Boss Fights: Tim Sweeney, Epic Games, and the Quest to Slay the Mobile Duopoly

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S1: On August 13th, a simmering tension in the world of technology erupted into open war epic games maker of the wildly popular video game fortnight sued a pair of tech giants, Apple and Google, both of which have banned fortnight from their app stores. In this week’s episode, we revisit the story of epic games, which we first reported on in June. And we discovered that this latest skirmish flows directly from the deep rooted philosophy of Epic’s founder Tim Sweeney, a multibillionaire who still sees himself as a guy who loves to make video games. Here’s our show.

S2: Do you remember when you first played it? It was sometime in second grade, late at night, I think I had a kind bar in front of me.

S3: Dominic Skalkaho is eight years old. He’s a huge fan of a game called Fortnight.

S4: Yeah, I heard that it was like really popular and everyone was just playing it.

S3: My friend, you’re playing it for, like, launched in 2017. Since then, it’s become one of the most successful video games ever created, 250 million players, billions of dollars in revenue. Last year, Netflix, at its biggest competitor for eyeballs, isn’t a TV rival like HBO. It’s fortnight as is often the way with things kids love. Parents have some concerns about fortnight, mostly. The kids love it too much. For me, it is so addictive and consuming that Dominic’s parents strictly limit his access. You get to play once a month. How often do you wish you could play?

S4: Basically, every single day, unless I wanted to do something else. But you rarely want to do surveillance or. Yeah.

S5: So where did this phenomenon come from behind this wildly popular video game is a 30 year old company based in North Carolina that has repeatedly shaken up the world of gaming and along the way, meet its eccentric founder, a multibillionaire. Do you know what company makes fortnight? Epic games.

S6: Fans like Dominic have made four tonight into a massive moneymaker for Epic Games founder Tim Sweeney. If you wanted to, Sweeney could sit back or at least occasional updates to fortnight and let the dollars keep rolling in. But recently, Sweeney decided to take a huge gamble, one that could jeopardize the future of his biggest cash cow. Sweeney deliberately provoked Apple and Google, two of the fiercest opponents he could have chosen. An Apple and Google are fighting back. The result is a corporate battle royale that has the potential to hit reset on the whole gaming industry. I’m Seth Stevenson.

S7: Welcome to Thrilling Tales of Modern Capitalism. Gay on the show, Boss Night, Tim Sweeney, epic games and the quest to slay the mobile duopolies.

S1: Where did epic games begin?

S8: So it founded in 1991 by a chap called Tim Sweeney, Simon Parkin is a contributing writer for The New Yorker.

S5: He covers the video game industry.

S8: He was sort of a programming genius who had started making games when he was just 11 years old.

S3: When he was still in elementary school, Tim Sweeney received an Apple two computer as a gift from his older brother. Sweeney almost immediately started programming very simple games on that computer. And then he began to test those games out by letting other kids play them while he watched.

S8: He was quite savvy for a teenager because he knew that if he wanted his games to be successful, he needed to make sure that players of different abilities could get into the game and understand what they were doing. So he would invite all the kids from the local neighborhood over to come and play his games that he was designing, and he would watch them while they were playing and make adjustments to take notes based on if they got confused or if they got stuck in a certain bit and then he’d go away and adjust the game accordingly.

S3: It was in these early years that Tim Sweeney started to figure out the very things that would later make him so successful, first, let people try your stuff for free and good things will happen. And second, listen to those people’s feedback about the products you make and act on it when Sweeney eventually incorporated his company. He applied those insights over and over again at bigger and bigger scale.

S5: Sweeney launched his company in earnest in 1991 when his games got good enough that people would pay money for them. The first name he chose for his company was Potomac Computer Systems, after his hometown in Maryland. He later changed it to epic mega games and then just epic games. The first game Sweeney sold was called E.T. and he chose that name because it would come dead last alphabetically and lists of games for sale. Everyone else was naming their games with A’s, so he thought he might stand out.

S3: He had graphics, but they were really basic, just shapes made out of letter and number of characters that you can move around with the cursor keys, collecting treasure and shooting at enemies. To sell the game, Sweeney used a business model that was popular in the world of software at the time, the model was called shareware. It’s what we now call freemium.

S5: He’d give out the early levels of society for free to kind of get you hooked, and then if you wanted to keep playing the later levels, you had to pay for them. Sweeney started selling about four or five copies of a day, shipping out floppy disks by mail from his parents house in Potomac. The most famous video games released in 1991 were for consoles like the Super Nintendo or the Sega Genesis. But it was an MSDOS game to play on your personal computer aimed at a slightly nerdy audience. People loved playing the game, but for a lot of customers, the best part of it was that it had a sort of editing program built into it that you could use to design your own video games. It was a tool that made creating games easier for people who weren’t as gifted at programming as Tim Sweeney. Sweeney was a college undergrad when he made it. He already had years of video game coding under his belt. So when he needed to pick a major at the University of Maryland, he decided to shore up other parts of his skillset.

