Epic Games CEO Tim Sweeney has admitted the company was grappling with a “financial problem” 10 weeks before announcing sweeping layoffs, in an unexpected admission during Unreal Fest earlier this week.
In a post on the social media platform X (spotted by Polygon), user @ImmatureGamerX uploaded a video recorded during one of the sessions available on the first day of the annual conference focused on Unreal Engine. However, this session is not included in the live streams available to the public.
Sweeney elaborated more on Epic’s financial woes that led to the company laying off 830 employees late last month. Sweeney explained that management became aware of how dire their financial difficulties were just 10 weeks before the announcement.
Tim Sweeney addresses Epic Games Layoffs… #UnrealFest pic.twitter.com/49t4Tf20SA
— Immature (@ImmatureGamerX) October 3, 2023
“This wasn’t a right sizing. I think we were in the right size, and I loved our original plans,” Sweeney explained. “This was a survival move that was necessary. And what we did accomplish, the one thing is we stabilized our finances so we won’t run out of money as we build the metaverse.”
While Sweeney did not speak freely about the change in Epic’s financial struggles, he admitted that the company relied heavily on Fortnite’s revenue in recent years. It’s not a complete surprise, as Fortnite has been one of Epic’s most profitable properties. In 2021, it was reported that the popular free-to-play battle royale had made $9 billion in two years and had 400 million registered users at the time.
Even with the revenue Fortnite brought in for Epic, the company has been spending more than it’s been making, something Sweeney disclosed in the letter sent out to staff last week. One costly venture is Epic’s ongoing legal feud with Apple, which dates back to 2020 when Epic sued Apple (and Google) after both companies removed Fortnite from digital storefronts. Meanwhile, Epic was fined $520 million for unwanted in-game purchases made between January 2017 and September 2022 in Fortnite.
Epic has also been generous with revenue splitting, from offering 40% of Fortnite revenue to content creators using the Unreal Editor for Fortnite. Two months ago, the company announced the Epic First Run, a program for third-party developers to keep 100% of the profits from its newly-released exchange to make its new titles timed-exclusives on the Epic Games Store. And Epic already takes a smaller cut for games released on its digital storefront, charging only 12% in contrast to the “industry standard” of 30% as seen on its competitor Steam.
To help ensure it is expanding its revenue streams, Sweeney revealed that Epic plans to increase the price of Unreal Engine. But unlike the situation with Unity, Epic does not plan to make it more expensive for game developers. Rather, Epic will move to a “seat-based” software pricing model where customers pay for “seats” or how many people can access the software.
Taylor is a Reporter at IGN. You can follow her on Twitter @TayNixster.
