In addition to UE5, why does the “Metaverse” rhythm master Epic let the valuation grow against the trend

The value upgrade of “game + technology”

Recently, shortly after the official release of UE5, Epic Games (hereinafter referred to as Epic) announced the completion of $2 billion in financing. The investor is Kirkbi, the family-controlled company behind the Sony and Lego Group. After this round of financing, Epic is valued at $31.5 billion.

This is Sony’s third investment in Epic, following a $450 million injection into Epic in 2020 and 2021. Lego is investing in Epic for the first time. Not long ago, the two parties announced a long-term partnership to develop a child- and family-friendly “Metaverse” that children of all ages can participate in.

As one of the first companies in the world to deploy the “Metaverse”, Epic has an important influence on the market trend. CEO Tim Sweeney is a staunch proponent of this direction, and he has publicly stated that after the success of “Fortnite”, Epic began to think more seriously about the “Metaverse” in 2017.

Epic also completed a $1.78 billion financing in August 2020. At this time, the company basically formed the “UE + “Fortress Night” + EGS” business model, and opened the virtual music scene due to the popularity of “Fortress Night”, becoming a seaside An early sample of the concept of the Metaverse, both inside and outside the study. Coupled with the dispute with Apple, Epic once became the center of market attention and discussion.

Since then, Epic has continued to explore multiple entertainment scenarios such as brand co-branding, virtual concerts, and movie announcements in Fortnite. As the market forms a certain consensus on the concept of the Metaverse, it will complete a $1 billion financing in April 2021 to promote the development of entertainment technology.

At present, game engines are serving as digital productivity tools for creators in the era of virtual-real symbiosis. More and more engine companies, game companies, and even streaming media and blockchain companies have begun to deploy the next generation of entertainment content, technologies and scenarios, and the virtual and real entertainment experience is becoming blurred. At this stage, with the release of UE5, Epic’s game + technical value is also more dominant.

At present, Epic is further promoting the layout of the “Metaverse” through investment and acquisitions. The core idea is to use UE as the technical base and “Fortress Night” as the experience carrier, continue to expand the virtual entertainment scene, and focus on the interactive entertainment direction with experience, community, and scene value.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

1 Future-oriented technology and multiple application scenarios support Epic’s high valuation of US$31.5 billion

Epic’s latest valuation of $31.5 billion is currently in a high range in the industry. As of April 21, it is higher than the market value of Unity ($24.6 billion), Roblox ($21.7 billion), and Take-Two ($15.8 billion), and is close to EA’s market value of $34.6 billion.

In the past year, the performance of the game sector of the US stock market has been flat, and the share prices of most companies have fallen to varying degrees. In the past year, Epic’s valuation has risen by $2.8 billion against the trend (the last round of financing was $1 billion, and the valuation was $28.7 billion).

The higher valuation is largely underpinned by the value of engine technology. Epic is currently using the UE series engine to position the future era of virtual-real symbiosis. Shortly before the announcement of this round of financing, the next-generation engine product UE5 was officially released.

According to Epic’s official website, UE5 can be used by large and small teams, allowing game developers and creators from all walks of life to achieve greater freedom, fidelity, and flexibility than ever before to realize the next generation of real-time 3D content and experience. Equipped with two core technologies: Nanite (virtualized micro-polygon geometry system) and Lumen (dynamic global illumination system), it can render details in real time comparable to movie CG and the real world.

The technical strength of UE5 has been recognized by many game studios. At least 22 games were produced using UE5 in the first batch, and some studios even gave up their own engines.

For example, CD Projekt recently announced that UE5 will be used to develop the new “Witcher” series, and other new works of the company in the future. From “The Witcher 2” (2011) to “Cyberpunk 2077” (2020), they were all developed using CD Projekt’s self-developed engine, RedEngine.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

The game studios currently cooperating with UE5 cover console, PC, and mobile game manufacturers. Among them are five Chinese companies: Tencent, Mihayou, Perfect World, Zulong Entertainment, and Game Science. Some projects have been made public. In August last year, Game Science released a 12-minute live demonstration video of “Black Myth: Wukong” based on UE5, which aroused heated discussions among players at home and abroad.

Among these projects to be developed and under research, most of the published works are 3A works, and the genres are mainly open world and big IP games.

CD Projekt CTO Pawel Zawodny said recently that UE5 was chosen because UE5 began to shift to “open world support”.Crystal Dynamics, which also abandoned its own Foundation engine and is using UE5 to make a new Tomb Raider series, said that migrating to UE5 will help “elevate the game narrative to a new level.”