S8: They decided to study mechanical engineering, which turns out to be a fortuitous decision, because during that course, he learns all sorts of complicated math to do with 3D and vectors and stuff that he wouldn’t have learned in a computer science course. And then, you know, in the late 90s, when computers become able to render 3D in real time in such a way that video games require them to be, he then has all of this mathematical knowledge from his university degree in order to be one of the first people to put together a fast paced 3D shooting game. And that’s that’s unreal. Epic’s first major hit game that they put out. Sweeney’s first blockbuster, a game titled Unreal, had stunning visuals, his rivals took note fairly early into the process after Unreal comes out to him and the team at Epic start to receive inquiries from video game developers saying, hey, the software they use to put Unreal together. Is there any chance you could sell that to us so that we can use it to make our 3D games and they have this light bulb moment of, well, why don’t we license the software and we can have a new revenue stream this way? So pretty soon they launch the unreal engine and the idea is that they sell licenses to people who want to make a game.

S5: When it came to the long term fortunes of Sweeney and his company, the important thing wasn’t so much the game, unreal as it was the extremely powerful software that was created in order to bring unreal to life. This software was an engine for making beautiful 3D video games. It was called The Unreal Engine. It’s kind of the same thing that happened with Sweeney’s first shareware games, where people loved the tool that made the game because it was so easy to use the tool to make other great games. Unreal Engine made it quicker and easier for other computer programmers, even the ones who didn’t major in mechanical engineering, to program an attractive, complicated video game like Unreal.

S7: Of course, Epic kept using the unreal engine to create its own games.

S9: They had a gigantic hit with a game called Years of War.

S5: That game wasn’t just a big success, it also served as great marketing for the Unreal Engine and the magic it could do. At first, Abbott charged other people a licensing fee to use the unreal engine for their own projects. But in 2015, with the release of a new version, Epic hit on a better way to make money off it.

S10: I’m Tim Sweeney, the founder of Epic Games, creators of The Unreal Engine. As of today, we’re making a new engine for freely available for everybody to download and use.

S3: This strategy of giving the software away for free, like with shareware back in the day, let unreal engine spread far and fast, it became the industry standard. It was easy to hire programmers who knew how to use it. And the royalty policy let the big successful games made with unreal engine subsidize all the projects that didn’t make money.

S10: It’s a business model open to everybody, and one in which we succeed only when you succeed.

S5: It’s come to religion that can download the software and start creating profits from the unreal engine powered Epic Games balance sheet for a couple of years, but by 2017, Epic was on the verge of its next and its biggest success.

S8: I met with Tim Sweeney probably in the spring of 2017, which is a few months before the first iteration of fortnight comes along, and I have to say that when I’m talking to him, he mentioned four nine and hardly anyone had heard about a fortnight. This time when 49 does first come out, it doesn’t make a splash at all.

S7: There’s not much interest in it, as Simon Parkin remembered it. The initial version of fortnight was not a smash hit. It was a game where you basically roam around on an island and shoot stuff. But then Epic tweaked it. They came up with a mode of play where instead of you against the computer, it’s you against 99 other real human beings out there on the Internet, all of you engaging in a brutal fight to the death. This new mode of play was called Battle Royale.

S8: Hundreds players are dropped onto an island with nothing but a pickaxe. They have to scavenge from materials and pick up weapons and then fight each other until the last one standing.

S4: Or as Dominic describes it, you’re in a giant blue bus powered by a hot air balloon and jump out of it and skydive to a location on a map. But no one is your friend. So like, you kill anyone, you see.

S5: Ford wasn’t the first video game with a battle royale mode, but it perfected it with fluid and intuitive gameplay powered by the Unreal Engine. The graphics were fun and lively, not dark and scary. Like in most fighting games, Forte was violent, but the violence was just cartoony enough that parents could stomach their kids playing the game. How bloody is it compared to other games you might play?

S2: It’s not bloody at all. In fact, when you kill someone, some random flying robot comes along and does a little weird hologram scanning thing and the guy disappears and the person’s items are laid out on the floor for you to pick them up.

S5: Once the battle real mode was introduced, a fortnight took off at an absurd pace, it was helped by network effects. The more of your friends who are on it that you could play with or against, the more you wanted to be on it, too.

S8: Almost immediately, this play mode becomes very popular. And in fact, between September the 15th, 2017, when it comes out and the end of December, it seems something like 40 million players. So it just gives you a sense of the scale of the success that suddenly comes along epic games as a privately held company.

