It's been a busy week for Epic at this year's GDC.
First, it announced that starting immediately, Unreal Engine 4 would move from the very popular subscription model introduced last year — which was so successful that CEO Tim Sweeney said "our Unreal Engine community has grown 25-fold" — to completely free, with royalty fees to kick in after sales of $3,000 or more per financial quarter.
Epic has also worked in collaboration with Weta Digital to show off the capabilities of Unreal Engine 4 in VR, courtesy of a scene from The Hobbit: The Desolation of Smaug, all using a just-announced Nvidia GPU.
During his talk about the state of Unreal this week, Sweeney waxed philosophical about the future of VR and the future of storytelling and where the two meet. But he also seemed preoccupied with the future of games in general. The particulars of this, and where Sweeney sees potential problems and solutions became clearer to me when I sat down to talk with him about Epic, Unreal, and AAA and independent development in general in 2015 and onward.
"The success in the AAA space has become more difficult, and teams have grown bigger and budgets have sky-rocketed and the only way to respond to that seems to be hit game after hit game. Every game has to be a hit." Sweeney doesn't believe that's a sustainable model, in part because there are so many things vying for attention now versus even a few years ago. "The audience's attention is more diffuse."
The solution is complicated, in Sweeney's opinion.
Epic is in a rare position, along with Valve and companies like Riot, able to make decisions about Unreal and the future of their company free of the immediate repercussions to existing business models. This has allowed Valve to make games like Team Fortress 2 completely free to play after an initial retail release, and Riot can make decisions with League of Legends free from concerns of its revenue stream. It's not a luxury smaller developers have.
I ask Sweeney if he feels it's the obligation of companies like Epic and Valve to help those developers find their way in such a difficult time. "I do think it's our responsibility," he says. He explains how Epic's deal with Chinese publisher Tencent has allowed them more breathing room to transition their business model away from packaged goods. "(The deal with Tencent) certainly gave us more flexibility to think about things. And selling the Gears of War IP to Microsoft gave us a lot of room to make these decisions."
These decisions include making the Unreal Engine free, and also their work to create an equivalent of the Steam Workshop, where modders and content creators can list and sell their in-game assets and mods to other users.
Sweeney is remarkably bullish on modding as a sustainable business model for independent developers. During his presentation and again during our conversation, Sweeney comments that indie developers are "competing for the same slots on top 10 charts for iOS and Android." Sweeney's candor here isn't surprising, but it is revealing — Epic's Infinity Blade led the way for "core" audience games finding massive success on mobile in late 2010. But now, at GDC 2015, Sweeney insinuates that mobile isn't the opportunity it was.
Sweeney suggests modding would allow indies to be "much bigger fish in a much smaller pond," pointing out the success of creators on Valve's Steam Workshop.
This is a major element of Unreal Tournament, which has been in what Sweeney calls "open development" for months. All assets and source code are available for perusal and feedback, and Epic is building the game with this input. The core game of Unreal Tournament is free — "not free to play, but completely free," Sweeney says. Epic can do this because of the capital infusion granted by Tencent and selling the Gears IP, but it's not a charity operation.
Instead, Epic is taking Valve's Workshop approach and applying it to Unreal. The plan is to provide multiple channels for modders and creators to sell content of all kinds based on the root version of Unreal Tournament, and, presumably, Epic would take a cut on these transactions. Based on the feast or famine scenario Sweeney discusses with regards to AAA games, this likely seems a better deal than the potential five percent royalty fee Epic would collect on shipped titles that manage to find some success.
All of this seems like a smart business move on Epic's part, and they've demonstrated an agility in adjusting to the realities of the industry for years. From leaning hard into dedicated 3D hardware, to competitive shooters, to engine vendor on both console and then mobile and now, responding to competition in that space from engines like Unity, Epic has been determined to make smart plays.
But it's hard not to miss the days when Epic was at the forefront of major retail releases with games like Gears of War, and I ask Sweeney if he misses that. He admits that it's been a rough road moving from a company who shipped major retail titles to the broader, less concrete vision driving Epic now. "It was a difficult transition and some people had a hard time," he said, "but with Unreal Tournament being out there it feels good. And we have the Fornite beta with a number of people playing that."
While there may be some relief inside Epic that their games will once again see the light of day, and soon, Sweeney is still looking ahead. He spends time during his talk dedicated to the future of graphics with photogrammetry and object-based rendering. He becomes more animated talking about the architectural and industrial design potential of UE4. And it's clear listening to him speak that regardless of where games end up, he's looking at a future that includes Unreal and Epic in it.