Large game studios established the UE5 technology roadmap in the very early stages of next-generation games, leading the industry as a whole. Even more than just game projects, it will also have an impact on game talent, hardware, business models, and non-game fields.

At present, the UE series has been widely used in non-game fields including engine film and television, automobile, industry, medicine, aerospace and so on. NASA has teamed up with Epic to use UE to build a MR International Space Station simulator to conduct simulated training for astronauts; Precision OS has also used UE to develop a VR surgical training platform.

Based on these layouts, Epic has actually seized a relatively important position at the product and application level facing the future era of virtual-real symbiosis, and has accelerated its technological leadership.

It is not difficult to see that Sony and Lego chose to invest in Epic at this node, which is largely optimistic about the potential major opportunities of engine technology in the process of upgrading the next-generation entertainment experience.

Kenichiro Yoshida, Chairman, President and CEO of Sony Group, said, “The combination of expertise such as Epic’s powerful game engine and Sony’s technology will accelerate our efforts to develop new digital fan experiences and virtual productions in sports.” . KIRKBI CEO Søren Thorup Sørensen said, “Part of our investment is focused on trends that will shape the future world we and our children live in, which will accelerate our engagement in the world of digital gaming.”

In recent years, LEGO has been making efforts on the digital entertainment track through investment and acquisition, and in 2021, it has clearly stated that it will invest in “innovating core game themes and exploring new game modes”. Sony is inclined to hardware and technology layout. In 2021, Sony indicated that it will make strategic investments of 2 trillion (trillion) yen ($18.39 billion) in the next three years, including the development of entertainment and sensor businesses.

For Sony and Lego, Epic’s technology + product business collaboration model is conducive to exploring a larger interactive entertainment market. There is a lot of room for cooperation between the two and Epic in the general direction of the “Metaverse”.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

2 Epic’s direction and rhythm, wanting to be “a leader in setting the standards of the Metaverse”

Epic is one of the first companies to move closer to the concept of the Metaverse. CEO Tim Sweeney has been a firm advocate of this direction, viewing the “Metaverse” as “a potential existence worth trillions of dollars in the world economy.”

In an interview with Bloomberg last year, Tim Sweeney said the next three years are critical for aspiring “Metaverse” companies. “Whoever brings in 1 billion users first will become the leader in setting standards.”

Epic’s popular game “Fortress Night” is regarded as a product form close to the concept of the Metaverse, presenting a diversified 3D virtual world in which tens of millions of players compete, socialize and create every day. Epic’s goal is to scale Fortnite from 60 million monthly active users to an entertainment experience that “may reach 1 billion in the future.”

In the past year, a number of companies including Meta, NVIDIA, Unity, and Roblox have invested in the virtual-reality symbiosis under the Metaverse concept. Meta invested more than $10 billion in the XR field last year; NVIDIA pushed Omniverse, a real-time 3D design collaboration and virtual world simulation platform; Unity acquired a number of technology companies related to real-time 3D content; Roblox also included the concept of the Metaverse in the prospectus.

Among them, some obvious products and application directions have appeared, such as digital twin, UGC, digital human, virtual performance, etc.

Epic has also made some progress in these directions. “Fortnite” has held virtual concerts for singers such as Marshmello, Travis Scout, and Ariana Grande. The Matrix Awakens: Unreal Engine 5 Experience, previously released in collaboration with Warner Bros., showcased digital human characters generated with UE5. UE is also increasingly used in the field of digital twins. For example, Tencent Maps builds global maps based on UE, and 51WORLD uses UE to build digital twin cities covering smart cities, park governance, transportation and logistics and other scenarios.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

When talking openly about the concept of the Metaverse, Tim Sweeney’s words are “open,” “social,” and “shared.” “We need to move from the closed economies of Fortnite, Minecraft, Roblox, and tens of thousands of other games to shared worlds…I hope in ten years time players are playing these When you play, you can be in the same world and have the same social connections.”

Therefore, in Tim Sweeney’s view, the “Metaverse” killer app will be “the ability to get together with friends and enjoy a beautiful social experience”, especially when players can switch back and forth between the real world and the game world at any time. While Fortnite is now able to engage hundreds of players in the same game battle, it has not been able to engage millions or even tens of millions of users in the same simulation environment.

