Free to play, expensive to love: 'Fortnite' changes video game business

[May 05, 2018]   By Jane Lanhee Lee and Jillian Kitchener

(Reuters) - 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.

"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.

One big winner is Chinese internet company Tencent Holdings Ltd, which bought 48 percent of Epic in 2012. Fortnite's storm is also giving a big boost to Amazon.com Inc'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.

Twenty Seven-year-old Christian Acevedo plays the video game 'Fortnite Battle Royale' from his home in Brooklyn, New York, U.S., on April 21, 2018. Acevedo says if he doesn't have to work the next day, he often stays up all night to play the popular game. REUTERS/Jillian Kitchener

Analysts say Microsoft Corp'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.

“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.

"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.

(Reporting By Jane Lanhee Lee; Editing by Bill Rigby)

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