After four years of being banned from the community of the world’s largest mobile operators, Fortnite is finally regaining some of the platform prevalence it had when it became a household name.
Epic Games announced its return last week, along with “Fall Guys” and “Rocket League Sideswipe,” to iOS users in Europe and Android users worldwide, after several legal battles were sparked after its apps were removed from Apple and Google’s app stores for bypassing their in-app purchasing systems. Epic is still fighting Apple’s blockade in the US
But even if the developer can keep 100% of Fortnite’s in-app revenue through the Epic Games Store, there are still many catches.
According to Newzoo, mobile gaming accounts for 49% of revenue in the nearly $200 billion global video game market, but Europe is only the third-largest region. It’s still a heavyweight, estimated to bring in nearly $35 billion this year, but that’s coming from a mix of different platforms.
Meanwhile, faster-growing markets such as Africa, the Middle East and Latin America are benefiting particularly from the wide availability of mobile games, which also dominate the key Asia-Pacific market. Newzoo estimates that gaming revenues in the Middle East and Africa will grow by almost 9% year-on-year by 2024, compared to just over 3% in Europe.
There are now nearly 560 million gamers in the Middle East and Africa, more than 100 million ahead of Europe. With Fortnite unavailable in China, where things like in-game purchases are strictly regulated for customers with children, bringing Fortnite to phones in emerging mobile markets is a top priority.
However, this does not mean that Epic has not had any luck in its misfortune with the European Commission and the EU Digital Markets Act.
Epic is one of many major gaming companies that have made massive staff cuts over the past two years. Last November, 16 percent of its workforce was laid off as the company juggles multiple business units following its massive expansion into the publishing sector.
Some of that pain was no doubt eased by the $1.5 billion deal Epic struck with Disney in February. And Fortnite’s return to iOS coincides with the new “Doctor Doom” content season, as Marvel returns to glory following “Deadpool & Wolverine,” which dominated the box office worldwide this summer with more than a billion dollars.
Epic knows what it’s like to hit numbers like that. Before Fortnite was banned from mobile stores by Apple and Google, Sensor Tower estimated that the company had already earned $1 billion in mobile revenue by April 2020 – two years after launching on mobile platforms.
Away from mobile, Fortnite still accounted for 8.4% of global play time across PC, PlayStation and Xbox consoles. It remains one of a handful of legacy online games that together account for more than a quarter of what players play on those platforms at any given time, not to mention the mix of annual releases and live services from “Call of Duty.”
That’s all well and good, but a Europe-limited iOS return leaves a lot of money on the line, considering how important mobile could be to Fortnite’s bigger picture. While Epic Games is a private company, Roblox is not, and the latter’s revenue paints a troubling picture of what Epic missed out on.
Roblox generated $2.8 billion in revenue last year, and according to its 2023 annual report, a whopping 80% of its users are on mobile devices.
Still, Epic had its reasons for questioning Apple and Google’s practices, which becomes clear when you do a thorough analysis of Roblox’s revenue. Despite near-consistent revenue growth and user engagement, as well as seemingly high cash flow, the company struggled to remain profitable due to huge expenses.
Some of these are unique to Roblox, which spends more than $100 million each quarter on “certain infrastructure” and trust and security expenses, but its quarterly cost of revenue has been above $150 million for over a year and reached nearly $200 million last quarter, covering distribution costs, including Apple and Google’s cuts to in-game spending on mobile.
Considering that Roblox’s developer exchange fees have cost more than $200 million over the past three quarters, Epic’s desire to cut out the big tech middlemen in mobile revenue is more than understandable, as it makes Epic’s long-standing prioritization of generous revenue shares with developers more affordable.
In line with its Epic Games Store policies, the company plans to offer third-party releases through its mobile app starting in December, taking only 12% of the revenue from those games. However, Apple will charge developers who want to publish games through third-party apps like EGS a “core technology fee” of €0.50 for every install over one million.
Although Epic is willing to pay such a fee, if releasing a successful mobile game comes with such a fee, it will likely discourage developers from working with them in the mobile space.
As nice as it must be for Epic to see concessions in its battle against the big tech companies, the company still operates a complicated business model that must continue to rely heavily on PCs and consoles at a time of cost-cutting and reductions among leaders on those platforms. It’s far from clear whether it’s worth returning to mobile in such a small way.
