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Epic Games, Inc.
Formerly
  • Potomac Computer Systems
  • (1991–1992)
  • Epic MegaGames, Inc.
  • (1992–1999)
Company typePrivate
IndustryVideo games
Founded1991; 33 years ago (1991) in Potomac, Maryland, US
FounderTim Sweeney
Headquarters
Cary, North Carolina
,
US
Area served
Worldwide
Key people
Products
OwnersTim Sweeney (>50%)
Tencent (40%)
Number of employees
1,000+ (2019)
Subsidiaries
Websiteepicgames.com
Footnotes / references
[1][2][3]

Epic Games, Inc. is an American video game and software developer and publisher based in Cary, North Carolina. The company was founded by Tim Sweeney as Potomac Computer Systems in 1991, originally located in his parents' house in Potomac, Maryland. Following his first commercial video game release, ZZT (1991), the company became Epic MegaGames, Inc. in early 1992 and brought on Mark Rein, who is the company's vice president to date. Moving their headquarters to Cary in 1999, the studio's name was simplified to Epic Games.

Epic Games develops the Unreal Engine, a commercially available game engine which also powers their internally developed video games, such as Fortnite and the Unreal, Gears of War and Infinity Blade series. In 2014, Unreal Engine was named the "most successful videogame engine" by Guinness World Records.[4]

Epic Games owns video game developers Chair Entertainment and Psyonix, as well as cloud-based software developer Cloudgine, and operates eponymous sub-studios in Seattle, England, Berlin, Yokohama and Seoul. While Sweeney remains the majority shareholder, Tencent acquired a 48.4% outstanding stake, equating to 40% of total Epic, in the company in 2012, as part of an agreement aimed at moving Epic towards a games as a service model. Following the release of the popular Fortnite Battle Royale in 2017, the company gained additional investments that enabled to expand its Unreal Engine offerings, establish esport events around Fortnite, and launch the Epic Games Store. As of August 2020, the company has a US$17.3 billion equity valuation.[5]

History

Potomac Computer Systems (1991–1992)

Potomac Computer Systems was founded by Tim Sweeney in 1991.[6] At the time, Sweeney was studying mechanical engineering and living in a dorm at the University of Maryland. He frequently visited his parents, who lived in nearby Potomac, Maryland, where his personal computer, used for both work and leisure, was situated.[6] Out of this location, Sweeney started Potomac Computer Systems as a computer consulting business, but later figured that it would be too much work he would have to put into keeping the business stable, and scrapped the idea.[6]

After finishing his game ZZT in October 1991, Sweeney opted to re-use the Potomac Computer Systems name to release the game to the public.[6] It was only with the unexpected success of ZZT, caused in most part by the easy modifiability of the game using Sweeney's custom ZZT-oop programming language,[7] that made Sweeney consider turning Potomac Computer Systems into a video game company.[6] ZZT was sold through bulletin board systems, while all orders were fulfilled by Sweeney's father, Paul Sweeney.[8] The game sold several thousand copies as of May 2009, and Paul Sweeney still lived at the former Potomac Computer Systems address at the time, fulfilling all orders that eventually came by mail.[6][8] The final copy of ZZT was shipped by Paul Sweeney in November 2013.[8]

Epic MegaGames (1992–1999)

Epic Games founder and CEO Tim Sweeney

In early 1992, Sweeney found himself and his new-found video game company in a business where larger studios, such as Apogee Software and id Software, were dominant, and he had to find a more serious name for his.[6] As such, Sweeney came up with "Epic MegaGames", a name which incorporated "Epic" and "Mega" to make it sound like it represented a fairly large company (such as Apogee Software), although he was its only employee.[6] Sweeney soon underwent searching for a business partner, and eventually caught up with Mark Rein, who previously quit his job at id Software and moved to Toronto, Ontario.[7][6] Rein worked remotely from Toronto, and primarily handled sales, marketing and publishing deals; business development that Sweeney found to have significantly contributed to the company's growth.[6] Some time this season, the company soon had 20 employees consisting of programmers, artists, designers and composers.[9] Among them was the 17-year old Cliff Bleszinski, who joined the company after submitting his game Dare to Dream to Sweeney.[10] The following year, they had over 30 employees.[11]

In 1996, Epic MegaGames produced a shareware isometric shooter called Fire Fight, developed by Polish studio Chaos Works. It was published by Electronic Arts.[12] By 1997, Epic MegaGames had 50 people working for them worldwide.[13] In 1998, Epic MegaGames released Unreal, a 3D first-person shooter co-developed with Digital Extremes, which expanded into a series of Unreal games. The company also began to license the core technology, the Unreal Engine, to other game developers.