S5: So hard numbers can be difficult to come by. But estimates suggest that as of the end of last year, a fortnight had amassed 250 million players worldwide and was collecting as much as 370 million dollars a month with epic clearing a profit of around three billion dollars a year. The company as a whole has been valued at fifteen dollars billion, and its investors include Disney and the Chinese mega conglomerate Tencent. Tim Sweeney himself is worth something north of seven billion dollars, which is quite something given that he launched this company from his parents basement. Here he is at a recent conference talking about his low expectations when he began.

S11: Hey, thank you all for coming in. When I started the epic games in 1991, I had the sinking feeling that it was too late. The leading developers and publishers had already been established and I wouldn’t really have a chance. And so it’s been awesome to watch. Over the past 30 years, this industry evolved from essentially a garage business into nearly 100 billion dollar a year global industry. That’s a powerhouse. But this time we’ve seen a lot of.

S5: Sweeney eventually moved epic games from his parents house to a corporate campus in North Carolina near Raleigh. He’s bought himself a few fancy sports cars along the way, but he seems to spend most of his money buying up land in North Carolina to conserve it. He apparently loves to hike in the woods. He made a fortune from creating imaginary digital worlds, and he’s used that fortune to preserve parts of the real world. You met him. Can you tell me about the circumstances when you met him and what kind of person he struck you?

S8: As I met him in Sweden at the Nordic video game conference where he was giving the keynote speech, probably one of the last interviews he did, I think I think as soon as a fortnight came out, he probably felt he didn’t need to give any interviews. He is like a typical sort of nerdish guy of his age is 50 now. He sort of wears rimless spectacles and black hoodies and very much looks like a computer programmer, but obviously very, very smart, you know, not only a talented mathematician and engineer and programmer, but also has a fair amount of business acumen.

S5: So Tim Sweeney basically sounds like every other tech founder and intelligent guy who, like Bill Gates and Mark Zuckerberg, never bothered to finish college, a nerdy fellow gifted at programming clever business. So what in particular explains the absolutely phenomenal success of his video game fortnight? There’s that idea of iteration of constantly tweaking your product and trying out new ideas.

S8: For example, fortnight for a little while had spy planes. So so players team up and get on an airplane and fly around. They’ll try it out for a few weeks. They’ll see how it affects the balance of the game and then they’ll take it out again if it’s not working. And there are hundreds of examples of things that they’ve put into fortnight, tried for a bit and taken out. So the game is being constantly refined at a very regular well intervals. And I think that’s certainly part of the reason for the success, because for players, there’s a sense of, you know, if you’re heavily invested in a game like this and that’s what you’re playing every day, you want evidence from the game maker that they are really on it, that they’re responding to feedback from the community, that they’re making the changes, that they’re improving things.

S5: And then there’s the idea of offering the goods gratis. The freemium model, just like his early hits fortnight, is free to play. You give people a taste, but once they start playing and they love the game, Epic will start selling them things.

S2: One of my friends has a fortnight back, back and a fortnight lunchbox. Do you have fortnight gear? No, only the action figures. Which action figures? The other. They have Ragnarok, Dreft. Jonesy, chapter one, I have no idea what Dominic’s talking about, last lord, great bomber called team leader, but I do know that the money he or his parents spent on these action figures was I think it’s the Eino goes to epic games is revenue with Dominic’s buying is actual physical merchandise.

S6: But a lot of fortnights revenue comes from players buying imaginary things inside the game. For instance, you can buy outlandish costumes for your character to wear or you can buy your character the ability to do silly dances. To be clear, these don’t have anything to do with winning the game. They don’t make your character any stronger. But people will still pay real money for this virtual stuff. More than a billion dollars a year, according to some reports. The way people spend their real money in a fortnight is by buying fortnights in game currency called Voicebox, which they can then use to get the special outfits and dances and such. So for any player, spend a lot of money on those vivax. But EPIK doesn’t get to keep it all. If you’re playing for a night on your iPhone and you buy five bucks. Apple takes a 30 percent cut if you’re playing on an Android phone. Google takes the same 30 percent cut. EPIK keeps the other 70 percent. This isn’t specific to for night. It’s how in app purchases work on the app stores. And that’s where things have gotten contentious. This month, Tim Sweeney decided he was fed up with that standard deal. He put a new link inside the fortified app, letting you buy Voicebox directly from EPIK, bypassing Apple and Google and denying them their cut.

S1: Sweeney passed on some of those savings to fortnights users for a little while, this seemed like great news for gamers, but for tonight was no longer playing by Apple’s and Google’s rules. So Apple and Google kicked the Fortnight app off their platforms and it soon became clear that’s exactly what Sweeney was hoping they do.

