Sorry, HOW?!?
How can a company like Epic games with one of the most successful gaming products of the last few decades be losing money with a product that is so mature? Almost every other games developer would love to be in their position on Fortnite but they've somehow turned that into a loss making proposition?!? I'm baffled.
I’ve been playing Fortnite a bit lately, after my nieces got me into it.
One thing is that although the player counts are high (always hundreds of thousands of players online, just in the main Battle Royale game), the average revenue per player can’t be that high.
For one thing, once you’ve bought the $10 battle pass once, you only need to average maybe 1 or 2 games per day to earn enough vbucks to buy the next season’s battle pass with vbucks. So if you stay active you can pay once then play the game free forever and still get access to a huge amount of free cosmetics. And much of the player base is kids who are just begging their parents/uncles to buy them stuff in the game rather than spend money themselves because they don’t have credit cards to link to their Epic accounts.
Compare this to something like Hearthstone which is similarly mature. They have a similar battle pass but there’s also a strong incentive to pay real $ for extra card packs and cosmetics. And there are clearly plenty of adult whales buying this stuff. For example, there’s a new mythic Deathwing skin on a gacha wheel that costs, on average, about $200 (!!) to get. It’s only been out a few days and I’ve run into multiple players who have it.
And anyways, the population who plays these kind of live service shooters is relatively constant imo, and there are new games on the block nowadays.
Actually what's an anomaly is how long Fortnite continued to be popular.
I seriously hope that isn't true because Fortnite is a showcase of nearly everything wrong with modern gaming. It's an ad platform/casino that prays on children and is designed to make them feel like shit by pumping them full of anxiety/FOMO over their various passes, gambling, and vbucks balance. I think the only good thing you can say for Fortnite is that it's not often pay to win (although there have been skins that gave players advantages over others) and it isn't run on child labor like roblox is. If Fortnite is actually losing players that's great news.
I hope that most games developers would be ashamed to release a game like Fortnite and that the ads and predatory casino mechanics are something they'd choose to avoid in their own games.
It's me. I have accumulated several dozen free games over the years through the Epic Store. Sorry Tim Sweeney!
The chances this is accurate are extremely small. This is either anticipating AI coding goals, the CFO proved they were overloaded on developers, or they're just cutting to hit quarterly numbers.
You can't just bet the farm on dropping a new $5B/year game.
Most game companies are a tiny fraction of that size. Even most AAA games are made by teams of hundreds. Not teams of thousands.
Probably the closest way to say "we're in a recession and gaming isn't resistant to this one" I've heard yet. But it makes sense: a "free" service that entices with cosmetics is easy to cut when parent money gets tight.
And if kids lose interest they will move to another game. Or more likely, TikTok and its medium. Just increasing the dopamine.
They are paying creators a lot. $220 million in 2023. [1]
That combined with trying to undercut Steam on royalties, the 2025 softening of their cash cow, the Apple legal wars, a number of R&D bets, giving away free games, and an absolutely MASSIVE marketing budget...it can go fast.
I think the reality is that Epic got big because of Fortnite but nothing lasts forever. They would have been better off building a war chest and pulling a Valve (though I'm sure they'd hate hearing it that way): going silent and making whatever they wanted for a while, and then trying to repeat the cycle, rebuilding the chest, and then going on. Video games are the exact opposite of Infinite Growth Forever. People get bored and move on.
Meanwhile, Epic has many stable and valuable businesses - Unreal, the game store, etc. - which are perfectly capable of sustaining a sizable company. Just not one as sizable as Epic is. The best case for them is they figure that out, and manage to make a sustainable go of it doing that.
> Video games are the exact opposite of Infinite Growth Forever. People get bored and move on.
To me, Epic Games were clearly trying to "pull a Valve" and capture the platform magic that allows Valve and other platforms like Roblox to be sustainably profitable. Obviously they have their own game store, but they also have a Fortnite Creative / UEFN (Unreal Editor for Fortnite) platform where people can create minigames inside Fortnite that work similarly to Roblox.
