Epic Games CEO Tim Sweeney addressed the recent mass layoffs during the first day of the Unreal Fest 2023 conference. He also discussed the company’s Metaverse ambitions and the changes to the Unreal Engine pricing model.

Tim Sweeney hints at Unreal Engine pricing changes, elaborates on Epic Games' Metaverse ambitions

Tim Sweeney (Image credit: Unreal Engine)

A video of Sweeney’s speech was shared by Fortnite map maker Immature. Just like in his letter to employees, the Epic Games boss noted that the job cuts were made to stabilize the company’s finances so that it won’t run out of money as it moves towards the Metaverse.

Layoffs and building the Metaverse-style ecosystem

  • Epic Games realized it was running into financial problems about 10 weeks ago, so the company had to act quickly to solve it.
  • Layoffs affected only 3% of the Unreal Engine engineering team, but more than 30% of the business, sales, and marketing teams were let go.
  • This process will have “implications for everything we do,” including deterioration in the quality of some of the company’s work (“I’m sorry for that,” Sweeney said).
  • Epic Games has always been focused on developing technology for creators across the globe and adding its own entertaining experiences on top of that, so its business is built around creating the synergy between these two things.
  • Sweeney reiterated that Epic Games’ ultimate goal is to build something similar to the open Metaverse.
  • Different Fortnite events, such as concerts and collaborations with Disney and other companies, are part of this journey, but Epic plans to take other steps in the future to create even more synergies in the sphere.
  • At the Unreal Fest, Epic Games also noted that since March 2023, it has paid over $120 million to third-party Fortnite creators (the company currently shares 40% of revenue with people who make and sell their UGC maps and other stuff within the game).

We're committed to serving all the different parts of the Unreal Engine ecosystem. And truly, we fought for this, realizing that the magic in what we do is in serving everybody. But the real core strategy of our business is to not just be a General Electric-style company with a bunch of divisions serving a bunch of different industries, but to connect everything together in real-time 3D and something resembling the open Metaverse.

Tim Sweeney

CEO at Epic Games

Upcoming changes to the Unreal Engine pricing model

  • Without mentioning names, Sweeney recalled that “other engine’s royalties have been discussed recently in the industry.”
  • He noted that ever since introducing the 5% revenue sharing model in 2014, the only conversations that Epic has ever had about royalties have been about possible ways to lower them.
  • “We had discussions a number of times, and the recent discussion concluded, ‘We really need money,'” he jokingly said.
  • So that 5% share is not going to change anytime soon. Game developers will still be able to use UE for free until a title they ship earns over $1 million in revenue.
  • What will change is the pricing model for Unreal Engine customers outside of game development. This will affect automotive, film, and other industries.
  • Starting next year, Epic will move to a seat-based enterprise software licensing model for non-game developers. “It’s not going to be unsually expensive or unusually inexpensive,” Sweeney noted, adding that the new model will be similar to software like Maya or Photoshop (i.e. subscription).
  • Exact dates and terms will be announced later, but the Epic boss wanted to briefly discuss the upcoming changes in advance “for transperacy.”
  • This move should help the company improve its engine revenue. Sweeney pointed out that Epic Games has been funded so heavily by Fortnite in the past six years that different parts of its business have become disconnected from their revenue streams. And this is what needs to be changed.

During his speech, Sweeney also talked about the Epic Games Store, saying that the company will continue to develop and support it. He sees this product as a “cure to the disease that is infecting a lot of the industry right now.”

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