Epic Games (1999–present)

Unreal and personal computer gaming (1999–2006)

File:Malcolm statue.jpg
A statue of Unreal's Malcolm at Epic Games' headquarters

In February 1999, Epic MegaGames announced that they had moved their headquarters to a new location in Cary, North Carolina, and would henceforth be known as simply Epic Games.[14] Rein explained that "Unreal was first created by developers who were scattered across the world, eventually, the team came together to finish the game and that's when the real magic started. The move to North Carolina centralizes Epic, bringing all of the company's talented developers under one roof."[14] Furthermore, Sweeney stated that the "Mega" part of the name was dropped because they no longer wanted to pretend to be a big company, as was the original intention of the name when it was a one-man team.[6] The follow-up game, Unreal Tournament, shipped to critical acclaim the same year,[15] at which point the studio had 13 employees.[16]

The company launched the Make Something Unreal competition in 2004, aiming to reward video game developers who create mods using the Unreal game engine. Tripwire Interactive won US$80,000 in cash and computer hardware prizes over the course of the contest in the first contest in 2004.[17][18]

Gears of War and console gaming (2006–2012)

Around 2006, the personal computer video game market was struggling with copyright infringement in the form of software piracy, and it became difficult to make single-player games, elements which had been part of Epic's business model to that point. The company decided to shift focus into developing on console systems, a move which Sweeney called the start of the third major iteration of the company, "Epic 3.0".[19] In 2006, Epic released the Xbox 360 shooter Gears of War, which became a commercial success for the company, grossing about US$100 million off a US$12 million budget.[20][19] A year later, the company released Unreal Tournament 3 for PC and acquired a majority share in People Can Fly.[21][22]

In 2008, Epic Games acquired Utah based Chair Entertainment and released Gears of War 2,[23][24] selling over three million copies within the first month of its release.[25] Summer 2009 saw the launch of Chair Entertainment's Shadow Complex, an adventure game inspired by the Metroid series.[26]

Epic Games released on September 1, 2010 Epic Citadel as a tech demo to demonstrate the Unreal Engine 3 running on Apple iOS, within Adobe Flash Player Stage3D and using HTML5 WebGL technologies. It was also released for Android on January 29, 2013. Epic Games worked on an iOS game, Infinity Blade,[27] which was released on December 9, 2010.[28] The third game in the series, Gears of War 3, came out in 2011.[29]

In 2011, Epic's subsidiary Titan Studios was dissolved.[30] At the 2011 Spike Video Game Awards, Epic Games announced their new game Fortnite.[31]

In June 2012, Epic announced that it is opening up a new studio, Epic Baltimore, made up of members of 38 Studios' Big Huge Games.[32] Epic Baltimore was renamed to Impossible Studios in August 2012.[33] However, the studio ended up closing its doors in February 2013.[34][35]

Epic alongside People Can Fly made one last game in the Gears of War series that served as a prequel to the other games, Gears of War: Judgement, which was released in 2013. At this point, Epic had considered developing a fourth main title for Gears of War, but estimated that its budget would be at least US$100 million.[20] Additionally, they had suggested the idea of a multiplayer-only version of Gears of War that featured improved versions of maps based on user feedback, similar to the concept behind Unreal Tournament, but Microsoft rejected this idea. Epic recognized the troubles of being held to the business objectives of a publisher, and began to shift the company again.[19]

Games as a service and Tencent acquisition (2012–2018)

An inside look at Epic Games, 2015

Coupled with their desire to move away from being beholden to a publisher, Epic Games observed that the video game industry was shifting to a games-as-a-service model (GaaS). Sweeney stated "There was an increasing realization that the old model wasn't working anymore and that the new model was looking increasingly like the way to go."[19] In an attempt to gain more GaaS experience, they made an agreement with Chinese Tencent, who had several games under their banner (including Riot Games' League of Legends) operating successfully as games as a service.[36] In exchange for Tencent's help, Tencent acquired approximately 48.4% of Epic then issued share capital, equating to 40% of total Epic – inclusive of both stock and employee stock options, for $330 million in June 2012. Tencent Holdings has the right to nominate directors to the board of Epic Games and thus counts as an associate of the Group.[2] However, Sweeney stated that Tencent otherwise has very little control on the creative output of Epic Games.[19] Sweeney considered the partial acquisition by Tencent as the start of "Epic 4.0", the fourth major iteration of the company, allowing the company to be more agile in the gaming marketplace.[19][37]

