Tim Sweeney made 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 revenues are. 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’s powered a revenue surge at Epic Games Inc., 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, North Carolina-based gamemaker 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 upwards 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 Inc. 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 Inc.
Based on the trading multiples of peers Electronic Arts Inc. and Activision Blizzard Inc., 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 still reasonably command $7.5 billion in a sale, Pachter said.