Epic Games: Dropping into the Indie Space
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
From Epic Beginnings to Digital Dominance
In 2017, Epic Games Inc. (Epic) shook the gaming industry by releasing Fortnite Battle Royale (Fortnite). The live-service game quickly became a global phenomenon, proving how lucrative in-game monetization could be, generating around $5.5 billion in the first year. With 2–3 million active players each month, Fortnite remains Epic’s most significant success, driving more than 80% of the company’s revenue. Building on this momentum, Epic expanded beyond game development in 2018 with the launch of the Epic Games Store, a direct competitor to Valve Corporation (Valve)’s Steam, the current market leader. Both platforms enable users to purchase, download, and play games while offering social features to connect players worldwide. However, Epic’s influence extends past Fortnite and digital distribution. The company’s foundation lies in game engine development, dating back to 1998, when Unreal Engine was created. Now in its fifth iteration, Unreal Engine has become an industry standard for AAA game development, powering some of the biggest titles in gaming.
Today, Epic continues to invest in Fortnite, expanding it beyond a game into a full-fledged social platform. As a live-service title (games that are continuously updated to keep players engaged over time), Fortnite relies on microtransactions, which are driven by continuous player engagement. However, game engagement follows a natural product life cycle—introduction, growth, maturity, and decline—forcing developers to continually innovate. To counteract the cycle, Epic transformed Fortnite into more than just a battle royale genre, incorporating new genres like racing, sandbox, and rhythm-based games while evolving into a social hub. The game regularly hosts large-scale social events, such as the November 2024 Snoop Dogg concert, bringing 14 million concurrent players to the platform. In March 2023, Epic doubled down on Fortnite as a platform by releasing the Unreal Editor for Fortnite, a lightweight game engine, empowering users to design, build, and monetize their games within the Fortnite ecosystem, much like Roblox’s business model. Epic’s move pushes Fortnite further into the Games-as-a-Service (GaaS) model, where user-generated content sustains engagement while Epic generates revenue from published experiences. By positioning Fortnite as a long-term creative platform, Epic aims to cement its status as a lasting pillar of the gaming industry.
Fortnite’s Battle Royale for Long-Term Sustainability: A League of Legends Case Study
Released in 2009, League of Legends (LoL) is a legacy game with over a decade of continued user retention. As Riot Games Inc. (Riot)’s most significant game, LoL was once believed to see perpetual user and revenue growth. However, LoL has been seeing a declining user base since 2022, from 180 million monthly average users (MAU) to 131 million MAU in 2024. The trend is expected to continue into 2025 with a projected 120 MAU. As a response, Riot developed and launched other games, including Teamfight Tactics in 2019, and VALORANT in 2020 to diversify its revenue streams as a response to LoL reaching the maturity stage of its product lifecycle. Although Fortnite generated about 80% of revenue in 2023, there is a risk that Epic sees a similar trend in Fortnite. In response, they should begin diversifying their revenue streams to mitigate the risk of a decline in Fortnite’s profitability severely impacting their business.
Indie or Bust?
Indie developers play a vital role in the ecosystem of digital storefronts like the Epic Games Store and Steam, contributing significantly to the network effects driving their success. Indie games, often crafted by smaller studios with limited resources, offer unique, diverse experiences catering to niche audiences frequently overlooked by the mass-market appeal of AAA titles.
Steam’s dominance is a testament to the importance of indie developers—98% of releases on the platform in 2023 came from indie studios, and these titles accounted for nearly half of Steam’s revenue from game sales. This significant revenue share highlights how indie developers have a strong financial impact on digital marketplaces. Indie games often fill the gaps where AAA studios fall short, providing artisanal experiences focusing on passion, authenticity, and detail. Despite their smaller budgets, indie games have the potential for immense success. For example, Hollow Knight, developed for just $42,000, earned $248 million in revenue, showcasing the high return on investment possible for well-crafted, niche games.
However, indie developers face considerable challenges, primarily due to market oversaturation. With thousands of new games released annually, standing out in a crowded marketplace is difficult, especially for teams with limited marketing resources. Unlike AAA publishers with massive advertising budgets, indie studios often struggle with discoverability and lack the financial means to reach a broad audience. Additionally, smaller teams and tighter budgets mean fewer tools and resources to refine and polish their games, making the path to success more complex and demanding. Despite these challenges, the impact of indie developers on the gaming landscape is undeniable as they continue to drive innovation and bring fresh perspectives to the industry.
Indie games are a viable source of self-sustaining revenue without the hefty game development costs in-house. In 2024, Steam saw around 48% of its revenue, at $4 billion USD, from indie games on its marketplace. Player engagement is high, which is ideal for a platform, with indie players spending around 18 hours per week on indie games, generating loyal communities around games. With a growing volume of indie game releases annually, some indie games achieve virality, amassing millions of users, like Among Us, reaching a peak of 60 million daily active users in September 2020. Helping indie game developers produce and release games on Epic can diversify its revenue streams and encourage users to stay within its ecosystem, even when Fortnite decreases in popularity.
The Developer’s Guide to Platform Success
To address the uncertainty surrounding Fortnite's long-term sustainability, Epic should diversify its revenue model by tapping into its other key assets: the Unreal Engine and Epic Games Store.
Drivers, Start Your Engines
Unreal Engine is one of the industry's most influential and widely used game development tools, offering cutting-edge graphics, advanced lighting, and physics capabilities. A game engine like Unreal provides the necessary tools for developers to design and manage all aspects of a game, from gameplay mechanics to sounds and visuals. However, unlike the more accessible Unity game engine, which is intended for a broader, user-friendly audience, the Unreal Engine is more complex and better suited for large-scale, high-quality projects. While its advanced features are ideal for AAA games, its reliance on more advanced programming languages, resource-intensive nature, and steep learning curve make it challenging for indie developers to adopt.
