Epic Games Poised to Become an Epic Investment
06.02.2023
The video game industry is booming.
A recent market research report projected that this industry will reach $431.87 billion by 2030, with a compound annual growth rate of 19.6%.
With such enormous growth potential, investing in video game publishers and platforms becomes very attractive. Epic Games is one particular company that could hit big as they continue delivering on the growing global demand for video game entertainment.
This company is arguably best known for developing Fortnite, the online multiplayer game that transformed into a cultural phenomenon. What else is Epic Games up to that is causing many analysts to speculate an upcoming IPO?
And what makes Epic Games such an attractive option for investors?
What is Epic Games?
Epic games is a video game company originally founded by CEO Tim Sweeney in 1991. Even casual video game enthusiasts will recognize Epic Games from their hit titles such as Fortnite and Gears of War.
Today they have more than 40 offices worldwide and their main headquarters are based out of Cary, North Carolina.
Early on, the company focused on self-publishing PC games. By the late 1990s, they achieved their first major commercial success with the first-person shooter Unreal series.
As the preferences and behaviors of gamers changed, Epic Games has continually evolved with the market. For instance, they shifted from making PC games to console games during the 2000s, and again pivoted in the 2010s to mobile games.
What sets Epic Games apart from competitors is that they are not just a video game publisher. The company also licenses out the Unreal Engine, a game engine software used by countless other video game publishers, and officially recognised as the World’s Most Successful Video Game Engine by Guinness World Records.
However, the story of Epic Games is not complete without mentioning Fortnite. Since being released in 2017, this game has tallied more than 350 million players, with approximately 3 million players playing online at any time.
Fortnite is the golden goose of Epic Games, bringing in more than $5 billion in total revenue after the first year it was released.
Why Invest in Epic Games?
Epic Games is in a prime position as a prominent company to capitalize on the growing video game market. The ability to create, publish, and market video game titles such as Fortnite that achieve resounding commercial success is a main selling point for investing in Epic.
Diversified Portfolio
Epic Games has continually diversified into several other areas as well to hedge its bets beyond a single franchise. For example, they acquired Bandcamp, the digital music platform and online store, in 2022.
Epic is at the forefront of exploring cutting-edge digital entertainment technology such as virtual reality (VR), augmented reality (AR), and the metaverse.
Key Business Decisions
In recent years, Epic Games has made some shrewd business decisions to maximize their brand's chances for success.
Releasing the Epic Game Store allowed gamers to download and purchase video games directly through their own platform.
Also, most of their published video game titles are cross-platform compatible, meaning the games can attract a wider audience and are less reliant on the success of a single video game console.
Institutional Investors
Major institutional investors are already taking note of Epic Games' potential.
More than a decade ago, Tencent acquired a 40% ownership stake in Epic Games in 2012. This investment complements shares of other video game giants held in their portfolio such as Activision Blizzard and Ubisoft.
In 2022, Epic announced that Sony invested $1 billion into the company. This investment was alongside an additional $1 billion investment from Kirkbi, the holding and investment company for The Lego Group.
These latest investments are primarily intended to fund development of the metaverse as an interactive and immersive platform for gamers.
These latest investments will take time to judge if they pay off or not. However, they do signal that the company has long-term ambitions and not coasting on the success of a single hit game.
Epic Games is unafraid to take risks to continually establish themselves as a premier video game and entertainment company.
How to Invest in Epic Games?
You don't have to be a gamer to earn a victory with Epic Games.
Epic Games has remained a privately held company for more than three decades. Unfortunately, this makes it difficult to invest in the company except for major institutional investors.
However, Venley Capital recently gained access to secondaries for Epic Games.
This means that regular investors may soon be able to participate in the exchange of private shares that are traded internally throughout the company.
This could be the perfect opportunity to gain equity in an exciting pre-IPO company that could deliver epic returns.