How a free-to-use software is making more money than Hollywood

Fortnite is arguably the biggest computer game of all time.

That might not mean much to you if you don’t play computer games, but, from an investment standpoint, it should.

Fortnite boasts 78 million monthly active players and has brought in $1.2 billion in revenue.

On top of that, its weekly “Friday Fortnite” video streaming is pulling in 8.8 million unique viewers.

From CNBC:

Then there’s Friday Fortnite, an event from Las Vegas hosted by streamers like Tyler “Ninja” Blevins and Keemstar.

Unlike esports competitions, which are tied to official leagues, Friday Fortnite is a group of enthusiastic gamers trying to out-survive each other to win prize money. In June, Keemstar said the competition pulled in 8.8 million unique viewers. To put that in perspective, the season finale of AMC’s “The Walking Dead” brought in 7.9 million viewers, the first round of the NFL draft raked in 5.3 million and the season premier of “Westworld” reeled in 2.1 million.

As you can see from that excerpt viewing figures for this game – that’s not even people playing it, but people watching people playing it – are bigger than the year’s blockbuster TV shows.

It may be dwarfing TV. But what about the film industry, how does Fortnite compare with that behemoth?

Well, it’s trouncing Hollywood, too.

Here is a list of the highest grossing films of 2017 and 2018:

  1. Avengers: Infinity War – $2,046,900,111
  2. Black Panther – $1,346,913,161
  3. Jurassic World: Fallen Kingdom – $1,304,937,955
  4. Incredibles 2 – $1,240,228,080
  5. Mission: Impossible – Fallout – $791,017,452
  6. Venom – $779,740,770
  7. Deadpool 2 – $734,245,921
  8. Ant-Man and the Wasp – $622,604,622
  9. Ready Player One – $582,218,455
  10. Operation Red Sea – $579,220,560

By the end of the year Fortnite is expected to hit $2 billion in revenue, which would put it on an equal footing with the fourth highest grossing film of all time – Avengers: Infinity War.

But here’s the weirdest thing about this game’s financial success.

Fortnite is a free to play

That’s right. Fortnite is 100% free to download and play.

If you don’t want to, you don’t have to spend any money on it whatsoever.

So how does it make its money?

The same way many brands do – by selling prestige.

Here’s how it works, from Polygon:

Essentially there’s only one thing in Fortnite you can buy with real money: V-Bucks.

I don’t actually know what the V stands for, but we’ll go ahead and assume it means vanity, because V-Bucks are spent on items that change the visual appearance of your character (without altering your actual skills).

Among the things you can buy using V-Bucks: emotes, character models and skins for your default weapons and backpack. Each day in the Item Store there’s a rotating allotment of items you can purchase with V-Bucks.

V-Bucks can also be spent on something called a Battle Pass. This is where things get a little complicated.

Each season of Fortnite (which last 10 weeks), you are given a Tier Ranking. Simply playing the game and completing challenges will increase your Tier Ranking. And for every Tier Ranking you unlock, you’ll get something new. That may be some bonus V-Bucks, a new skin or an XP booster to increase your leveling.

So, you can basically buy new outfits. That’s all there is to buy. And these outfits have no effect on your player’s ability or skills, just the way it looks.

You’d think that most people wouldn’t go for these pointless upgrades. But they are extremely popular.

People like to stand out and show off their individuality, and buying virtual clothes lets them do that.

I have a group of friends who play a similar game to Fortnite on their phones. It has the same ability for you to buy new outfits which have no effect on the game play.

My friends all said that buying these outfits would be a pointless waste of money. Then when I talked to them a couple of weeks later, they had started spending money on these outfits.

As I said, just like in real life, unique items and outfits – even if they serve no practical purpose – have a big draw on our psyche.

The desire for prestige and respect it a strong one.

In a game like this, you can either stand out because of your skill, or because of your unique look.

Not many people have enough skill to stand out in a game with millions upon millions of players. But most people who play have enough money to spend a couple of pounds on a unique outfit.

It’s such a smart business model.

Not only that, but, just like popular TV shows, it has “seasons”. Each season has a certain theme, story and – yes, you guessed it – unique items you can buy.

Who owns Fortnite?

Tencent, the company that developed WeChat owns a 40% stake in Epic Games, the company that created Fortnite.

If you’re not aware, WeChat is a hugely popular social media platform in China. Almost everyone is on it, and almost everyone uses it for a lot more than just chat.

You can book restaurants, pay for things, hail a taxi – basically anything you can do on the internet – all within its platform.

It’s what Facebook Messenger wants to be but never will be.

It even has its own payment system, WeChat Pay, which is used by “hundreds of millions of active users every day”.

In fact, according to Wikipedia, Tencent is:

The world’s largest gaming and social media company, one of the world’s most valuable technology companies, and one of the world’s largest venture capital firms and investment corporations.

And as The Telegraph reports, Fortnite should soon be coming to China, too:

Epic, is also waiting for a licence to release Fortnite in China after a bureaucratic shakeup delayed new games being released in the hugely lucrative market.

So, as I said, even if you don’t play any computer games yourself. If you want to make money investing in tech, taking an interest in new blockbuster games, and the companies behind them, could really pay off.

After reading all that, you might be surprised to learn that I don’t actually play any computer games myself.

But I am extremely interested in how they become so popular, who is making money from them and how they’re doing it.
And if you really want to find out how to make money from the stock market, you should watch my colleague Eoin Treacy’s “Bull Market Climax” presentation.

In it he lays out why he believes we’re about to see “the greatest day in stock market history” – and how you could use this knowledge to triple every penny you invest.

Click here to see what Eoin has to say

Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Crowdfunding

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