A ‘Battle Royale’ Between Two Video Game Companies
The debut this month of Apex Legends, the new, free battle royale video game from the company Electronic Arts, is kicking up some dust in the gaming industry. This is mainly because Fortnite, the free battle royale game that has been a runaway hit for Epic Games since it launched in July 2017, now has some serious head-to-head competition. According to the latest numbers, Apex Legends has signed up 25 million users since it launched last week on February 4, a much faster rise than Fortnite, which signed up 45 million registered players in its first four months. Of course, Fortnite now has more than 200 million users.
While many gamers spend time analyzing the virtual battlefields, they don’t always understand how the companies that create these games operate and compete. So, jump on our business “battle bus” and let’s check out four fast facts about the competitive landscape of the companies that created Apex Legends and Fortnite.
- Electronic Arts (Apex Legends) and Epic Games (Fortnite) are both American video game developers; however, they are also different in many ways. Electronic Arts, based in North Carolina, is a public company, which means that its ownership is spread among the general public through the issuance of shares of stock that are traded on a stock exchange, in this case, NASDAQ. Epic Games, based in Silicon Valley, California, is a privately owned company, which means that it is owned by a small group of shareholders or company members and does not trade its company stock to the public on an exchange. Public companies, regulated by the Securities and Exchange Commission, must report much more information about their company decisions and financials to the public, while private companies are often able to keep more information to themselves. This difference in corporate structure was especially notable last week when EA launched Apex Legends. The company’s stock surged to its biggest gain since 2014, as eager investors wanted to buy shares when they saw so many users signing up to play the Fortnite rival.
- Launching a new game like Apex Legends is a really big deal, so it is positive corporate news for Electronic Arts that the user base is growing quickly. In other words, EA could see a strong return on its investment to develop the game. Ethan Mollick, a Wharton associate professor of management who studies entrepreneurship and innovation and follows the gaming industry, recently told the publication Penn Today that video games from big-league developers are increasingly more expensive to create and launch, which means that not as many giant games are hitting the market. The team at Electronic Arts has got to be encouraged that Apex Legends recently took over on Twitch, attracting the most viewers on the live-streaming video platform.
- Despite its cred as the reigning worldwide battle royale champ, Epic Games has started looking over its shoulder at the approaching Electronic Arts. The competitive gaming industry requires companies to be mindful of their closest rivals and constantly be finding ways to innovate in order to dominate. This week, Epic Games is rolling out Fortnite 7.40, the latest version of the popular game that will fix some of the issues that players have complained about. Fortnite gamers will now be able to crouch while in Edit Mode and planes will no longer be able to crash through structures, for example. While these changes have been in the works, the timing following the robust Apex Legends launch is likely no coincidence. “The success of Apex Legends highlights the importance of quality over first-mover advantage within the video gaming industry,” notes Wharton marketing professor Pete Fader. “Playerunknown’s Battleground (PUBG) was the first major entrant into the “battle royale” genre. It’s early success was quickly overshadowed by the launch of Fortnite, a better designed game. Now, Fortnite itself is threatened by a newer, sleeker challenger. How Fortnite will respond remains a question.”
- Gamers love to play and to win, but the mission for heavy hitters like Electronic Arts and Epic Games is ultimately to make money. Don’t let the fact that they both now have free battle royale video games competing head-to-head fool you. They are focused on generating revenues without having to invest too much money into making new products. Wharton’s Mollick points out that the move toward the free-to-play model is because, once they captivate the players, the companies can generate substantial ongoing revenue. “From a company perspective, anything that can help you make money without a lot of development effort is going to be helpful,” he told Penn Today. “Subscription services, loot boxes, and downloadable content are all proven ways to do so.”
Related Links
- Bloomberg: EA Stock Jumps
- Penn Today: What to Expect at E3
- Venture Beat: How the Rise of Esports Will Affect the Game Industry
- ESPN: Newzoo Estimates Esports Revenue will Top $1 Billion
Conversation Starters
Which do you prefer, Fortnite or Apex Legends? What do you think are the key competitive advantages for each company?
