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Epic laid-off ~900 employees as Fortnite revenue struggles


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"For a while now, we've been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators. I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic," CEO and founder Tim Sweeney said in a memo to staff and shared on Epic's website.
 

"While Fortnite is starting to grow again, the growth is driven primarily by creator content with significant revenue sharing, and this is a lower margin business than we had when Fortnite Battle Royale took off and began funding our expansion," he added. "Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics."
 

About two-thirds of the job cuts came from teams outside of "core development," Sweeney said. "Some of our products and initiatives will land on schedule, and some may not ship when planned because they are under-resourced for the time being," he said.
 

Sweeney went on to say that efforts have been made to reduce costs, including a "net zero hiring" freeze and cutting spending on marketing and events. However, this wasn't enough. "We still ended up far short of financial sustainability. We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances," Sweeney said.

What Epic has not stopped spending on is Project Liberty, which is Epic's legal battle against Apple and Google. Sweeney said Epic is pushing so hard here "so the metaverse can thrive and bring opportunity to Epic and all other developers."
 

He added: "Saying goodbye to people who have helped build Epic is a terrible experience for all. The consolation is that we're adequately funded to support laid off employees."

 

https://www.gamespot.com/articles/epic-games-cuts-almost-900-jobs-in-video-game-industrys-latest-mass-layoff/1100-6518049/

 

You can't read an article about a company failing to meet its financial goals and mentioning the Metaverse as part of their business plan and not roll your eyes. It also seems short sided to think Fortnite would stay popular for so long given how competitive the gaming industry is, and when its core audience has no income. 

 

Epic did do one thing though, they got Valve to lower their prices for devs/publishers and a lot of the ones that had left Steam like EA and Ubisoft came back as a result. Thanks Epic for making Steam even better. 😆

Edited by UltraMega

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36 minutes ago, UltraMega said:

 

You can't read an article about a company failing to meet its financial goals and mentioning the Metaverse as part of their business plan and not roll your eyes.

 

You are badmouthing some of the most profitable companies on the earth with this statement. 

 

In addition you are badmouthing people I know and love who work in the Metaverse and I assure you make more than 99.99% of this board.

 

Something to think about.

 

 

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31 minutes ago, TonyBombassolo said:

 

You are badmouthing some of the most profitable companies on the earth with this statement. 

 

In addition you are badmouthing people I know and love who work in the Metaverse and I assure you make more than 99.99% of this board.

 

Something to think about.

 

 

 

I'm not badmouthing anyone. I think the metaverse is a massively over-hyped idea compared to the money that's been invested in it, and the tiny user base of the metaverse itself and inability to gain any traction is tangible evidence of that sentiment. 

 

The profitability of a business has nothing to do with it being OK or not to criticize them, but if it did then I would be well justified to criticize Epic here. 

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7 hours ago, UltraMega said:

 

I'm not badmouthing anyone. I think the metaverse is a massively over-hyped idea compared to the money that's been invested in it, and the tiny user base of the metaverse itself and inability to gain any traction is tangible evidence of that sentiment. 

 

The profitability of a business has nothing to do with it being OK or not to criticize them, but if it did then I would be well justified to criticize Epic here. 

Well put.   I too, am not here to "badmouth" any specific businesses or people, but Ultra's sentiments on the "metaverse" in general absolutely do sum up the general public's thoughts on it too.  Most people think the metaverse is a joke, something that was rolled out with the pandemic to help with "working at home".  That's over, and people don't care as much about virtualized hanging out anymore.

 

Personally, I will NEVER enter a metaverse.  VR just doesn't work for me.  Throws me off really badly.  Idk why, but I have to actually be able to see the real world around me or my brain freaks out.  This is why I love big ultrawides or eyefinity arrays though, so I can immerse myself into the game I'm playing.  VR and meta aren't going away, no.  But to hear a company's announcement, and use the word "metaverse" in it, as Ultra said........ *Cringe :rolleyes:

Also, very solid points about Epic and Fortnight brought up too.  Who'd have thought marketing a video game to a bunch of 5 year olds was a profit making endeavor?  I mean really?  They did try really hard, and Fortnight really is a pretty neat title.  But, as Ultra stated too, they kinda DID help Steam to be better too, so thank you Epic!  🤣

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41 minutes ago, pioneerisloud said:

Well put.   I too, am not here to "badmouth" any specific businesses or people, but Ultra's sentiments on the "metaverse" in general absolutely do sum up the general public's thoughts on it too.  Most people think the metaverse is a joke, something that was rolled out with the pandemic to help with "working at home".  That's over, and people don't care as much about virtualized hanging out anymore.

 

Personally, I will NEVER enter a metaverse.  VR just doesn't work for me.  Throws me off really badly.  Idk why, but I have to actually be able to see the real world around me or my brain freaks out.  This is why I love big ultrawides or eyefinity arrays though, so I can immerse myself into the game I'm playing.  VR and meta aren't going away, no.  But to hear a company's announcement, and use the word "metaverse" in it, as Ultra said........ *Cringe :rolleyes:

Also, very solid points about Epic and Fortnight brought up too.  Who'd have thought marketing a video game to a bunch of 5 year olds was a profit making endeavor?  I mean really?  They did try really hard, and Fortnight really is a pretty neat title.  But, as Ultra stated too, they kinda DID help Steam to be better too, so thank you Epic!  🤣

Thanks Pio. I'm definitely not trying to offend anyone here. 

