Tim Sweeney made the video game Fortnite a phenomenon by doing something that sounds crazy: He gave it away.
That strategy has made him a billionaire.
In an industry chock-a-block with monster hits, such as Candy Crush and Pokemon Go, Fortnite’s popularity isn’t surprising. Its revenue is. Between the release of the current version in September and the end of May, Fortnite brought in more than $1.2 billion, according to SuperData Research. As of early June, it has been played by 125 million people.
That has powered a revenue surge at Epic Games, the company Sweeney created in his parents’ basement 27 years ago. Fortnite alone is on track to generate $2 billion this year, making the Cary, N.C.-based game maker worth $5 billion to $8 billion, according to the Bloomberg Billionaires Index. Sweeney, 47, is the controlling shareholder.
Fortnite is a global phenomenon, played obsessively by children, rappers, professional athletes and middle-age accountants. It’s a cartoonish, last-character-standing, fight-to-the-death battle royale where players thrash one another in a struggle for weapons, resources and survival on a shrinking, storm-ravaged island.
Instead of shelling out upward of $40 for the game, players buy online V-bucks, a virtual currency they can exchange during play for outfits, called skins, celebratory dances or special missions that can cost as much as $20 each.
“On the revenue side, they’ve done something that’s really unique, which is come up with a perception of exclusivity,” said Michael Pachter, an analyst at Wedbush Securities. Many accessories in the Fortnite shop are available on a limited basis, prompting players to buy before coveted items disappear from virtual shelves. “If you see another player in a leopard skin and go to the store and see it’s no longer available, you think, ‘Shoot, I’ve got to move on it next time.’ ”
All that commerce translates into some of the highest rates of revenue-per-user in the industry and operating margins north of 50 percent, according to analysts.
“Epic’s valuation has exploded alongside Fortnite’s success,” said Timothy O’Shea, who covers gaming at Jefferies Financial Group.
Based on the trading multiples of peers Electronic Arts and Activision Blizzard, Epic could be worth as much as $14 billion, though potential buyers would demand a discount due to questions over whether Fortnite could sustain revenue growth, O’Shea said. Even if sales were to fall to $1 billion a year — half of its current estimate — the company could command $7.5 billion in a sale, Pachter said.
That’s a bonanza for Sweeney and Chinese internet behemoth Tencent Holdings, which bought 40 percent of Epic in 2012 at an $825 million valuation.
While most games hit peak popularity shortly after launch, Fortnite was still drawing millions of new users six months on, thanks to a broadly appealing aesthetic that’s more comic mischief than graphic violence. Celebrity fans such as rapper Drake and the Los Angeles Lakers’ Josh Hart have pushed it further into mainstream consciousness. French soccer star Antoine Griezmann celebrated a goal in the World Cup final this month by performing the game’s “Take-the-L” dance.
As a game that’s social, easy to play and hard to master, it has been a particular hit with school-age kids, raising concerns from teachers and parents reporting obsessive playing during class.
Fortnite is no bolt from the blue for Epic. The developer’s biggest previous hit was Gears of War, a bestselling franchise for Microsoft’s Xbox 360. Epic also owns Unreal Engine, one of two widely used operating systems developers rely on for building games. At first, Epic charged customers to use the software. Sales took off when Sweeney made the product free and instead began collecting a royalty on sales from games made using the software, which have included such hits as Mass Effect and Batman: Arkham.
Fortnite also started as a paid product. Launched in July 2017 as a $40 version where players built forts to defend themselves against zombie hordes, the game really took off after Epic made it free and added the multi-combatant style of play.
Its success surprised even Epic. At last year’s E3, the industry’s big trade show, Epic showed a few reporters the game hidden away in a meeting room. At this year’s convention, the Epic booth was entirely devoted to Fortnite. That week, Epic staged its first Fortnite Celebrity Pro-Am with guests such as comedian Joel McHale and professional gamer Ninja (real name Tyler Blevins) competing in a soccer stadium. In May, Epic announced it would provide $100 million to fund prize pools for Fortnite competitions.