They even had the right idea for a while - refusing in-app transactions in their Fortnite Creative platform to encourage actually fun games rather than greedy games that prey on players. Unfortunately they had to walk back that system recently, which I now assume to be for the same financial reason as this new layoff.
I think their idea didn't work for two reasons. First, they locked down the UEFN platform too hard, leaving not a lot of options for developers to modify core gameplay features like movement and player controller. Devs like me who wanted more control over the player character and game mechanics were really severely restricted - if it was intentional, it was a bad call, and if it was unintentional then it shows that UEFN was too half-baked technically when they launched it. Second, Fortnite already had the reputation of being "just that Battle Royale game", so people didn't innovate too far beyond the game's base gameplay, rather than Roblox which was more like a true game engine / platform where every genre was possible. This kind of doomed their plan to compete head-to-head with Roblox from the start.
I though my grievances with Epic are primarily because we never got Jazz Jackrabbit 3.
I don't think their approach is getting to stable, valuable businesses and keeping them that way. Their company name is Epic, not Mediocre BlueChipGameCo. I think their approach has been to make big investments into things, almost like Amazon's earlier approach where they would re-invest everything into the business and that might be where Epic now has to react to the market slowing for them and pull back.
I have to imagine AI is having an impact but not in the way people jump to about them using AI. How many people out there have ideas for games and can't execute them because they don't know the tech? How many people in the software industry were drawn to computing because of gaming?
If they built AI into Unreal Engine so that someone could approach it from a Game Producer/Designer role and not have to get deep into C++ programming or shaders and art assets, and produce games, games that go to the Epic Game Store and they take a cut? That would move the market in a way that would be more fitting for their company name.
Isn't that exactly what they were trying to do with the Epic Game Store?
Steam is the thing that has made Valve successful. They were great as a game company, but as you said, the games don't last. Steam does, and I don't think Valve would be that successful in a business sense without it.
They tried, it's called the Epic Game Store
Re Tim the man: I have no opinion on him, but I follow gaming news closely and know that he is polarising. However, I saw this recently in PC Gamer and thought it was admirable: https://www.pcgamer.com/gaming-industry/epic-ceo-and-billion...
Google has been a money printing machine for 20+ years almost unparalleled in human history. That's allowed Google to write bespoke software for everything, which has been useful because almost nobody has Google's problems. It's also allowed Google to contribute a bunch to open source and engage in vanity projects. They can afford it.
Then you see the likes of Twitter a decade or more ago who dedicated possibly hundreds of engineers to make Cassandra work. That's doing Google shit. But they aren't Google. And eventually those chickens come home to roost.
Games are like any content business where the owners and leadership are trying to create a formula that can be repeated infinitely. Content business actually hate the creative people who make their content because creativity doesn't scale. This is why movie studios churn out sequels and superhero movies. It's a formula.
Games eventually fall out of favor as genres get stale and new genres get created. Minecraft is an almost unique exception to this. There's a reason it sold for ~$2 billion. It's still popular. It's crazy. But that kind of example is so incredibly rare you should assume it's never going to happen.
The hubris at Epic was that they could challenge the Apple and Google app store monopolies. They were wrong. And they wasted an extraordinary amount of time, money and opportunity chasing that. That was a strategic mistake, even though I agree with their philosophical position.
I'm reminded of id software. John Carmack was legendary for years. Wolfenstein was groundbreaking. So was Doom then Quake. But eventually (IMHO) id games ceased to be games but because tech demos to sell engine licenses before ultimately being acquired and swallowed.
I feel like Epic is the same with the Unreal Engine. Fortnite is a success while it's popular and people buy cosmetics but when that popularity wanes, they have a huge revenue problem.
* Fortnight revenue was $5.5B in 2018 and $3.8B in 2019
* Employee counts in those years: 1063 and 1932
* Average "People" cost per employee: $141K, $142K (CPI adjusted is $182K in 2026).