Are you an investor in the video game industry? Which company shares do you own and why? Share your story in the comment section of this article.
The esports industry may soon top $1 billion in annual revenues. Using the related links, explore this industry and how it fits into the video game business. Share what you’ve learned with a partner or in a group.
Fortnite!!!
I used to follow the esports industry back in 2013-2017, and it has been growing at an exponential rate. There is an enormous fanbase – literally fans will pay thousands of dollars to fly to a different country to watch a major competition. And of course, this increases the flow of money in the economy, as these fans will have to spend money on hotels, food, transportation, etc. (and definitely merchandise)!
Supercell had a great time a few years ago with Clash of Clans and Clash Royale. Too bad its private 😉
Harry, I’m curious…from a gamer’s perspective, why is Fortnite your favorite? And…do you invest in any gaming companies? If so, why?
According to NewZoo, revenue from the games industry has surpassed that of the movie industry. This is why the stakes are very high when a company tries to create a blockbuster video game. As this article points out, Epic Games was the first mover with Fortnite. They enjoyed success from a great game but also got help from digital concerts. They teamed up with Marshmello, Travis Scott, and Ariana Grande. I am sure that Epic Games does not need any more help, but they can also try incorporating popular brands into their games. For example, the pairing of Kojima Productions’ Death Stranding and the Monster energy drink led to an increase of gamers drinking Monster while playing as the main character in the game. This character’s energy bar can be restored by drinking a can of Monster.
Of course, Electronic Arts can also join in on this marketing strategy. But why fight at all? Instead of a “Battle Royale,” both Electronic Arts and Epic Games can consider increasing their co-development strategies. Since creating a game takes lots of start-up money, these companies can share the costs by teaming up. Just as they promote co-op options in their games, they should co-op elements like planning, settings, story flow, or modes of play. They can also share their use of outsourced third-party companies. Starloop Studios says that co-development and outsourcing allows companies to reduce costs because these services can be shared and used only when needed.
Ever since I got a PC in 2018, I have been obsessed with video games. To be more specific, sports-related video games. I’ve tried it all: FIFA, NBA2K, and Road to the Show. I’m a big sports fan in real life, and I like how these games put me in the action. Last summer, however, my friends invited me to play a game called CSGO. CSGO is a first-person shooter game, and it’s really competitive, requiring teamwork and precise shooting. Fascinated by the introduction, I decided to give this game a try. Ever since, I’ve been in love with it.
This year, I had the opportunity to watch one of the biggest CS GO tournaments in the world: the “major.” It’s held every year in a different location. In 2023, it was held in Paris. I went there with my friends to experience the amazing atmosphere of professional gamers competing at Accor Arena. During other tournaments, my friends and I would often watch the games live on YouTube, and we would talk about the progression of the game. However, watching the games live in Paris was a completely different experience. In soccer, people cheer when their team scores. It’s the same thing with CSGO! We cheered on our favorite teams whenever they got a kill, or eventually won the round. Interestingly, we were sitting next to fans with a trumpet and a drum. Every time their team got the point, they played the trumpet and beat the drum, and the audience would clap to the rhythm during the game!
While this article lists some of the different ways that major gaming companies make money, it fails to mention the revenue and exposure that they get from these tournaments. While my friends and I were at the tournament, we found a shop that sold merchandise for our team. I purchased a hoodie with the logo of my team, the Faze Clan, on it, and it cost me around $100. There were also mugs, notebooks, and pens with team logos. Along with the profits these clubs and gaming companies make from merchandise and ticket sales, many gamers, gaming companies, and YouTubers can gain valuable exposure at tournaments.
As the article mentions, it’s clear that gaming companies are trying to make as much profit as possible through as many ways as they can. However, in the process of doing that, whether it’s a free-to-play model or an international gaming tournament, gaming companies are just making the experience for us players even better.