S12: I don’t think for epic, it’s necessarily about the money. It’s about the principle of it. And it feels like based on the timing of all of this in the way that they had everything prepped, they are more than ready and more than capable to go to war with Apple and Google over this 30 percent commission.

S1: Joanna Kneelers is a staff writer with Gizmodo. She says the VBC shenanigans were a careful trap laid by Tim Sweeney because when Apple and Google booted fortnight out of their app stores, Epic was all ready to hit them back that same day with legal action when Apple and Google kicked fortnight off their platforms, that gave Sweeney an opportunity to bring the fight into court together. Apple and Google dominate the market for mobile phone operating systems, which makes them subject to antitrust scrutiny by demonstrating how much power those companies have, Sweeney is aiming a spotlight at the issue. Now, to be clear, this isn’t David and Goliath. Epic is worth many billions of dollars with huge corporate investors behind it. But that’s what makes wienies move so interesting with all the money it’s raking in for digital goods, goods that have no marginal cost, that represent pure profit, EPIK could afford to let that 30 percent go for smaller game companies. It’s a much more painful concession.

S12: It hurts the little guys more than it actually hurts epic, so epic is trying to, you know, stand up for the smaller developers who are just trying to get their game out there and make a decent amount of money.

S1: Joanna says this is all in keeping with Tim Sweeneys values like when he let developers use the Unreal Engine for free. He likes to help the people who actually make the games. Sweeney made his own game store on the Web, where he takes a 12 percent cut from game makers instead of 30. But he can’t control what happens on people’s phones and that grates on him.

S12: Epic’s business philosophy for a long time has been take as little percentage of commission possible from the developers because they’re kind of the whole reason why your store exists. So, I mean, I’m going to always be on the side of game developers because at the end of the day, those are the people who make the games that I enjoy and that I like to play. And as long as they’re doing well and they’re thriving, then that trickles down to the people that play games.

S1: Despite its widespread name recognition and its continued ability to pile up profits in terms of sheer cultural ubiquity, for they might have peaked a year or two ago.

S5: People aren’t playing for it. Not quite as much this year as they were playing last year. And the year before is. It’s still cool. Do you think do you think kids still like it?

S2: Yeah, kids definitely still like it, but it’s not as huge and big and popular as it was a year ago.

S5: But the game is still a powerhouse. And during the quarantine that’s happened due to the coronavirus fortnight has once again become a favored place for people to hang out together. Virtually fortnight, even recently added a party royale mode where there’s no shooting of guns, just shooting the breeze and various non-violent contexts, which aligns with some of Tim Sweeney’s grander ambitions. Even before the pandemic that shut down real world gatherings, Sweeney spoke a lot about virtual reality and how he believes that in the near future we’ll be spending a ton of our time in the virtual realm, conducting business, making friends and doing everything else we do in real life, but doing it in a constantly updating, beautifully rendered 3D world, the kind of world the Unreal Engine is designed to create. The onset of social distancing is only accelerating our shift to virtual spaces like fortnight.

S7: That’s Tim Sweeney’s dream. In the meantime, Sweeney is living in the here now, and he’s choosing to use his considerable power and influence to change the reality on the ground. His effort to undermine the Apple Google duopoly on mobile gaming platforms might turn out to be a bloodier fight than anything you see in a fortnight. A few other companies, like The New York Times, The Wall Street Journal and Microsoft have already joined the fight on epoxide. And Joanna Nuclease says it’s all just getting started.

S12: I have no idea how this will shake out, but I think EPIC is in a really good position and it’s going to be a wild ride, that’s for sure. So it’s only going to get more interesting from here.

S7: That’s our show for this week. This episode was produced by Jess Miller and HSLDA Technical Direction from Kevin Bendis and Jacob Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of podcasts at Slate. June Thomas is senior managing producer of the Slate podcast network special thanks to Slate’s Tom Skorka for allowing us to make his son podcast famous. By the way, Dominick would like to make clear that although he loves to play for night and he owns many fortnight action figures and he dressed as a fortnight character for Halloween, he is definitely not like, oh my gosh, for 1994, Nate must always have four at night, fortnight for it and more.

S4: Four at night for night fortnight.

S7: If you like our show, consider signing up for Slate, plus, it’s only 35 dollars for the first year and you’ll get this and other Slate podcasts ad free. Sign up now at Slate, Dotcom, Rilling plus. Next week on the show, a show so ugly it just won’t go away. If you were to see someone you love wearing a pair of crocs, what might you say to them? What on earth are you doing? I’m Seth Stevenson. We’ll be back with more thrilling tales next week.