Epic has rocked the video game industry by laying off 16% of its workforce, nearly 900 people. While layoffs and studio closures and game cancellations are all too common in the industry, this seemed not just larger than usual, but worse than usual, given the context in which they took place.
That would be because of the decisions Epic has made over the last few years, spearheaded by one man, Epic CEO Tim Sweeney, and his obsessive pursuit of the metaverse, and attempting to punish all those that oppose it.
Almost every poor, money-losing decision Epic has made over the last few years can be traced back to Sweeney and his metaverse ambitions.
While Fortnite did originally feel like one of the most logical places to begin an actual, virtual, shared world metaverse, more so than VR or blockchain attempts, Epic has utterly failed to deliver on that potential. It’s kept its battle royale chugging along, but instead of building out a large-scale space where people could exist and socialize and realize the sci-fi visions of the metaverse, it opted to go after Minecraft and Roblox instead with Fortnite Creative, parceling out metaverse creation to its community in little self-contained islands. Neat player projects were borne from it. The metaverse was not.
While Fortnite Creative has brought in more users, those users are getting revenue share from Epic, meaning Epic is making far less money from these new Creative endeavors, rather than when Fortnite itself was just making huge profits from cosmetic sales. Sweeney cites this specifically as a “transition” he thought he could make without layoffs, but here we are.
This goes past what Sweeney is citing in his non-apology explanation letter, however. Sweeney has declared war on two powerful industry forces, Steam and Apple, and spent ungodly amounts of money fighting each of them.
For Steam, he actually created a product, the Epic Games Store. Sweeney maintained that Steam had a monopoly in the PC space and its 30% cut was too steep. So, he made the EGS with a better dev split, 88-12, and tried to lure both developers and players over.
It has not worked. There remains no meaningful reason for players to use EGS over Steam outside of booting up Fortnite or picking up a free game or two that Epic has spent a fortune on securing. It’s been revealed that Epic has spent enormous amounts of money on timed exclusives or these free offerings, and yet they released a storefront without basic functionality like a shopping cart or user reviews. They are still not really close to catching up with the features of Steam, or making a dent in its userbase. And as such, the project has continually set money on fire.
Then there’s Apple. I wish I loved anything as much as Tim Sweeney hates Apple. In what he thought was a clever ploy, Sweeney had Fortnite purposefully break Apple’s app store rules by offering a way to bypass iOS store payment, where Apple, again, takes a 30% cut. This got Fortnite promptly banned from the store and Epic was immediately both ready to sue, and roll out an anti-Apple PR campaign that included a deeply embarrassing parody of Apple’s famous 1984 ad, and a Fortnite skin depicting an evil Apple-headed businessman.
These lengthy, expensive legal battles have barely gotten anywhere. Epic has lost nearly all of its claims, outside of one win that allows language directing toward non iOS payments. But Apple and Epic are now both attempting to head to higher courts, Apple to overturn that bit, Epic to try to get more losses turned into wins, like declaring the iOS store a monopoly in its mobile ecosystem (the goal, of course, is to get the Epic Games Store on iOS to bypass those 30% cuts).
This legal crusade was even addressed in an FAQ about the layoffs, and guess what was cited again? The metaverse:
What About Project Liberty? (yes, they seriously call it “Project Liberty”): “We’ve been taking steps to reduce our legal expenses, but are continuing the fight against Apple and Google distribution monopolies and taxes, so the metaverse can thrive and bring opportunity to Epic and all other developers.”
There are two options here. Either Tim Sweeney really is just using his company’s resources on an ideological crusade that actually is not all wrong, those 30% cuts are steep, but is just…failing at it. And by failing he is the main reason Epic is losing so much money, and you can imagine that without money-burning projects like the Epic Games Store and the Apple/Google lawsuits, many, if not all, of those 900 jobs could have been saved.
The other option that that Sweeney is being disingenuous. That the “ideology” he’s fighting for is mainly something that benefits Epic and its profit margins. Given that Epic is the only major games company seriously pursuing the metaverse at this point, by saying “these cuts hurt the metaverse” you are really just saying you want these big companies to reduce their cuts to help your core business objective. A business objective you have clearly mishandled given how Fortnite Creative has also cut into profit.
Neither of these are good, and both of them are the result of poor decisions by management, and Tim Sweeney especially. But it’s not Sweeney paying the price, the billionaire has not announced anything like a pay cut to his own salary, the way we’ve seen in the past from the late Nintendo CEO, Satoru Iwata. Rather it’s 900 workers getting sacrificed, who did not need to be let go if different paths had been taken.
It’s unclear where Epic goes from here. Fortnite is still popular enough. Unreal Engine 5 is a key part of the entire industry and its chief rival, Unity, is faltering. But how long will these wars last against Steam and Apple? And who will Sweeney pick as his next target? I’m not sure anyone still working on Epic is looking forward to finding out. I’ve asked Epic for comment on much of this, and will update if I hear back.
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