Founded in 1991, Epic Games is a video game and software development company based in Cary, North Carolina. The company is best known for its widely popular battle royale game Fortnite, which has been downloaded over 350 million times since its release in 2017. In recent years, Epic has increasingly focused on building out its Unreal Engine technology, which allows developers to create densely realistic 3D worlds for games and other applications. Now, Epic is positioning itself as a key player in the development of the Metaverse—a shared virtual space where people can interact with one another and digital objects in a realistic and immersive way.

Epic's Metaverse Strategy is predicated on three pillars:

1. Acquisition/Partnerships with Infrastructure Providers
2. Onboarding developers and content creators into Unreal Engine
3. Securing valuable IP that can be used to create games or game components such as wearables and avatars.

Building out the Metaverse Infrastructure

Unlike its more centralized and vertically integrated competitors, Epic Games' ethos to building the Metaverse seems to be more decentralized and focused on partnerships. In a 2020 interview, Epic Games CEO Tim Sweeney argued that a "critical element of the Metaverse [would be that]  it’s not just built by one mega-corporation" and instead  would be "the creative work of millions of people who can each add their own elements to it through content creation and programming and design." In keeping with this theme, many of Epic's recent partnerships and investments have focused on enabling the creative work and collaboration of metaverse developers and participants, even when it involves introducing a competitor's solution to its users.

Investment in Hadean

In September, Epic Games announced that it would be investing in Hadean's $30 million funding round. This move could have big implications for the company’s future. Currently, Epic cannot host more than 100 players each on an instance of a map, which is a pivotal barrier to a cohesive metaverse experience. Epic believes Hadean’s “open platform for distributed cloud computing” may be part of solving that. The potential here is that instead of having to shard servers by player count and hope people get into the same instance as their friends, an infinite number of servers could be created, and people would seamlessly drift between them. According to Epic’s VP of Unreal Engine Ecosystem, Marc Petit - “Hadean’s computing power will provide the needed infrastructure as we work to create a scalable metaverse. The company’s technology complements Epic’s Unreal Engine by enabling massive amounts of concurrent users and unlocking new tools for creators and developers."

Partnership with NVIDIA

Nvidia has been a critical partner for Epic Games since 2012, when Nvidia launched the GeForce GTX 680.

In May 2022, Fornite, which had been removed from Apple's App Store in August 2022, partnered with Nvidia to develop a touch-friendly version of Fortnite for mobile devices that’s playable on browsers through its GeForce Now cloud gaming service.

This partnership continues to grow with the launch of Unreal Engine 5. NVIDIA supports Unreal Engine 5 with plugins for key technologies, including Deep Learning Super Sampling (DLSS), NVIDIA Reflex, RTX Global Illumination, and its real-time design collaboration and simulation platform - Omniverse Connector.

These plugins have an important place in the developer toolkit. For example, DLSS taps into the power of a deep-learning neural network to boost frame rates and allows game developers to generate beautiful and sharp images. Reflex aligns CPU work to complete just in time for the GPU to start processing, minimizing latency and improving system responsiveness. Meanwhile, RTX Global illumination computes multibounce indirect lighting without bake times, light leaks, or expensive per-frame costs. Finally, Unreal Engine Connector for NVIDIA's Omniverse enables artists and developers to achieve live-sync workflows between Omniverse and Unreal Engine and supercharge their art pipeline.

Partnership with Microsoft

Similar to Nvidia's GeForce Now cloud gaming service, earlier this year, Epic Games announced a new partnership with Mircrosoft, which will make Fortnite available on supported browser-enabled devices with Xbox Cloud Games. Players are now able to play Fortnite on iOS, iPadOS, Android phones and tablets, as well as Windows PC (with internet access) with Xbox Cloud gaming for free in 26 countries (including Australia, Brazil, China, France, India, Japan, New Zealand, Russia, Sweden, UK, and the US).

Partnership with Autodesk

Epic and Autodesk (3D designer, engineering, and construction software provider) first teamed up in 2008 when the latter joined Epic Games’ Integrated Partners Programme, enabling the integration of Autodesk 3D design software with Epic’s Unreal Engine. In 2021, both firms collaborated to offer a new Unreal Live Link for Maya plugin, allowing media and entertainment (M&E) creators to stream data from Maya to Unreal in real time.

In October 2022, Epic Games announced a new strategic collaboration with Autodesk to accelerate immersive real-time (RT) experiences across industries, with an initial focus on architecture, engineering, and construction (AEC). The first integrated offering will combine Epic Games’ Twinmotion with Autodesk's Revit to deliver real-time rendering and storytelling. As Revit is used to design, document and deliver building and infrastructure projects, Twinmotion complements the process by creating real-time visualizations for a fast, interactive design process. Autodesk intends to make Twinmotion for Revit available to all Revit customers as part of an upcoming release.

Partnership with Open 3D Engine

Epic Games is also unafraid of partnering with potential competitors such as O3DE, an open-source 3D development engine. O3DE began as an Amazon product called Lumberyard, but was open-sourced in July 2021 by The Linux Foundation under a new organization called the Open 3D Foundation (O3DF). Somewhat surprisingly, Epic Games joined O3DF as a premier member in August, alongside Adobe, Amazon Web Services (AWS), Microsoft, and others.

O3DE and Unreal Engine's partnership allows 3D developers to move media assets and limited code between the engines.  According to Royal O'Brien, General Manager of Games and Digital Media at the Linux Foundation, Epic Games will benefit from the partnership by taking things that are “table stakes” — such as basic runtime pieces — and while focusing on newer advancements like Nanite, the virtualized geometry system in Unreal Engine. O'Brien also believes that as a modular system, O3DE will provide the scalable architecture for Epic Games' metaverse platform.

