🕹️ Unreal Editor for Fortnite is a Game Changer🔥

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We are splitting the Market Wire newsletter into separate market data and news segments.

You are now reading the newly updated news segment: GameMakers News Wire!

Moving forward, you’ll get this news segment towards the end of the week.

The top news from the past week in the world of F2P games:

• Unreal Editor for Fortnite is a potentially massive game changer 🔥

• The ability for AI to make games is now real 🤖

• How impactful will Microsoft mobile app store be? 📱

Fortnite Has Epic Creative Ambitions 📈

Welcome to Roblox 2.0.

Epic’s announcement at GDC of Unreal Editor for Fortnite (aka UEFN) is potentially a massive industry game changer, and it would be good to understand the implications.

While we knew this was coming since at least 2020, when Epic invested $15M into Manticore, it’s quite another thing to see the vision implemented live in Fortnite.

- Adam Sussman, President of Epic Games on the Manticore investment in 2020

Key points from announcements:

• Currently in public Beta

• Epic announced Creator Economy 2.0, which will share 40% of Fortnite revenues with Fortnite creators based on player interest and engagement

• A custom programming language called Verse was developed and included with UEFN

• Epic unified its digital asset stores into a single store called Fab; it’s currently available in alpha as a plug-in to UEFN with Fortnite-optimized assets

Cool tech demo:

Ok, so why do I think UEFN could be massively huge?

First of all, massive hit games don’t just come from nowhere. 

Most hit games have some indication of product-market fit to scale somewhere. Many of them come from game mods. From MOBAs to tower defense to even Battle Royale and many more, most new types of gameplay were born from game modes or mods.

Secondly, the Fortnite audience base automatically makes UEFN instantly relevant.

The enablement of Fortnite’s large fanbase tied to Unreal creator tools is a massive win. A huge community and incredibly powerful technical capabilities. This is basically peanut butter + chocolate!

Third, Epic’s economic model *potentially* upstages Roblox’s developer payouts, making it much more compelling for developers to jump on to UEFN. 

Many professional developers have shied away from Roblox because of the perception of limited upside. Increasing economics will hopefully open the funnel for more professional developers to consider UEFN seriously.

Roblox currently shares 24.5% of revenue (for in-game, aka in-“experience” transactions through developer exchange aka “DevEx”) and 5.1% of revenue for share of “engagement” by Roblox premium users (aka “EBP”).

Hence, revenue payouts are 24.5% (DevEx) + 5.1% (EBP) = 29.6%.

I’ve also heard some studios can break even on EBP revenue alone.

While it’s difficult to compare Roblox and Fortnite Creative 2.0 revenue directly, I believe that 40% of all Fortnite net revenue (note this number is net not gross) may potentially be substantially higher to creators as Fortnite revenue likely subsidizes Fortnite creators.

Essentially, the Fortnite money printing machine makes money that gets shared with creators, who are rewarded for engaging and retaining players. Hence this model theoretically also takes the pressure off creators to be forced to monetize strongly and lets them focus on retaining and engaging instead.

Or at least that is my current belief. It’s still early, so let’s see what happens.

Also, the new unified digital store, Fab, already linked to UEFN, shares 88% of revenue back to developers.

The above represents my current interpretation of economics. However, I believe the UEFN economics will be more favorable simply because I know Tim Sweeney thinks a lot about ecosystems and developer economics:

Fourth, limited players in a huge market.

There is only one major competitive creator platform in Roblox, which has a greater audience limitation in its focus on kids. Fortnite has a much broader audience range, making it more attractive to developers. Further, while Roblox has been rumored to have been working on higher fidelity capabilities for Roblox for at least the past five years, progress on this front has been relatively slow.

While we have seen some progress, for example, FRONTLINES on Roblox, developers will also have a much broader range of audience, game fidelity, and technical capability with UFEN relative to Roblox.

Fifth, UEFN provides longer-term career progression.

Many of the Roblox developers I have spoken with have felt limited in their capability to progress as developers. For example, I’ve noticed that most Roblox players I’ve met are under 16 years of age, say 5-16, and the developer community I have spoken with is largely 16-25.

UEFN + Verse enables young developers to jump in and develop for Fortnite Creative but then opens up the potential for those same developers to expand into standalone development using Unreal Engine + C++ later in their careers.

Roblox has not considered the ongoing professional durability of their creators, which Epic with UEFN will likely use to win over professionally-minded developers.

Finally, Tim Sweeney talked about why an open-world MMO creative space, whatever it’s called (Metaverse or whatever), is so important:

In summary, hats off to Epic, kudos to Tim Sweeney for being a badass, and let’s see how Roblox responds because we now have a real creator platform battle on our hands!

