Say what you want about a lame joke from an asshole who can’t finish an overfunded game, but sparks weren’t just flying on the speech podium at GDC. The gaming industry just saw a race for the bottom in arguably the basis for creating games—the engines.
For those of you are are not aware, the engine of the game is the software framework on which a developer creates a game. It’s the guts, if you will, that determines what happens when you enter a particular piece of code. You may have seen evidence of this and never even realized—if one of the three logos above (particularly the Unreal “U”) appears before the title sequence to your favorite game, you just saw the logo for your game’s engine. And while some companies prefer to make their own in-house engine for company use only (EA’s Frostbite comes to mind), most developers prefer to utilize an third-party engine to save on development time and money.
Now that you know the basics, on to the currently developing battlefield of the big three engines: Unreal, Unity, and Source.
Unreal throws down the gauntlet
Epic Games has been playing with their engine monetization scheme of late—it was only a year ago that they adopted the $19 a month subscription fee to use Unreal Engine 4. But on March 2, in a move probably designed as a direct shot at their free competitor Unity, Epic announced that they were dropping the subscription model altogether and were giving away the engine for free. There is, of course, a catch—five percent of your gross revenue over and above $3000 for each quarter goes to Epic as a royalty. Not a particularly bad deal, considering the same royalty was in place when the subscription was still around.
As you can imagine, this did not go over well at Unity, whose engine has always been free. They saw it for what it was—Epic coming for their market share at the lower end. Currently, Unity 5’s pricing is the same as their previous iterations—Unity 5 will be available as a Personal version for free. They also have a Professional version available for a $75 monthly subscription plan or as a $1,500 perpetual license.
In an interview with Gamesindustry.biz, Unity CEO John Riccitiello fired back at Epic’s move.
If you’re a seven-figure developer, you can afford $75 a month. But if you’re not, if you’re just getting started or just choose for artistic reasons to give your games away for free, or if you’re a hobbyist screwing around or a student, this is free. You get the full power of Unity 5 for free. There’s no royalties, no fucking around. It’s simple.
Mr. Riccitiello further balked at any comparison between his product and the Unreal engine.
It’s $75 a month or $1,500 for a perpetual license; we’re not nickel-and-diming people and we’re not charging them a royalty. When we say it’s free, it’s free. When we say $75 a month, it’s $75 a month. Yeah, you can buy other stuff from us. We’re not a one-trick pony, but we’re not charging a royalty, which I think is akin to looking for whales. For example, if Candy Crush had a 5 percent royalty, the licensing fee for that would be billions over time, maybe $50 million in a given year. You have to pay $75 a month a lot of times to get to $50 million.
As a side note, if John Riccitiello’s name sounds familiar, it should. Before being Unity CEO, he was the CEO of Electronic Arts during it’s historic run as back-to-back winner of Worst Company in America, beating such companies as Halliburton, British Petroleum (during the Gulf spill, no less!) and Comcast. People really hated the ending of Mass Effect 3, didn’t they?
Valve drops a bomb in the Engine War
Unity got to bask in their response to Epic for an entire day. Then Valve fucked up both their worlds.
In between announcements on Valve’s VR headset, their new streaming (Steaming?) device, and their long awaited Steam Machines and controller (but not Half-Life 3, goddamnit), Valve’s Jay Stelly also mentioned that Valve’s new engine, Source 2, will be completely free. Note the lack of any mention of royalty or subscription—with Valve, free is actually free.
Given how important user generated content is becoming, Source 2 is designed not for just the professional developer, but enabling gamers themselves to participate in the creation and development of their favorite games. We will be making Source 2 available for free to content developers. This combined with recent announcements by Epic and Unity will help continue the PCs dominance as the premiere content authoring platform.
It’s pretty classy of Mr. Steely to act like this is somehow in the best interest of Epic and Unity. But let’s face facts.
Valve can afford to give away Source. First, consider Steam. Steam is pretty much a one-stop shop when it comes to buying your games online (don’t talk to me about Origin or uPlay—if you seriously espouse using those ecosystems, I don’t know what to tell you). Even when sites like Green Man Gaming, Amazon, and Gamestop sell you digital games, what you usually get is a Steam code. Having the market effectively cornered on digital PC gaming is pretty damn lucrative—though it’s not known specifically (word on the street is Steam takes a 30-40% cut on sales).
Forbes estimated that “Steam controls half to 70% of the $4 billion market for downloaded PC games” in 2011. (Valve does not release sales figures to the public.) Given the growth in PC gaming over the last few years, those numbers have almost certainly increased.
Second, consider the business savvy Valve has demonstrated of late. Rather than incur development and manufacturing costs like, oh, every other console maker, when it came to making the Steam Machine, Valve outsourced the whole thing to multiple PC companies. That’s staggering when you consider there is very little profit margin in making a console—both Alienware and iBuyPower were publicly unenthusiastic about potential profits, but they’re making them anyway because VALVE. While your standard console maker can shore up the money they lose on the console from software sales, that option isn’t open to the Steam Machine makers. So how did they convince anyone to make the damn things?
The bottom line here is Valve no longer needs the money from Source, and that’s what separates them from Unity and Epic, for whom it is their livelihood. This could end up like the Internet Explorer vs. Netscape Navigator debacle of the mid-90’s—in the battle of free vs. cheap, free always wins. Will the anti-trust suit that resulted for Microsoft also happen to Valve? Only time will tell.