* Average "Production & Hosting" cost per employee: $189K, $150K (CPI $248K, $194K)
* Platform royalty expenses were 25% of total game revenue
* Slightly under half their Operating Expenses were people
* Fortnight was >90% of revenue
I have a strong guess that "People" costs doesn't include all salaries, and that many employees are categorized under "Production & Hosting", although I expect that also includes other costs. I'll guess 75% is people, which makes total CPI adjusted average cost per employee somewhere around $320K-$370K, but I'll say $320K.
This means 5000 employees cost around $1.6B and cutting 1000 saved around $320M/year in addition to $500M of other costs.
Most estimates of Fortnight revenue claim it's roughly flat or falling between 2020 and 2025 fluctuating between $3B and $6B.
Unless Unreal Engine or EGS revenue took off, it's kind of weird to quadruple headcount while keeping revenue basically flat or falling. If fortnight only makes $2B next year, then they would be underwater on just royalties and salaries.
https://s3.documentcloud.org/documents/20696836/epic-apple-t...
Yes, Unreal Engine keeps getting improved, more Fortnite content gets produced. But there is a general lack of innovation, one that I find personally painful when I look at Epic's recent-ish track record. Needing to fire this many employees is not just a result of market conditions, but also a straightforward consequence of not being able to leverage them for sufficiently lucrative outcomes.
Companies with this amount of capital are well positioned to take multiple strategic bets which aren't at all safe bets, but pose no real financial risk for the company in aggregate. Why do these bets end up being taken instead by indies with much more to lose? Well, partly because indies often _need_ to take riskier bets to carve a niche. But the other side of the coin is, what I can only surmise, a lack of imagination and adventurousness on the part of management. They could be funding many experiments and seek to have another hit like Fortnite, perhaps in a somewhat different market. Having to seek another hit while your finances are declining is less pleasant.
When a company loses its edge in this way, as long as it hasn't _really_ captured a demographic or created some very sticky ecosystem, it's bound to get whittled down repeatedly. I doubt that Epic will suddenly get more creative and adventurous at this point, but perhaps necessity will have its part to play.
(Aside from all of that, I agree with most commenters here that the layoff is being handled about as gracefully as one could reasonably hope.)
Some of it is real need for things like support, payments, and compliance in a bunch of languages and jurisdictions and across a bunch of platforms and combinations of platforms.
A lot of it's just that large businesses tend to be shockingly inefficient, often taking literally many hundreds of person-hours to do things that a small company or small team might do in low-tens. Coordination costs are high, processes are often really bad in ways that nobody who could fix them is empowered to, serious principal-agent problems are the norm rather than the exception, et c.
One of the weirdest things to me about the AI craze is that I don't see how it fixes organizational problems, and most big orgs are already burning more cash on waste due to those than they could possibly gain from fairly-optimistic LLM gains. Like, if they wanted to 5x development speed, they already can without a single LLM involved, by managing better. They could have done that ten years ago. All the more wild that they're flipping out over LLMs. You can't even come close to efficiently organizing the resources you already have...
Each job is justified in isolation to do a specific thing, at least at the hiring time. I suspect there aren't a lot of people thinking at a high level as you are "we have this many gajillion dollars - what are we betting on?"
Remember that their success came from abandoning their original zombie game idea, and copying ideas from the new battle royale genre. With more polish, of course.
Nanite? Lumen? Metahuman?
They are bleeding edge when it comes to real-time rendering tech
And that's just rendering, there are a lot of other engine domains
Twitter. I despise musk, ftr.
You could spend a lot on developing a store to avoid paying $1b in fees!
Plus, your chance to launch a store is when you have a big product. Valve launched Steam with Half Life 2. It didn't really work that well at first but everyone wanted to play HL2.
Anway, it's not quixotic IMHO.
We are Legion.
