Free to Play, Expensive to Love: Fortnite Changes Video Game Business

 
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Free to Play, Expensive to Love: Fortnite Changes Video Game Business

Highlights

  • Fortnite is in the arena-style battle royal genre
  • The game has in-app purchases for costumes and other add-ons
  • Console makers profiting from game, thanks to slice of in-app purchases

To see the storm that online video game Fortnite has unleashed on the world, just visit Jett Sacher in Brooklyn. The 13-year-old spends an hour or two every day on the game with his friends and is not afraid to spend his pocket money on it - bit by bit.

"So I bought one dance, two skins and the battle pass," Sacher told Reuters TV about recent gaming sessions. "So that's, I spent $20 on both skins so $40 ... and the dance was another $10 so $50, 60 bucks, something like that."

Sacher's pay-as-you-go expenditure on dressing up his online avatar in the 'free-to-play' game helped Fortnite take in an estimated $223 million from in-game purchases in March, according to Joost Van Dreunen at research firm SuperData.

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Fortnite, a sort of hybrid of The Hunger Games and Minecraft, drops 100 people onto an island to fight each other for survival. It is a game-changer in the industry, analysts have said, because of the huge revenue it is making from tween and teenage boys purchasing outfits and other add-ons.

Its publisher, Epic Games, is now worth $4.5 billion, according to Jefferies analyst Tim O’Shea. Rival video game makers Activision Blizzard, creator of Call of Duty, and Grand Theft Auto owner Take-Two Interactive lost billions of dollars in market value in March as investors took notice of Fortnite's ability to wring cash from players.

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One big winner is Chinese Internet company Tencent Holdings, which bought 48 percent of Epic in 2012. Fortnite's storm is also giving a big boost to Amazon.com's online video service Twitch, where gamers broadcast their efforts to larger and larger captive audiences, and Discord, a chat app for gamers, which have both boasted new records.

Analysts say Microsoft's Xbox and Sony's PS4 are also doing well, thanks to getting a slice of the in-game purchases and a boost in hardware for gaming.

One of the top Fortnite streamers is a 20-year-old Swedish gamer who goes by the name BogdanAkh. He said he makes about $1,000 a month from his bedroom in Stockholm, where he streams his plays on Twitch, talking to other players through Discord wearing a mohawk with blond tips and big black headphones.

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"If you really think you want to make a lot of money, you have to put a lot of work into it," he told Reuters TV.

Fortnite is forcing change in the gaming world. The concept of arena-style survival, called battle royale in gaming lingo, is now likely to show up in other titles as well. And the success of the ‘free-to-play’ model could put pressure on big gaming companies' sales of games that cost anywhere from $40 to $60 or even more, said O’Shea.

Wedbush Securities analyst Michael Pachter said the company is nimble and the creative team is keeping interest in Fortnite high by constantly adding new items to sell and only selling them for a limited time.

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"The idea that they can charge 15 or 20 bucks for something that other games charge a dollar by making it scarce is brilliant," Pachter said.

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