Partnership with Meta

Epic has enjoyed preferred partner status with the Oculus Store since 2016. Any Oculus-exclusive games or apps made with Unreal Engine enjoy a royalty-free grace period until they hit $5 million in revenue. Additionally, this month, at the Meta Connect 2022 keynote, Zuckerberg announced that they would partner with Epic Games to bring Creative Commons-licensed content from the Epic-owned Sketchfab library to Horizon Worlds.

Onboarding Developers and Content Creators

While competitor Valve has taken a hardline stance against games that feature cryptocurrency or blockchain-based assets, Epic is more open to working with developers in this new field. Though there may be some limitations on what types of games will be allowed, Epic is willing to work with early developers to explore the potential of this new technology. This move could help Epic attract more developers to its game store, as well as tap into a new and growing market for games that utilize cryptocurrency or blockchain technology. Whether or not this decision pays off remains to be seen, but it’s clear that Epic is positioning itself as the more open and flexible option for game developers.

Unreal Editor for Fortnite: Fortnite Creative 2.0

Back in May, Epic Games CEO Tim Sweeney revealed that Epic was planning to release the Unreal Editor for Fortnite later this year. The move comes as Epic looks to compete with Roblox and position itself as the leading platform for user-generated content (UGC). The editor seeks to change how players create their own games and islands.

CEO Tim Sweeney told Fast Company that around half of players' time in Fortnite is spent playing other users' content, and Epic Games wants to make that experience more fully-fledged through the editor and the ability to monetize that custom content. He added that Epic Games aim to make Fortnite a marketplace similar to Steam or the App Store, comparing it to other games like Roblox that, while free to download and play normally, feature player-made content that can be bought with real money.

Sweeney suggests that people misunderstand the metaverse. Instead, he sees it as a long and ongoing project that's formed of multiple different strands and open to all companies, without gatekeepers. He argues that the decision to release the Unreal Editor for Fortnite is so that anyone can "build very high-quality game content and code and deploy it into Fortnite without having to do a deal with [Epic]."

Epic's goal with the Editor is to make it more attractive for creators and developers to create games and experiences for its 83 million monthly active players and incentivize those doing so by creating an underlying economy that rewards these efforts.

Unreal Engine License & Epic Store Fees

In addition to releasing the Unreal Editor for public use, Epic often offers far more generous terms to game developers compared to its competitors.

For example, on both the Epic Game Store and the Unreal Marketplace for developer assets, Epic only charges a 12%  compared to Apple and Unity, which charge around 15%-30%.  Arstechinca's Kyle Orland reports that thanks to combined, existing promotions, an Unreal Engine game's launch on EGS could garner a whopping 23 percent more revenue after fees than on Steam.

Additionally, in 2020 Epic also raised its royalty-free grace period for a game using Unreal Engine from $50,000 to $1 million.  Previously, Epic offered a royalty-free grace period for a game or app's first $50,000 of revenue, then began requiring payment of 5 percent of the software's "worldwide gross revenue" from that point on, including DLC, crowd-sourced fundraising related to the software, and other related revenue streams. That 5-percent fee still applies, but it now leaves game makers unaffected until a $1 million threshold is hit.

By lowering costs for game designers, Epic hopes to continue to add to its portfolio of titles and bring more viral games under its umbrella. Not only is this critical in onboarding new users, but it also allows Epic to secure the IP rights for new content created on its platforms.

Securing High-Value Intellectual Property

Any video game consists of many different types of intellectual property. For example, the characters and worlds are often protected by copyright, while the gameplay mechanics may be protected by patents. One of Epic's biggest coups has been securing licensing from legacy content players like Marvel, Sony and Lego while acquiring newer entrants such as Rocket League. These licensing agreements are often mutually beneficial. Epic can use their licenses for likeness to popular characters to enhance player experiences while encouraging creators to adopt the platform to create new experiences and games using the coveted IP.  Additionally, by including new and popular characters, Fornite incentivizes users to continue purchasing new skins from the marketplace, thereby making the game economy sustainable.  Meanwhile, the content providers not only profit from the licensing agreement but also generate greater exposure for their franchises amongst a younger audience.

In addition to various licensing agreements with Marvel, NFL, NBA, Nintendo (Pokemon), Star Wars, DC, Game & TV Franchises (Lara Croft, Kratos, Master Chief, John Wick, Terminator etc.), and real-life figures (Ninja, Lebron James, Neymar Jr. , Harry Kane, Travis Scott, Marshmello, Ariana Grande), it's recent $2 billion raise from Sony and LEGO helps Epic secure future licensing agreements which have been a key pillar in its Fortnite and Metaverse development.

The investment by Sony guarantees that Fortnite will continue to leverage characters such as Kratos, Solid Snake, Dante, Nathan Drake, Spiderman, Venom, and Morbius, while having access to Sony's massive Playstation platform for distribution.

The investment with Kirkbi, the parent company of the Lego Group, was followed by the announcement that Epic was with Lego to build a metaverse aimed at kids. The companies intend to shape the future of the metaverse to make it safe and fun for children while building an immersive digital experience for kids to play in. This move is Epic's attempt to directly compete with Roblox for the attention of 9-12 year-olds, who comprise almost 60% of Roblox players. Moreover, as these kids outgrow the Lego metaverse environment, Epic will offer them a more age-appropriate alternative in Fornite with a seamless transition of their assets.

Epic appears to be in a strong position to dominate the metaverse. It has made key acquisitions and partnerships, which gives it access to the technology it needs to scale its offerings. Additionally, it has made these solutions accessible and profitable for content creators, which should help it attract new users. Finally, it has secured valuable intellectual property, which will provide key assets for content creation and fuel a sustainable game economy. These three pillars will be essential for Epic as it looks to dominate the metaverse in the years ahead.