Tim Sweeney also believes that in order to scale simulations to enormous scale, a new programming model will be required in the future. “As an open, real-time development platform, you can go from one world to another, and code can be interoperable”. UE is working on higher-quality graphics technology to make virtual worlds look more realistic.

For the next-generation entertainment experience, the market has formed a certain consensus, including cross-platform, large-scale, digital identity, distributed economic model and other elements. Not only the gaming industry, but also cryptocurrency and blockchain-related companies, as well as streaming platforms such as Netflix, are also exploring how to provide experiences for future users.

Netflix management once regarded Epic, along with TikTok and YouTube, as competitors that “need to be taken seriously” during the 2021Q2 earnings call, and said that the core of the competition is to compete for users’ screen time.

With the advent of the era of virtual and real symbiosis, the boundaries between games and other entertainment, virtual and real experiences tend to blur, and these companies may compete in new dimensions in the future. At present, major players, including Epic, have already taken action, and even actively entered the competitive field to avoid missing major industry opportunities.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

3 Epic’s business layout: virtual music performances, UGC… Strengthen the realization of commercial products under the concept of the Metaverse

At the current stage, Epic is promoting the layout of the “Metaverse” through investment, acquisition of related technologies, and content assets. With UE as the technical base and “Fortress Night” as the experience carrier, the virtual entertainment scene continues to expand.

In the past year, Epic’s investment and acquisition focus has gradually shifted to technology platforms with experience, community, and scene value. These manufacturers do not only provide technical solutions, but a large part of them have the ability to implement commercial products, mainly for pan-entertainment scenarios.

Taking the virtual music scene as an example, Epic has recently acquired music game developer Harmonix and online music store Bandcamp. Among them, Harmonix plans to create new music experiences and gameplay for “Fortnite”, and Bandcamp will help Epic expand the ecosystem of music content creators. It can be seen that the virtual music scene has become the current focus of “Fortress Night”.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

It is worth noting that the virtual music experience provided by “Fortress Night” is more of a community system serving the product itself. According to previous Epic and Apple hearing documents, “Fortnite” was described as “a highly social community” rather than simply defined as a game. The June 2020 filing shows that Fortnite has 80.4 million monthly active users and 350 million player accounts.

On the basis of attracting players with Gameplay, “Fortress Night” is committed to becoming a 3D entertainment social space, accelerating the construction of interactive social experience. In order to gather players and tap new product possibilities, Epic is consciously promoting the UGC ecology of “Fortnite”.

There have been signs before. Last year, “Fortress Night” launched the “Soundwave Series” plan, allowing musicians around the world to create a virtual concert through in-game tools. The acquisition of Harmonix is ​​also optimistic about its music UGC creation ecology.

Recently, Epic also invested in Aquiris, the developer of the UGC game “Wonderbox”, which is centered on creation and adventure, especially the creation mode, which has been well received. Players can use convenient built-in tools to design and build game scenes by themselves, as well as set game level rules, which can be shared with the official game platform after production is complete for other players to experience.

In addition to UE5, why does the "Metaverse" rhythm master Epic let the valuation grow against the trend

Although on a technical level, UGC tools are not yet in direct competition with Epic’s UE engine. However, at the creator ecology level, the introduction of UGC to expand the number of creators and improve the efficiency of content production is a relatively common method in the industry. Especially in the “Metaverse” context, easy-to-use and universal UGC tools are expected to become one of the important content production methods in the future.

In fact, for Epic, compared to the game engine business represented by UE and the game publishing business represented by EGS, the self-developed game business based on “Fortress Night” has always been the main source of income. Epic and Apple hearing documents show that Fortnite earned $9.1 billion in 2018 and 2019 alone. For this reason, Epic has taken the development route of game and technology synergy for a long time.

However, it is increasingly difficult to cover the cost of continuous iteration of UE by relying on the game “Fortress Night” alone. The previous lawsuit with Apple has already had a certain adverse effect on “Fortnite”. In the long run, only relying on self-developed game blood transfusion will dampen the company’s fundamentals, and it is equally important to improve the hematopoietic ability of the engine business itself.

Therefore, at this point, the completion of $2 billion in financing has relieved Epic’s own pressure to a certain extent. The cooperation with Sony and Lego also helps Epic to enhance its grip on product monetization.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/in-addition-to-ue5-why-does-the-metaverse-rhythm-master-epic-let-the-valuation-grow-against-the-trend/
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