Around this point, Epic had about 200 employees.[19] A number of high-profile staff left the company months after the Tencent deal was announced for various reasons. Some notable departures included:[38]

  • Cliff Bleszinski, then the design director, announced he was leaving Epic Games in October 2012 after 20 years with the company. His official reason was "It's time for a much needed break".[39] Bleszinski later stated that he had become "jaded" about the gaming industry in the lead-up to Tencent's involvement. After Tencent's investment, Bleszinski attempted to renegotiate his contract, but failed to come to terms, making him think about retirement instead. He opted to stop coming into work, spending his time at his beach house, eventually leading Sweeney to come down and have a heart-to-heart discussion with Bleszinski on the new direction Epic was going, and asking him to make a firm decision regarding his commitment to Epic. Bleszinski opted to write his resignation letter the next day.[40] After about two years, Bleszinski started Boss Key Productions in 2014.
  • President Mike Capps announced his retirement in December 2013, and cited the reasons as the arrival of a baby boy he was having with his wife and his plans to be a stay-at-home dad.[41] He subsequently announced his departure of his advisory role as well as his affiliation with the company in March 2013.[42]
  • Rod Fergusson, who had been a lead developer for the Gears of War series, left Epic in August 2012. Fergusson stated that he had seen the direction that the Tencent acquisition would have taken the company, and was not interested in the free-to-play style of games but instead wanted to continue developing a "AAA, big-narrative, big-story, big-impact game".[43] Fergusson briefly joined Irrational Games, owned by 2K Games, to help complete BioShock Infinite. While there, Fergusson talked with 2K about potentially continuing the Gears of War series, leading to talks between 2K Games, Epic, and Microsoft.[19] As a result, Microsoft acquired the rights to Gears of War on January 27, 2014, eventually assigned those to Microsoft Game Studios; Fergusson moved to Black Tusk Studios, owned by Microsoft Game Studios, to take on lead development for a new Gears title, with the studio being rebranded as The Coalition. The first game since the acquisition, Gears of War 4, was released in October 2016.[44][45]
  • Adrian Chmielarz, the founder of People Can Fly and who joined Epic when his studio was acquired earlier in 2012, decided to leave after Tencent's acquisition, stating that he and other former People Can Fly members did not believe the free-to-play, games as a service direction fit their own personal vision or direction they wanted to go. Chmielarz and these others left Epic in late 2012 to form The Astronauts.[40]
  • Lee Perry, a lead designer on both Unreal and Gears of War series, who felt that Epic has started to grow too large to maintain a role as an eccentric game developer. Coupled with the studio's need for more management to support the games as a service model, Perry felt that their creative freedom would become limited. He and five other senior people left Epic to form a new studio, Bitmonster.[40]

Epic continued on its goal to deliver games as a service following these departures. Fortnite was to serve as their testbed for living games, but with the shifts in staff, as well as shifting its engine from Unreal Engine 3 to 4, its release suffered some setback. Epic started additional projects; the free-to-play and community-developed Unreal Tournament, first announced in 2014,[46][47] and the free-to-play multiplayer online battle arena game Paragon, launched in 2016 for Microsoft Windows and PlayStation 4.[48] Epic also released a remastered version of Shadow Complex for newer consoles and computers in 2015,[49][50] and their first foray into virtual reality with the release of Robo Recall for the Oculus Rift.[51][52]

The investment infusion from Tencent allowed Epic Games to relicense the Unreal Engine 4 engine in March 2015 to be free for all users to develop with, with Epic taking 5% royalties on games developed with the engine.[53]

In June 2015, Epic agreed to allow Epic Games Poland's departure from the company and sold its shares in the studio; the studio reverted to their former name, People Can Fly. The Bulletstorm IP was retained by People Can Fly who has since launched a remastered version called Bulletstorm: Full Clip Edition on April 7, 2017, published by Gearbox Software.[54][55]

Fortnite success (2018–present)

