the game-making software.
The adoption of a per-seat licensing plan for other industries is also not likely to cause much of a stir, so long as the pricing changes don't risk disrupting entire company's business models.
What developers will need to mull over is if they're interested in following Sweeney and Epic Games on their mission to build an actual functioning metaverse. In his speech and statements around last week's layoffs, Sweeney remained committed to the idea of building interconnected online worlds. It's a business ambition that goes beyond building engine technology and entertainment products—and it's a vision seemingly abandoned by a large portion of the software industry.
What is frustrating about Sweeney's speech is that however effective Epic Games' business shift turns out to be, it will have made that transition on the backs of the almost-900 employees it put out of work last week. Though said layoffs came with promises of hefty severance bonuses and maintained support for health insurance, it's hard to reconcile Sweeney's desire to build a better game industry with a move that exemplifies how the game industry can chew people up and spit them right out.
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