Building a marketplace or AppStore isn't quixotic - it helps build distribution and gives Epic the power needed to drive studios to the Unreal Engine, though this strategy clearly went to the backburner due to Fortnite and it's entire ecosystem becoming the golden goose.
That said, Epic is also significantly more overstaffed than it's peers.
Since game journos are completely woke and unreliable using Steam's game ratings from REAL players is a God-send.
Without it you simply wouldn't know if a game is any good or not.
https://insider-gaming.com/epic-games-store-give-away-662-mi...
In addition they've payed other game devs for Epic Game Store exclusivity so games would be available for 1 year before being released on Steam.
The whole company has been mismanaged into the side of a mountain.
>For example, in the U.S., they’ll receive paid coverage for 6 months. We’ll also accelerate their stock options vesting through January 2027 and extend equity exercise options for up to two years.
The wording of the announcement is better than the usual corporate non-speak too.
And still the overwhelming sentiment on HN is that unions are worthless.. When my company had layoffs the laws (thanks to the unions) made it favorable to us without needing the goodwill of the company. Additionally, representatives from the union were involved in all steps and made sure everything went as it should.
They've been pull about that much in per year since 2019 AFAIK.
I really hope this one have knock ons for Unreal Engine or lead to Unity like licensing. Their indie grants are also quite generous.
Does the company owe a living to those people that it doesn't actually benefit from having on board? Sometimes it sounds like people think so.
2. Given the economic conditions, I am more sympathetic. Normally a large severance would he good reassurance that they'd land on their feet. But I see more and more devs (especially game devs) going through year long gauntlets just to find something not as good. Tim, in comparison, will manage.
I suspect the popularity and ease of distribution/development on the platform makes it very attractive for developers with a dream.
But not just Roblox. People are spending their time and money elsewhere too. Polymarket and sports betting for one.
They just happened to hit the goldmine with Fortnite.
Executives care little about the stakeholders: the employees, the customers, the community. It's their company, too. They only care about investors and themselves. People who "own" pay a lower tax rate than those that "work". Let's fix that and make things great again.
Maybe he could destroy his wealth to keep the employees around a bit longer but it's better for everyone if they move on and the company has a legitimate opportunity to survive. Besides people don't want to be on corporate welfare anyways, they'd rather be part of a company where they can add meaningful value.
It is just mismanagement of the money they earned with fortnite, they failed to keep the momentum and stopped taking risks. The technical incompetency doesn't stop with UE5, it shows in the store, which is laughably bad and inefficient since forever. I think its good these people get a new chance to start working for companies who can put their skills and time to good use and value their expertise. Long term nobody working there would be happy with the way the software portfolio is moving downwards.
This is a problem that infects all of the large studios now, from Epic to EA, Ubisoft, etc. My read on it is that it feels less risky to double-down on an exiting successful live service game like Fortnite or Rainbow Six Siege. That's probably true for ~5 years. After those ~5 years, it's far riskier to continue investing in the game than it is to start winding it down into maintenance mode while working on new titles or IP. The related risk is assuming that since the one title was huge that players are going to crave other titles in the same brand or franchise. For example, Ubisoft's assumption that Rainbow Six Extraction would naturally follow the success of Rainbow Six Siege.
These companies get addicted to the recurring revenue stream and pivot their businesses under the incorrect assumption they will last forever, at the expense of new projects.
I know someone in Epic and they told me that its no secret inside Epic that Roblox is killing them. Why? He told me a story where a neighbors kid came by and wanted to play Roblox but he told the kid he didn't have Roblox. The child replied "It's easy! I'll show you!" and this 8 year old sat at his PC, downloaded a few MB client, signs in, selects a game and is playing within minutes. The game was a brain dead platform jumping game where you jump to the top of a tower. No enemies. No items. No anything. Just get to the top. Yay. At one point the kid fell down and the game offered to move him back to where he was for $3. Yup a fucking game hit a kid up for hard cash. The people who makes these games are child predators. Scum really.
