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Fortnite Creative 2.0 Supercharging UGC Creation Tools
With the launch of Unreal Engine for Fortnite (UEFN), UGC creation tools are entering a new phase
Unreal Engine for Fortnite (UEFN) enables the creation of 100x more sophisticated UGC games and experiences on the platform.
Fortnite creators will earn 40% of Fortnite Net Revenue based on engagement and players to incentivize professionals to use the platform.
The conversion of Fortnite to Unreal Engine 5 as a showcase for the graphics is impressive.
Some remaining challenges for Fortnite/Epic vs Roblox and others include a true UGC marketplace and really turning over the keys to the community.
Epic has finally released Unreal Engine for Fortnite (UEFN) to the general public and puts Epic and Roblox on even playing field for platform based UGC creation tools (aka metaverse to use 2021/22 slang). Taking a break from SBC/dilution quagmire discussion, I wanted to dig in on the evolution of Fortnite/Epic into a platform.
It’s been long delayed (2022, then EOY ‘22, then Jan ‘23 and finally Mar ‘23), but the first step development of a real in-game economy for Fortnite and Epic is here. Fortnite has absolutely killed it since the launch in 2017, but has for all intents and purposes remained a single title as opposed to a true platform. Creative Mode was launched in 2018 to fanfare, and the most underappreciated aspect is that 40%+ of engaged hours on the platform are in creative mode despite the development tools available being lackluster. Creative map/experience development was limited to usage of the in-game editor which limited assets, coding, game-types, and creativity. None of this stopped players from utilizing creative mode to hang out with friends and express themselves, but it wasn’t remotely what Roblox Studio offered.
UEFN is essentially a reskinned and lighter version of Unreal Engine that allows full fledged game development (think Roblox or Core) and I’d expect AA-esque quality titles to come out over the next 6-12mo. The player demand is there and now the quality of games will be too.
The State of Fortnite Creative 2.0 and Unreal Engine as UGC
The first groundwork laid for UEFN was the release of Unreal Engine 5 and the re-working of Fortnite using UE5 as a showcase for what the engine is capable of.
In the nitty gritty the addition of nanite, lumen, better reflections/shadows and other tech makes an enormous difference in the graphic quality of the player experience. Fortnite still retains it’s unique cartoony quality, but the engine update makes a huge difference.
What does Creative 2.0 / UEFN mean for the player economy?
Since the launch of Creative, the compensation structure for creators/players has been lackluster. Fortnite would compensate creators with 5% of the value of in-game purchases made using their Creator Code. Think of it more as a tip-jar on Twitch as opposed to real compensation for the time and effort that went in.
With a low quality in-game editor and no direct means of compensation tied to game quality, we’ve seen Roblox dominate the UGC game/experience segment.
With the launch of creative 2.0, Epic will be providing engagement based payouts to creators out of a 40% pool of Fortnite net revenues. Simply put, if you creative an amazing experience you’ll be compensated the more time users spend in-game.
My expectation is that we’ll see the proliferation of high quality games with much more robust customization. Companies like Beyond Creative will be able to flex their muscles and we’ll see the rise of independent studios similar to what we’ve seen with GameFam and Twin Atlas on Roblox.
How does Fortnite Creative stack up with peers?
First lets take a step back and look at the competitive set for creative mode pre Creative 2.0:
Fortnite was sharing 5% exclusively through a tip-jar with their support-a-creator program.
Roblox is a sliding scale given direct share as well as engagement pay-outs but generally is 24-30%.
Core is a UE4 based competitor that has the highest pay-outs at 50%.
Horizon Worlds (from Meta) isn’t exactly apples-to-apples but the platform pay out is 45-50%
Rec Room sells access to rooms and shares 70% with creators (although suffers from the same lack of real creator tools as Fortnite did previously)
Minecraft Partner Program is a 50% revenue share with mod creators
CliCli newly launched is a 70/30 split
Generally most platforms shake out somewhere between 70/30 and 50/50 depending on what expenses their covering (iOS and Play Store fees being a really big portion for Roblox). Fortnite was clearly out of market with the previous 5% support-a-creator program revenue share.
Creative 2.0 Changes
Epic announced that 40% of total Fortnite net revenue will be shared with creators. This is an enormous change in the economics of the business because today Epic is keeping >95% of the economics.
This immediately places Fortnite among the top revenue share platforms, and is going to usher in a radical change. One of the downsides of Roblox is that because creators are compensated more on the Robux they generate on their experience, there are some unhealthy game loops that can be exploitative.
By focusing exclusively on generating the best quality games and experiences, Fortnite incentivizes positive behavior in game development. Simply put if a creator makes a popular game that has a lot of users, they will earn more of that pool of 40% of Fortnite net revenue.
As a side effect this is going to put huge pressure on Roblox which pays out about half of what Fortnite will be paying out. As a rough estimate, Roblox and Fortnite are similarly sized on a revenue side, but under this formula Fortnite will be paying out $500-600m more per year to creators than Roblox.
Platform Strategy: Grow users
With the aggressive push utilizing engagement based payouts by Epic, the strategy is materially different than Roblox’s. Fortnite now is still not quite a marketplace and I would define the strategy as the following:
Epic creates all purchasable virtual goods (skins, battle pass, etc)
Players can choose where they spend their time (battle royale vs creative)
Creative 2.0 will massively grow the player base through engagement and Epic will share revenue with creators who help do that.
Epic profits through a bigger player base spending more time on the platform by selling more virtual goods.
I’d contrast this with Roblox which is a real marketplace. There’s no “Roblox game” and the company is slowly phasing out Roblox created virtual goods in favor of 100% UGC. They’re an agnostic platform providing UGC tools for players and creators to do what they see fit with. The biggest challenge Epic will have even with creative 2.0 is the natural tension between it’s own revenue streams and growing a real creator/UGC ecosystem.
What is Creative 2.0 Missing?
This is where Creative 2.0 still has a lot of room to innovate. Epic has been hesitant to open up the ecosystem to creators on the avatar/accessory side in the way that Roblox has. There is definitely an aspect of innovators dilemma in that the sale of branded skins and accessories has been the bread and butter for Fortnite’s revenue. You’ll cannibalize some of that existing revenue and profitability to open the ecosystem and create a real marketplace and you don’t want to kill the golden goose.
It’s impressive that 98% of layered clothing items on Roblox are community created and as they’ve turned the keys over to UGC for creation they’ve 2x’ed the number of UGC creators on the platform. It’s a big challenge for Epic to determine when/how/if to make this sort of transition.
The most obvious thing missing (and is more of an Epic issue overall) is the lack of mobile. Part of the strength of Roblox in the post-covid gaming weakness has been their accessibility on mobile and the enormous market it opens up internationally. There’s the chance for resolution of lawsuits with Apple and Google that would be a big tailwind to Fortnite, but I’m not holding my breath in the near term. Perhaps most interesting might be what Microsoft is doing with the preparations for an Xbox store on iOS and Android. It’s a giant stick in the eye to AAPL and GOOGL, and could help break the walled gardens down.
It’s an interesting time in the gaming landscape. With the exception of Roblox, gaming revenues remain depressed (Epic/Fortnite included). Whether it was IDFA, covid re-opening, or the rise of interest rates and end of the free money party, gaming has been in a state of reset for the past year. Creative 2.0 has the potential to be a step function change for Fortnite and over the next year we’ll likely see the incremental benefit of the Lego/Epic partnership.
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