Epic's Fortnite exhibition space at E3 2018

By July 2017, Fortnite was finally in a state for public play. Epic launched the title through a paid early access then, with a full free-to-play release expected in 2018.[56] Following on the popularity of PlayerUnknown's Battlegrounds, a battle royale game released earlier in 2017, Epic developed a variant of Fortnite called Fortnite Battle Royale, which was released in September 2017 as a free-to-play title across computer, console, and mobile platforms. Fortnite Battle Royale quickly gained an audience, amassing over 125 million players by May 2018 with estimates of having earned over US$1 billion by July 2018 through microtransactions, including its battle pass system. Epic Games, which had been valued at around US$825 million at the time of Tencent's acquisition, was estimated to be worth US$4.5 billion in July 2018 due to Fortnite Battle Royale, and expected to surpass US$8.5 billion by the end of 2018 with projected growth of the game.[57] Player count continued to expand when Epic broke new ground by convincing Sony to change its stance on cross-platform play allowing players on any device to compete with each other in Fortnite Battle Royale.[58] Fortnite has drawn nearly 250 million players as of March 2019.[59]

Fortnite's commercial success enabled Epic to make several changes to its other product offerings. In July 2018, it reduced the 30% revenue cut that it took for assets sold on the Unreal Engine Marketplace from 30% to 12%.[60] Epic launched the Epic Games Store digital storefront to compete with services like Steam and GOG.com, not only taking a 12% cut of revenue compared to the industry standard of 30%, but also eliminated the 5% cut for games using the Unreal engine sold via the storefront.[61] However the company also refocused its development efforts to provide more support for Unreal and Fortnite by ending support for Paragon[62] and Unreal Tournament.[63]

The financial success of Fortnite brought additional investment into Epic Games. Epic Games was one of eleven companies selected to be part of the Disney Accelerator program in 2017, providing Epic equity investment and access to some of Disney's executives, and potential opportunity to work with Disney in the future. Disney had selected both Epic and aXiomatic as potential leads in the growing esports arena.[64] Epic announced in October 2018 that it had acquired US$1.25 billion in investment from seven firms: KKR, ICONIQ Capital, Smash Ventures, aXiomatic, Vulcan Capital, Kleiner Perkins, and Lightspeed Venture Partners. The firms join Tencent, Disney, and Endeavor as minority shareholders in Epic.[65][66] With the investment, Epic Games was estimated to have a nearly US$15 billion valuation in October 2018.[67]

Besides expanding support for Fortnite and the Epic Games Store, these investments allowed Epic to acquire additional firms. In January 2018, it was announced that Epic had acquired Cloudgine, a developer of cloud-based gaming software.[68] The company also announced the acquisition of Kamu, a firm that offered anti-cheat software, in October 2018.[69] A year later, in January 2019, Epic acquired 3Lateral and Agog Labs. 3Lateral is known for its "digital human" creations, using a combination of digital technology, motion capture, and other tools to create photo-realistic human subjects in real time. Epic plans to add some of 3Lateral's features to the Unreal Engine.[70] Agog had developed SkookumScript, a platform for scripting events in video games; on announcement of this acquisition, Agog stated they will stop development of SkookumScript to work more on Unreal Engine scripting support.[71]

Epic's has used its windfall to support its products. In January 2019, following a dispute between Improbable and Unity Technologies over changes to the acceptable uses of the Unity game engine, Epic announced it was partnering with Improbable to launch a US$25 million fund to help bring developers they believe affected by these changes towards solutions that are more open and would have fewer service compatibilities.[72] Epic launched a US$100 million prize pool in February 2019 for Fortnite-related esports activities that it plans to run from 2019 onward.[73] To expand its esports initiatives, Epic Games hired Nate Nanzer from Blizzard Entertainment and their commissioner of the Overwatch League in May 2019.[74] At the 2019 Game Developers Conference, Epic announced it was launching a US$100 million MegaGrants initiative, allowing anyone to apply for up to US$500,000 in funding to support game development using the Unreal Engine or for any project, even if not directly games-related, that would benefit the Unreal Engine.[75] One of the first major funded entities under this was the Blender Foundation in July 2019, having received US$1.2 million from the MegaGrants funding, to help them to improve and professionalize their Blender tools for 3D art creation.[76]

Epic acquired Psyonix, the developer of Rocket League, in May 2019. Epic and Psyonix have had a past history, as Psyonix was originally founded a few miles from Epic's headquarters and had contributed to Epic's Unreal Tournament.[77] Epic acquired the Twinmotion visualization tool used in architectural design in May 2019 from Abvent, and which they plan to expand and incorporate into their Unreal Engine offerings.[78] Epic acquired Life on Air, the developers behind the Houseparty social chat application in June 2019.[79]