Epics problem is Unreal can't be easily deployed like Roblox. You want to play Lego star-wars? You need to first download the base Lego game of 30GB then the 20GB Star Wars pack. A Roblox user just downloads a small client, signs in and is ready to play a stupid simple game that isn't 50+ GB. Unfortunately most of those games are not games but attention stealers that entice users to spend real money on NOTHING.
Shame that everything has been boiled down to an attention and money milking scam.
(Also, eight year olds don't have $3 in Robux unless someone buys it for them, so blame the parents as well)
Roblox isn't killing Epic, Epic is killing itself by desperately trying to steal Roblox's players when they have no reason to stop playing Roblox. Even if they released a 50MB Fortnite client that streams low quality assets like Roblox, it would be no different because those kids would simply keep playing what everyone else is already playing. Tim Sweeney making another tweet about his metaverse or whatever isn't going to change that.
Layoffs really, really suck, but at least there's not a whiff of the "we're doubling down on AI to boost productivity" cop out that we're seeing across the industry.
It's sad that a company being honest about a difficult decision is praiseworthy these days, but here we are.
I agree, though it might also be worth pointing out that for a game company there's some risk in that messaging that doesn't exist for a normal SaaS company. Investors might like to hear it (whether it is the truth or not), but the game-playing audience tends to be only slightly less anti-generative-AI than say the art community.
https://www.fortnite.com/news/fortnite-v-bucks-price-increas...
Didn't Valve push Steam through HL2? It's a different kind of forcing of course, but still.
What? If the person writing the article is so unfamiliar with the subject they are writing about, they likely should not be writing about it.
But the contract can always change (look at Unity). That's a part of why it's best to own your tools if you're able to.
- Millions spent rushing out huge amounts of Fortnite content at a breakneck pace
- Millions spent organizing, designing and marketing 5 new Fortnite collabs every week
- Millions spent trying to wrangle Fortnite's spaghetti codebase as it crumbles under more than a decade of tech debt
- Millions spent trying and failing to keep the content pipeline flowing at a constant speed despite the tech debt
- Millions spent developing a failed Roblox competitor inside Fortnite
- Millions spent paying people to create awful AI generated games in their failed Roblox competitor
- Millions spent developing their own "metaverse" of brand-focused modes that nobody plays in their failed Roblox competitor
- Millions spent developing a failed Steam competitor
- Millions spent paying off developers to release their games exclusively on their failed Steam competitor
- Millions spent giving away free games every week on their failed Steam competitor
- Millions spent lining executives' pockets
It's really not hard to see where all that money is going.
Also I wonder if their low cut on EGS is doing part of these problems...
Epic has been pissing money away paying "creators" to churn out slop "red versus blue" modes/maps for Epic's meta-verse.
A lot of these maps are effectively hello world applications. Like the lowest of low quality. You add in a few weapon spawns, a few prefab buildings, and you're done. Time to get yourself a few thousand a month.
Revenue wise they might be down from the 6bn in 2025 to somewhere in the mid 5's, so might as well get rid of 1000 employees while handing out bigger bonuses to senior staff.
I like this choice of word, it seems fitting.
Apparently, that wasn't enough, and the billions of dollars in revenue the game makes every year are simply too little to keep the lights on. So now they're laying off over a thousand people and cutting several official gamemodes, so they can continue paying hundreds of millions to the creators of AI slop modes like Steal the Brainrot [2].
It's becoming increasingly clear that Epic Games is a dysfunctional company that simply stumbled onto a golden goose by sheer luck, and now that the goose can't lay eggs any faster to keep the line going up, they're panicking.
[1] https://www.fortnite.com/news/fortnite-v-bucks-price-increas...
[2] https://www.fortnite.com/news/fortnite-developers-will-soon-...
Changing that to a shooter with the Battle Royale mechanic was a $10 billion win. They have managed it pretty well, but it seems they just over extended without innovating to attract and retain players.
Just to hazard a guess: the majority of this money went to investors and executives and now, when the pot is empty, the employees pay the price.