References:

• Unreal Editor for Fortnite (Fortnite)

• Epic’s New Unreal Editor For ‘Fortnite’ Must Be Seen To Be Believed (Forbes)

• Epic Games Leads $15M Investment in Manticore Games® (BusinessWire)

• Fortnite’s Unreal Engine editor lets it compete with Roblox (Polygon)

• Unreal Editor for Fortnite launching in beta today (GamesIndustry.biz)

• Verse Language Quick Reference (Epic Games)

• Roblox FRONTLINES (Roblox)

• Tim Sweeney explains how the metaverse might actually work (The Verge)

• Developer Economics (ROBLOX)

Note: This section was updated after clarification by someone with intimate knowledge of Roblox. I misunderstood some of the wording in the Roblox Developer Economics website.

AI Making Games For Real 💻

It was probably 2016 or so, and I was excited to be able to attend a talk by Ray Kurzweil about AI in San Francisco. At the end of the talk, I somehow found myself standing next to him, so I decided to talk to him:

JK: Hey, what’s up Ray? You mentioned that AI would have a profound impact on business and society. What are the specific industries you think will first be impacted by AI?

Ray turned towards me with a steel gaze and stared at me super hard. I don’t think he blinked once. And he had an almost look of contempt on his face.

Ray: Every industry. Everything. AI will disrupt everything.

He then, to be honest, sort of rudely turned around and walked off.

Turn the clock forward to 2023, we’re here today and that vision of what he spoke about not only in San Francisco but for years before is materializing before our very eyes.

By the way, I did tell you guys all of this was coming last year… a trend I have been calling “small vector creation” facilitated by AI:

To get into the details a bit more, I recommend reading this Tweet thread written by Josh Lu from a16z:

There’s already a ChatGPT integration into Unity directly:

Here’s an example of AI being utilized for animations:

We’re just at the beginning of AI being utilized for various applications, many of which we haven’t even considered. Game development certainly will change.

Bill Gates likens AI in its potential to the PC and Internet revolutions:

Welcome to the first inning of the next few decades of the AI revolution!

References:

• Mr. Beast, Tesla AI Day, and the Future of Game Development: Small Vector Creation is Coming! (GameMakers Substack)

• The Age of AI has begun (Gates Notes)

How Worried Should Apple Be Of Microsoft’s Mobile App Store? 😟

Roger McNamee, the famous tech investor, once stated in an interview:

Smart dude.

Since the laws of the land are changing about the nature of exclusive app store distribution on phones, Microsoft has set its sights on its own mobile app store.

So Microsoft’s big push for acquiring Activision Blizzard, which owns King, the makers of Candy Crush makes sense. Microsoft is quickly trying to acquire the content to give its store enough gravitas to drive users to its store.

Candy Crush has generally been a top 10 grossing and downloaded game worldwide for years. Here are the estimated revenue and download ranks for the past year:

A big concern has been whether the Activision Blizzard acquisition from Microsoft could be legally cleared. However, good news for Microsoft, according to the CMA (A UK governing body known as the Competitive Markets Authority):

In a recent interview ahead of GDC, Microsoft Gaming’s Chief Executive Phil Spencer stated:

Some things we could see if Microsoft launches its own app store:

• Exclusive titles to Microsoft app store could include Candy Crush Saga, Warzone Mobile, Call of Duty Mobile, Diablo Immortal, and future titles with great IPs like Minecraft, Blizzard titles, etc.

• Microsoft App Store integrated into Microsoft Android devices like Surface Duo

• Potential integration of Game Pass or cloud gaming services

Also, don’t count out Microsoft’s potential future capability to vertically integrate into the OS. Remember, Microsoft did have its mobile OS until 2019 when it discontinued Windows Phone.

While I don’t think much of Wall Street analysts who are wrong so often, here’s what Morgan Stanley thinks:

• “We estimate the impact of a potential Microsoft App Store on the iPhone would be limited to <3% of App Store revenue and <0.5% of EPS, but it still represents the biggest potential threat to the App Store today.”

• “Morgan Stanley analysts also found that fewer than 30% of Apple users would be willing to buy apps outside of the company’s App Store. Even so, they said Microsoft’s app store could prove to be a true competitor with time.”

With enough exclusive content, Microsoft could be a competitor, especially on the Android side.

However, “the biggest potential threat” is hard to believe.

Come on, guys, who are you afraid of more? Phil Spencer or Tim Sweeney?

References:

• Microsoft plans mobile games app store to rival Apple and Google (Financial Times)

• Apple to Allow Outside App Stores in Overhaul Spurred by EU Laws (Bloomberg)

• Microsoft’s new project: A mobile app store that can take on Apple and Google (Windows Latest)

• Microsoft poses ‘biggest potential threat’ to Apple’s App Store: Morgan Stanley (CNBC)

• CMA narrows scope of concerns in Microsoft – Activision review (Gov.UK)

Quote of the Week 🗣️

SciPlay CEO Josh Wilson spoke about the biggest challenge facing the mobile games industry today in an interview with PocketGamer:

By the way, if you want to learn more of the secrets for how SciPlay manages their live ops to great success, watch this data.ai webinar where I interviewed SciPlay’s VP of Product Management and Director of Monetization:

Webinar link: HERE

What Do You Think?