Epic Games was given the British Academy of Film and Television Arts Special Award in June 2019 for its past and continuing developments for the Unreal Engine,[80] a software which also earned it the Engineering Excellence Award from the Hollywood Professional Association.[81]

In November 2019, Epic acquired Quixel, the world's largest photogrammetry asset library which makes 3D models of objects based on real-world high-definition photography. Epic plans to open Quixel's existing library of models to users of Unreal Engine, while the Quixel staff will continue to build out its assets within Epic.[82] The company acquired Cubic Motion, a studio that provides highly detailed digital facial animations for both films and video games, in March 2020.[83]

Epic announced in March 2020 it was establishing a new multi-platform publishing label, Epic Games Publishing. Alongside this, the label had announced three deals with developers Remedy Entertainment, Playdead and GenDesign in which Epic would fully fund development and publishing (including employee salaries, quality assurance, localization, and marketing) of one or more games from each studio, but leaving full creative control and IP rights to the studio, and sharing profits, following Epic's recouping of its investment, 50/50 with the studio.[84][85]

Unreal Engine 5 was announced in mid-May 2020, with plans for a late-2021 release. Alongside this announcement, Epic released its Epic Online Services, a free SDK toolset for online matchmaking and other similar cross-platform play support features based on its Fortnite. Epic further waived all Unreal license fees retroactively for games up through the first US$1 million in revenue, regardless of how they were published, retroactively starting from January 1, 2020.[86]

Bloomberg reported that Epic was nearing a US$17 billion valuation in June 2020 once it had completed a new US$750 million investing round from its previous investors and newcomings T. Rowe Price Group Inc. and Baillie Gifford.[87]

Across July and August, Epic raised an additional US$1.78 billion in capital investment, bringing the company's post-money equity valuation to US$17.3 billion.[5][88] This included a US$250 million investment from Sony, approximately a 1.4% stake in the company. The deal continues the two companies' technology collaboration after they had worked together on the development of Unreal Engine 5, but does not commit Epic to any exclusivity to the Sony PlayStation platform.[89][90] Sweeney said that Sony had started talking with Epic about investing following the demonstration of the Unreal Engine 5 in May 2020.[91] Sweeney remains the controlling shareholder with these additional investments.[88]

On August 13, 2020, Epic released a version of Fortnite that included a permanent discount on V-bucks across all platforms, but for those on iOS and Android devices, only if they purchased directly through Epic, bypassing Apple and Google's storefronts. Both Apple and Google immediately delisted the game for violating the storefronts' terms of service by including their own storefront, which led Epic to file lawsuits against both companies the same day, accusing them of antitrust behavior in how they operate their app stores.[92]

Products

Video games

Main article: List of games by Epic Games

Epic Games is known for games such as ZZT developed by founder Tim Sweeney, various shareware titles including Jazz Jackrabbit and Epic Pinball, the Unreal video game series, which is used as a showcase for its Unreal Engine, the Gears of War series which is now owned by The Coalition and Xbox Game Studios, Infinity Blade, Shadow Complex, Bulletstorm, and Fortnite.

Unreal Engine

Main article: Unreal Engine

Epic is the proprietor of four successful game engines in the video game industry. Each Unreal Engine has a complete feature set of graphical rendering, sound processing, and physics that can be widely adapted to fit the specific needs of a game developer that does not want to code its own engine from scratch. The four engines Epic has created are the Unreal Engine 1, Unreal Engine 2 (including its 2.5 and 2.X releases), Unreal Engine 3, and Unreal Engine 4. Epic has also announced Unreal Engine 5 that will be available in mid-2021. Epic also provides support to the Unreal marketplace, a digital storefront for creators to sell Unreal assets to other developers.