 

Tim Sweeny already divested from his partnership with Meta over Oculus, so this news shouldn't be that surprising. I think Sweeny's statements are also sort of incomplete. I appreciate his leadership in taking blame for this upon himself as his own miscalculation, but I've got to imagine Covid and global inflation are a big part of it too, and no one could have predicted that. 

 

More than that, I think Sweeney really under-estimated Valve's willingness to reassess it's fees for game devs/publishers. Ever since Steam changed it's fee structure, the arguments over steam vs epic and how devs get paid has gone completely silent. 

 

Epic also has a big Chinese investment and.. well.. that's an increasingly awkward situation to be in. 

 

 

I'm sure all of the people being laid-off are great people, and I wish the best for them. Epic's misstep in no way reflects on those individuals. The bottom line here is that this paints an interesting picture for Epic's future. Where will they go from here? Will they keep pushing the Epic Store or is this the beginning of the end in that front? 

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The concept of the metaverse isn't limited to Facebook's / Meta's interpretation that people will simply do their day-to-day socialization through a virtual or augmented reality or whatever Meta is trying to achieve. Fortnite had grown into something much larger where players can have these types of experiences on top of a game environment. E.g., live concerts within the game. Will that model be sustainable? Time will tell and I think it would be unwise to jump to conclusions at this stage. You can say that a lot of MMOs or larger social games are also metaverses too. Runescape, WoW, Destiny 2, EVE, Final Fantasy XIV... they all offer similar experience where you can have large social interactions with people on top of a game world so it's really open to interpertation*. 

 

A crowd like us isn't really a fair representation of the Fortnite market either. We're old farts, PC enthusiasts, and really represent a very small niche market. We're really not the target demographic that are ~12-17 or ~18-24 gaming primarily on consoles or on our phones. You know, when they take on a goliath like Apple in court for cutting your mobile revenue, it's clear that their primary focus is not us but that sweet, sweet v-bucks lol 😛

 

If you look at past data from that lawsuit with Apple, you can quickly gather they've more than double in sized (employee count) over the past 3 years. (~2000 employees to ~5000 employees). See consolidated financials for more info. https://s3.documentcloud.org/documents/20696836/epic-apple-trial-epic-games-exhibit.pdf Mix that growth together with the current market context and yes, it's not hard to see that they have a lot of challenges right now.

 

I don't have full insights into their business and they're still private mind you (majority owned by Tim) but I can't see GaaS going away for at least 5 years from Epic since they're still the king with Fortnite and the gap is large. The amount of revenue from that title is staggering. Let alone other titles like Rocket league. This why I think other companies are struggling to dethrone Fortnite. There is only so much space in that market because there is only so much time people can play or invest in a single game. If something comes along that offers something better than Fortnite, then Epic is really in trouble but I am not sure what that would be. They're very far ahead there so who knows, really, how long that train will go on for. 

 

RE: UE5, I assume there still in the heavy R&D phase with a lot of sunk costs. I assume that they anticipate to recover once UE5 games start to flood the market and they collect royalties etc. in a couple years time but game development is taking longer this generation than ever before too. I also don't believe they will drop Epic Games Store anytime soon. It's seems a bit necessary to keep spending there to acquire customers, offering free games to continue to acquire customers, supporting studios and getting timed exclusives (Chivalry 2, Alan Wake 2 etc.) to have a serious competitor to Valve and to gain foothold in other markets "emerging" markets (Asia). Some interesting stats here ->  https://store.epicgames.com/en-US/news/epic-games-store-2022-year-in-review Do I like EGS personally? No, because I'm very invested into Steam and I like how GoG, the other store front I use, offers something unique (DRM free, classic games) and works in conjunction to Steam or all other store fronts. Epic feels like it's trying to catch up with Valve but I really doubt they will but doesn't mean it's not worth the investment. 

 

Anyway, next couple years will be tough for sure but either way, crappy situation for a lot of people. LinkedIn recruiters are refreshing their posts again, as they've been doing all year after Embracer and other large organizations have been firing people left, right, and center....

Edited by Slaughtahouse
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After they stopped developing unreal tournament. I stopped looking at their games. I hope Microsoft or someone else buys them and brings back unreal tournament. I believe they removed their games from steam as well. So you can't easily play their older games. And I would never use their bloatware game launcher.

Edited by ozlay
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19 hours ago, UltraMega said:

 

You can't read an article about a company failing to meet its financial goals and mentioning the Metaverse as part of their business plan and not roll your eyes. It also seems short sided to think Fortnite would stay popular for so long given how competitive the gaming industry is, and when its core audience has no income. 

 

Epic did do one thing though, they got Valve to lower their prices for devs/publishers and a lot of the ones that had left Steam like EA and Ubisoft came back as a result. Thanks Epic for making Steam even better. 😆

Don't forget the source link 😛

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16 minutes ago, ENTERPRISE said:

Don't forget the source link 😛

Whoops. How embarrassing. 

 

 

It is super lame that they abandon Unreal Tournament. I wonder if the kids playing fortnite these days even know where the Unreal part of Unreal. Engine even comes from. 

Edited by UltraMega

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