Epic Games & Sony – Epic unreality.

If you can’t beat them, join them.

• Sony’s investment in Epic Games finalises the end to any ecosystem that it intended to build and from here on we are going to see Sony providing the game or media content to power the ecosystems of others.
• Sony is paying $250m to purchase a 1.4% stake in Epic Games, the creator of the widely used game creation tool Unreal Engine as well as the hugely popular game Fortnite.
• RFM has long identified Fornite and TikTok as newcomers to digital ecosystems with the potential to expand a very popular service into something more encompassing.
• Fortnite is the most advanced in this area and has been holding virtual concerts (see here) and venturing into instant messaging and video conferencing (see here) for some time.
• The pandemic has accelerated the move of social life and events to the online world for which Epic Games is perfectly positioned.
• Its Houseparty app has been one of the winners from the lockdown and Fortnite has hosted some of the best-attended concerts in history.
• Consequently, the pandemic could help accelerate Fortnite from a last-man-standing game to a proper digital ecosystem where users can spend an increasing proportion of their digital lives.
• Sony used to have a similar strategy, but this has not worked out very well.
• The idea was to use its hardware, content and gaming popularity to underpin the adoption of other services, but uptake was poor.
• This was largely because the user experience was typically substandard and because Sony has historically placed its own interests ahead of its users and customers.
• The net result is that Sony has a few good assets that do well in their respective areas but there is no real integration or communication between any of them.
• In fact, Sony clearly abandoned this back in 2015 (see here) and has been surviving on its individual businesses ever since.
• Deeper integration with the successful ecosystems now makes much more sense which has been further reinforced by the pandemic.
• I suspect that this is what is behind Sony’s investment and that Fortnite will become more deeply integrated into Sony’s products such as the PS5 as well as its content assets.
• Epic Games strategy to unseat the app stores failed badly but the overall outlook remains pretty good.
• If it were listed, this one I would continue to have great interest in.