Epic Games Store

Main article: Epic Games Store

Epic announced its own Epic Games Store, an open digital storefront for games, on December 4, 2018, which launched a few days later with The Game Awards 2018 presentation. Differing from Valve's Steam storefront, which takes 30% of revenues (30/70 revenue-sharing agreement) from the sale of a game, the Epic Game Store will take 12%, as well as foregoing the 5% for games developed in the Unreal Engine, anticipating that these lower revenue-sharing agreements will draw developers to it.[93][94]

Epic Online Services

Epic Online Services is a free SDK based on Epic's Fortnite code that allows developers to implement cross-platform play features in their games, including matchmaking, friends lists, leaderboards, and achievements, with support for Windows, macOS, PlayStation 4, Xbox One, Nintendo Switch, iOS, and Android systems. It was first released for all in May 2020.[86]

Subsidiaries and divisions

Inside Epic Games Berlin, 2017
Name Area Location Founded Acquired Ref.
3Lateral Motion capture digitization Novi Sad, Serbia 2008 2019 [70]
Agog Labs Game scripting engines Vancouver, Canada 2013 2019 [71]
Chair Entertainment Video game development Salt Lake City, US 2005 2008 [23][95]
Cloudgine Cloud-based gaming technology Edinburgh, Scotland 2012 2018 [68]
Cubic Motion Facial animation Manchester, England 2009 2020 [83]
Epic Games Berlin Video game development Berlin, Germany 2016 — [96][97]
Epic Games China[a] Video game development Shanghai, China 2006 [98]
Epic Games Cologne Video game development Cologne, Germany 2019 [99]
Epic Games Japan Video game development Yokohama, Japan 2010 [100][101][102]
Epic Games Korea Video game development Seoul, South Korea 2009 [103][104]
Epic Games Montreal Video game development Montreal, Canada 2018 [105]
Epic Games New Zealand/Australia Video game development — 2018 [106]
Epic Games Publishing Video game publishing — 2020 [107]
Epic Games Seattle Video game development Bellevue, Washington, US 2012 [108][109][110]
Epic Games Stockholm Video game development Stockholm, Sweden 2018 [111]
Epic Games UK[b] Video game development Sunderland, England 2014 [112][113][114]
Kamu Anti-cheat software Helsinki, Finland 2013 2018 [115][69]
Life on Air Mobile app development San Francisco, US 2012 2019 [79]
Psyonix Video game development San Diego, US 2000 2019 [116]
Quixel Photogrammetry assets Uppsala, Sweden 2011 2019 [117]

Former

Name Location Founded Acquired Divested Fate Ref.
Impossible Studios Baltimore, US 2012 — 2013 Closed [118]
People Can Fly Warsaw, Poland 2002 2012 2015 Sold to management [119]
See also: Fortnite Battle Royale § Past and ongoing concerns

Litigation with Silicon Knights

On July 19, 2007, Canadian game studio Silicon Knights sued Epic Games for failure to "provide a working game engine", causing the Ontario-based game developer to "experience considerable losses".[120] The suit alleged that Epic Games was "sabotaging" Unreal Engine 3 licensees. Epic's licensing document stated that a working version of the engine would be available within six months of the Xbox 360 developer kits being released. Silicon Knights claimed that Epic not only missed this deadline, but that when a working version of the engine was eventually released, the documentation was insufficient. The game studio also claimed Epic had withheld vital improvements to the game engine, claiming they were game-specific, while also using licensing fees to fund the development of its own titles rather than the engine itself.[121]

In August 2007, Epic Games counter-sued Silicon Knights, alleging the studio was aware when it signed on that certain features of Unreal Engine 3 were still in development and that components would continue to be developed and added as Epic completed work on Gears of War. Therefore, in a statement, Epic said that "SK knew when it committed to the licensing agreement that Unreal Engine 3 may not meet its requirements and may not be modified to meet them".[122] Additionally, the counter-suit claimed that Silicon Knights had "made unauthorized use of Epic's Licensed Technology" and had "infringed and otherwise violated Epic's intellectual property rights, including Epic's copyrighted works, trade secrets, know how and confidential information" by incorporating Unreal Engine 3 code into its own engine, the Silicon Knights Engine.[122] Furthermore, Epic asserted the Canadian developer broke the contract when it employed this derivative work in an internal title and a second game with Sega,[123] a partnership for which it never received a license fee.[124]

On May 30, 2012, Epic Games defeated Silicon Knights' lawsuit, and won its counter-suit for $4.45 million on grounds of copyright infringement, misappropriation of trade secrets, and breach of contract,[125] an injury award that was later doubled due to prejudgment interest, attorneys' fees and costs.[126] Consistent with Epic's counterclaims, the presiding judge, James C. Dever III, stated that Silicon Knights had "deliberately and repeatedly copied thousands of lines of Epic Games' copyrighted code, and then attempted to conceal its wrongdoing by removing Epic Games' copyright notices and by disguising Epic Games' copyrighted code as Silicon Knights' own".[126] Dever stated that evidence against Silicon Knights was "overwhelming", as it not only copied functional code but also "non-functional, internal comments Epic Games' programmers had left for themselves".[126]

