In a world where the digital realm is becoming increasingly intertwined with reality, Tim Sweeney, the CEO of Epic Games, remains resolutely bullish about the potential of the metaverse. Despite recent layoffs and skeptics questioning the company’s commitment, Sweeney’s unwavering belief in the metaverse’s future is evident.
Metaverse is the Next Important Shift in Gaming
Sweeney’s fascination with the metaverse dates back to around 2015 when he first began promoting the concept. Fast forward to 2023, and he passionately declared the metaverse as the next important shift in the gaming landscape. He firmly believes that it’s not just a passing trend, stating in an interview with the News Observer that the revolution is happening right now.
A Metaverse for All
At its core, the metaverse is a virtual space where users, represented by avatars, can engage in a myriad of activities like gaming, shopping, attending concerts, meetings, training, dating, and more. It is accessible through virtual reality headsets. Sweeney envisions a metaverse that embodies the principles of openness, akin to the internet, where various companies coexist, and users can freely traverse between platforms.
Epic Games, renowned for its iconic game Fortnite, is actively constructing its own metaverse platform within this digital frontier. Since its release in 2017, Fortnite has maintained a staggering 70 million monthly active users, a testament to its enduring popularity. Sweeney’s ambition extends beyond gaming; he seeks to transform Fortnite into something more profound, a multifaceted metaverse of entertainment and interaction.
Fusing Realities
Epic Games has already embarked on its metaverse journey through crossover events, collaborating with global brands like Nike and Ralph Lauren, as well as musicians like Travis Scott and Ed Sheeran. In 2020, Travis Scott delivered an animated avatar concert within Fortnite, amassing a staggering 208 million views on YouTube. According to Sweeney, this signals the emergence of a “new social entertainment medium.”
Through Unreal Engine, another Epic creation, users can fashion lifelike human avatars, aptly named MetaHumans, which seamlessly integrate into the metaverse. In spring 2022, Epic secured $1 billion each from Sony and Kirkbi, the parent company of Lego, to pioneer a kid-friendly metaverse platform, valuing the company at a substantial $31.5 billion according to data from The Motley Fool.
Navigating the Challenges
However, Epic’s journey into the metaverse has not been without challenges. Recently, the company made headlines with a significant workforce reduction, shedding 830 employees, roughly 16% of its workforce, citing the hefty cost of metaverse development as the primary reason. In a candid memo, Sweeney acknowledged that his optimism had led to unrealistic expectations. Meanwhile, critics have not been shy about questioning the wisdom of Epic’s substantial investment in the unproven virtual realm.
Epic Games is not alone in its metaverse-related setbacks. Meta, Facebook’s parent company, also resorted to layoffs after funneling billions into its metaverse ambitions. Analysts suggest that these cutbacks reflect the challenging reality of accelerating technological development in line with public and investor expectations.
One of them is Janna Anderson, director of the Imagining the Internet Center at Elon University, who emphasized the commonality of such pullbacks in tech sectors driven by intense enthusiasm, like self-driving vehicles and VR platforms. She remarked, “It is expensive, time-consuming, and often quite impossible to accelerate technological development as quickly as the public and investors would like to see it happen.”
Currently, the Meta is making noise in the industry with its newly-launched Meta Quest Pro VR. To fuel further hype, the company’s CEO, Mark Zuckerberg, recently accepted an interview with Lex Fridman within the metaverse using their signature VR device.
Paving the Path to Profit
Despite the hurdles, Sweeney remains steadfast in his commitment to Epic Games’ metaverse vision. He is confident that they will navigate the challenges and emerge as a leading metaverse company. To make the metaverse profitable, Epic has adopted various strategies.
One such strategy is the introduction of Unreal Editor for Fortnite, enabling users to create and monetize their content within the game. Epic offers creators a substantial 40% share of net revenue from their content. Although this shift has led to lower margins compared to Fortnite’s earlier days, it has bolstered the creator ecosystem.
In addition to job cuts, Epic also reduced marketing expenditures and scaled back hiring to stabilize its finances. However, it should be noted, too, that the company faced a significant financial setback when it agreed to pay a record $520 million fine to the Federal Trade Commission due to allegations of violating children’s privacy laws, which baited users in making unintended purchases within the platform.
Final Thoughts
The bullish outlook of Tim Sweeney on the metaverse represents an unwavering commitment to pioneering a digital frontier that holds enormous potential. Despite challenges and criticism, his vision for his company as a metaverse trailblazer remains intact. The path to profitability in this nascent space is undoubtedly intricate, so it remains to be seen how Epic Games will navigate through their plans.