In contrast, Unity has become the preferred choice for indie developers due to its beginner-friendly programming language, user-friendly interface, and less demanding resource requirements. Unity's accessibility is a significant reason for supporting more indie games, with 8,824 titles released in 2024 compared to 3,275 on Unreal Engine.
David vs. Goliath
The Epic Games Store directly competes with Valve’s Steam, boasting 74 million monthly active users (MAUs) and a growing library of 4,000 games. While Epic has made strides in taking market share, Steam—with over 130,000 games and 132 million MAUs—has a considerable head start, having cemented its dominance since 2003. Epic utilized aggressive strategies to increase its market share, such as offering a more favourable revenue split (12% take rate) to developers than Steam (30% take rate), giving away free games, and securing exclusive titles to attract users. Offering free games played a key role in quickly building a large user base. Still, this move also fostered a 'freebie culture,' where players, having already redeemed ~$12 billion worth of free games on the store since 2019, began to expect free titles instead of purchasing them. As a result, Epic struggled to convert its large user base into paying customers, hindering its revenue generation.
The prevalence of a free-to-play mentality has been a significant barrier to Epic’s efforts to drive paying users to its storefront, a key source of profitability for digital platforms. Epic has struggled to attract consistent revenue from third-party games despite attracting millions of users. This is particularly problematic as the Average Revenue Per User (ARPU) spent on third-party games for Epic is $4.28, compared to Steam’s around $14.58 in 2023. This gap highlights a fundamental issue with Epic’s strategy: while it successfully attracted a large player base, it struggled to convert those players into paying customers.
Gaining an Extra Life
For Epic to diversify its revenue sources and reduce its reliance on Fortnite while also tackling its ‘freebie culture,’ it needs to take advantage of its digital storefront and powerful game engine to attract the rapidly growing market of indie game developers to list games on its marketplace. These developers can provide a steady supply of new games to the Epic Games Store, allowing them to begin closing the gap in listings between them and Steam, thus making them less reliant on Fortnite as a primary revenue stream.
To do so, Epic should prioritize simplifying the development process for smaller teams by providing starter kits with pre-built functionality and assets across multiple game genres that allow indie developers to skip past boilerplate fundamentals like health and damage systems. Lowering the engine’s steep learning curve would make Unreal Engine more approachable, allowing indie developers to create high-quality games they can funnel into the development pipeline for the Epic Games Store. Although Epic released the Lyra Starter Game as a sample Unreal Engine project, providing a gold standard template for developers to reference when creating new projects, Lyra is built as a learning resource, not a development framework. Ultimately, no current framework exists to simplify the development process and shorten the often arduous setup time indie developers face before they can start bringing their ideas to life.
To encapsulate the full spectrum of game genres that indie developers pursue and build for, Epic should build a portfolio of starter games that can act as a core framework on which developers can build on top of for genres like 2D or 3D platformers, top-down action RPGs, and vehicle racing games. This would save indie developers from reinventing the wheel and rebuilding fundamental game systems. These starter games should bundle features like inventory, save and load, and other functionalities in almost all games to save time and money for developers. For an action starter game, the kit could include blueprints for ranged and melee weapons and enemy characters with simple AI for combat. Including sample art assets like a default player character, simple animations, and textured props and environments would allow developers to start experimenting with the engine and prototyping their ideas immediately.
An Epic Game Jam
To ensure these starter kits are widely adopted, Epic should host regular game jams as starter kits for new genres are released. The most significant game jams are community-hosted events with over 2,000–9,000 games submitted. Should Epic host its game jam, considering its brand recognition, it would likely attract a large audience of developers on par with these more enormous game jams. Epic has an incredible opportunity to increase its game library in the Epic Games Store, where the benefit would be twofold. As the number of games listed on Epic’s store increases, the user base should also increase, responding positively to the increasing number of options available. A growing user base further incentivizes developers to release games through Epic, establishing strong network effects that build a positive feedback loop helping the Epic Games Store capture a large share of the PC video game market. Additionally, these game jams can also be used as a means of stress testing Epic’s newly released game starter kits and allow them to find and correct any bugs immediately before they are adopted by the larger developer ecosystem. In return for providing Epic with a consistent supply of games and stress testing their products, all indie developers are given valuable starter kits to save them time, energy, and funding in their future game development endeavours. Award-winning indie developers can also be featured on Epic’s storefront, giving them a strong incentive to perform well in the game jam. A featured placement would help developers cut through the noise in the industry and address their concerns about oversaturation.
Epic’s Endgame: Beating the Platform Boss
Epic should foster a more indie-friendly environment in the Epic Games Store to establish a more substantial pipeline for indie developers. One key way to do this is by increasing visibility for Unreal Engine-powered indie games. Epic could create curated lists such as "Best Indie Games Built with Unreal Engine," giving these titles greater exposure. This visibility is essential for smaller developers, who often struggle to stand out in a crowded marketplace. Epic could also incentivize player interest by offering platform-wide discounts and promotions focused explicitly on indie games, which would boost the sales of these titles and draw more consumers to the Epic Games Store.
In conclusion, Epic’s future depends on diversifying its revenue streams and tapping into the full potential of its ecosystem. By supporting indie developers through a simplified Unreal Engine and strengthening its Epic Games Store, Epic can drive network effects that benefit creators and players. The key to long-term growth lies in creating a sustainable pipeline where high-quality indie games thrive, helping to secure Epic’s place in the gaming industry. With the proper focus on developer support and strategic marketing, Epic can use its existing strengths to overcome its current challenges and remain a dominant force in gaming.