As a result, on November 7, 2012, Silicon Knights was directed by the court to destroy all game code derived from Unreal Engine 3, all information from licensee-restricted areas of Epic's Unreal Engine documentation website, and to permit Epic Games access to the company's servers and other devices to ensure these items have been removed. In addition, the studio was instructed to recall and destroy all unsold retail copies of games built with Unreal Engine 3 code, including Too Human, X-Men Destiny, The Sandman, The Box/Ritualyst, and Siren in the Maelstrom (the latter three titles were projects never released, or even officially announced).[127]

On May 16, 2014, Silicon Knights filed for bankruptcy and a Certificate of Appointment was issued by the office of the Superintendent of Bankruptcy, with Collins Barrow Toronto Limited being appointed as trustee in bankruptcy.[128]

Apple and Google lawsuits

Since at early as 2017, Tim Sweeney had questioned the need for digital storefronts like Valve's Steam, Apple's iOS App Store, and Google Play, to take a 30% revenue sharing cut, and argued that when accounting for current rates of content distribution and other factors needed, a revenue cut of 8% should be sufficient to run any digital storefront profitably.[129] While a 30% revenue cut was an industry standard across computers, consoles, and mobile platforms in 2019,[130] Sweeney stated that higher revenue shares made sense on consoles where "there's enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers", but did not expend to open platforms like mobile devices and personal computers.[131] Part of the reasoning for creating the Epic Game Store was to demonstrate that Epic could operate at a lower revenue cut (12%).[132]

As Fortnite expanded from personal computers to other platforms with the popularity of the Battle Royale mode in 2018, Epic Games sought to bring the free-to-play game to mobile devices. When Epic first released its Android client, it offered it as a sideloaded package rather than as a Google Play store app, as they did not want Google to take any revenue from the microtransactions in the game.[133] However, this resulted in a number of security concerns and numerous unscrupulous clones attempting to pass themselves off as the real Fortnite game in the Google Play store,[134] and by April 2020, Epic discontinued the sideloaded version and placed the game on the Google Play store.[135] As Apple does not allow sideloading on iOS devices, Epic had just released the client on the App Store directly in 2018.[136]

In mid-2020, Sweeney reiterated his stance on the 30% revenue cut that Apple and Google took, ahead of a large United States Congressional hearing investigating antitrust charges on the Big Tech companies including Google, and during similar investigations of Apple in the European Union.[137] Sweeney said in a July CNBC interview that "Apple has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software", and "Google essentially intentionally stifles competing stores by having user interface barriers and obstruction".[138] Sweeney further stated that "If every developer could accept their own payments and avoid the 30% tax by Apple and Google we could pass the savings along to all our consumers and players would get a better deal on items. And you'd have economic competition."[138] After Apple stated that cloud gaming services like Microsoft's xCloud were not allowed on the iOS platform as they would allow content that bypassed Apple's content review, Sweeney wrote "Apple has outlawed the metaverse. The principle they state, taken literally, would rule out all cross-platform ecosystems and games with user created modes: not just xCloud, Stadia, and GeForce NOW, but also Fortnite, Minecraft, and Roblox."[139]

On August 13, 2020, Epic Games updated Fortnite across all platforms, including the iOS and Android versions, to reduce the price of "V-Bucks" (the in-game currency) by 20% if they purchased directly from Epic. For iOS and Android users, if they purchased through the Apple or Google storefront, they were not given this discount, as Epic said they could not extend the discount due to the 30% revenue cut taken by Apple and Google.[140] Within hours, both Apple and Google had removed Fortnite from their storefronts stating the means of bypassing their payment systems violated the terms of service.[141][142]

Epic immediately filed separate lawsuits against Apple and Google for antitrust and anticompetitive behavior in the United States District Court for the Northern District of California.[92] Epic retained the legal council of Christine A. Varney, formerly lead of the Antitrust Division of the U.S. Department of Justice under the Obama administration, for both cases.[143] As part of the suit against Apple, Epic also released a video called "Nineteen Eighty-Fortnite", parodying Apple's "1984" advertisement using Fortnite assets, which Epic points out in their lawsuit had been used by Apple then to challenge the weight of IBM at the time.[92] In its suit against Apple, Epic accused Apple of antitrust behavior with its practices around the App Store and its payment system, charging that these were in violation of the federal Sherman Act and the California Cartwright Act.[144] In its suit towards Google, Epic challenged Google's past mantra of "Don't be evil" and claimed that its practices around the Google Play store and its payment system violate the Sherman Act and California's Cartwright Act.[145] Epic stated that because of Google's restrictions on the Android system interfered with deals for pre-loading Fortnite on phones from OnePlus and LG.[146] They state in the claim "Notwithstanding its promises to make Android devices open to competition, Google has erected contractual and technological barriers that foreclose competing ways of distributing apps to Android users, ensuring that the Google Play Store accounts for nearly all the downloads of apps from app stores on Android devices."[145] Epic did not seek monetary damages in either case but instead was "seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers."[144] In comments on social media the next day, Sweeney said that they undertook the actions as "we're fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly. The primary opposing argument is: 'Smartphone markers can do whatever they want.' This as an awful notion. We all have rights, and we need to fight to defend our rights against whoever would deny them."[147]

Google, in response to the lawsuit, stated to The Verge that "For game developers who choose to use the Play Store, we have consistent policies that are fair to developers and keep the store safe for users. While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play."[145] By August 17, 2020, Apple had informed Epic that it would terminate its access to developers accounts and tools for the App Store and iOS and macOS by August 28, 2020. This led Epic to file a motion for a preliminary injunction to block this as well as prevent Apple from delisting Fortnite from the App Store, asserting that lack of assess to the development tools for iOS and macOS would affect Unreal Engine development and subsequently impact all developers that used the engine.[148][149] Apple stated in response to the request for preliminary injunction that Epic had approached them in June to ask for a special deal for Epic to operate Fortnite on the App Store to allow users to pay Epic directly, and when Apple had failed to grant them this, Epic had contacted them prior to updating the version on August 13, 2020 to state they were willingly going to violate the App Store terms. Apple further requested the court deny Epic the preliminary junction, calling the "emergency" situation one that Epic had created itself.[150] Sweeney stated in response that as his emails in Apple's complaint said, he was looking for Apple to extend to this type of exemption to all iOS developers and not just for Epic Games.[151] Epic filed a response to Apple's complaint with support of Microsoft, specifically asking the court to block Apple from taking away its iOS development tool access as this would impact all developers that have used the Unreal Engine. Microsoft wrote in their support, "Denying Epic access to Apple’s SDK and other development tools will prevent Epic from supporting Unreal Engine on iOS and macOS and will place Unreal Engine and those game creators that have built, are building, and may build games on it at a substantial disadvantage."[152]

Companies like Facebook, Spotify, and the Match Group supported Epic Games in their lawsuit and spoke of their own past issues with Apple's App Store policies related to their services.[153] Digital Content Next, a non-profit trade group representing media outlets like The New York Times and The Wall Street Journal, also backed Epic's suit, asserting among other issues that Apple has given out uniquely favorable deals to some providers like Amazon but not to others.[154]

On August 24, 2020, after a court hearing Judge Yvonne Gonzalez Rogers granted Epic's request to prevent Apple from taking away its developer licenses for iOS and macOS, but did not grant the preliminary injunction to overturn Apple's decision to remove Fortnite from the iOS store. Rogers wrote that the removal of the developers licenses had "potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally" and Apple "has chosen to act severely" in threatening that step. On terms of Fortnite, Rogers agreed with Apple that "Epic Games has not yet demonstrated irreparable harm. The current predicament appears of its own making."[155]

Criticisms

Since the partial investment by the Chinese company Tencent, some consumers have become wary of Epic Games' reliability and use of their data, particularly in relationship with the Epic Games Store. These concerns have been connected to broader issues of general distrust of the Chinese government and Chinese corporations among some Western video game players. Epic has stated that Tencent does not have access to any of this private data nor provides this to the Chinese government.[156][157]

In late March 2020, accusations began circulating on social media that Houseparty led to other services such as Netflix and Spotify being hacked. However, both Epic and Life on Air claimed this was a smear campaign against its product and offered a US$1 million bounty for anyone able to substantiate their claim.[158][159][160]

Further reading

Notes

  1. ^ Additional studio in Suzhou
  2. ^ Additional studios in Guildford, Leamington Spa and Newcastle

References

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