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During what was supposed to be the quietest week, we got some real news. Amazon has announced that it will open the source code for its Lumberyard game engine as the Open 3D Engine, which is overseen by the Linux Foundation and supported by 20 companies. Next, Our Machinery announced its lightweight, hackable game engine, The Machinery.
And Nintendo has announced that it will ship the Nintendo Switch OLED model with a new screen and slightly better sound. It was not possible to have any rumors of features that would likely be part of a Nintendo Switch Pro still possible. It has a better OLED display, but it doesn’t run 4K graphics even though it will cost $ 350 when it debuts in October at $ 50 more than the regular Switch.
During this otherwise slow week, it’s fun to examine the strategic significance of these chess moves and their impact on competition in game engines and to further divide game developers into factions. The console war affects gamers. But the game engine war has big consequences for developers.
The console war
Nintendo’s move represents a small defensive move against Sony and Microsoft, who are selling their new game consoles against the old Switch technology. Still, Nintendo’s focus on hybrid home and mobile means it’s not really in direct competition with Sony and Microsoft. The move simply allows Nintendo to take on die-hard Switch fans and new Nintendo customers with the Switch OLED and Metroid: Dread combo this fall. It’s about taking a bigger slice of the holiday pie this fall. Nintendo can still launch a better Switch Pro, but it doesn’t need to rush it amid the semiconductor shortage that is now restraining all sales.
This is basically good Nintendo marketing and merchandising, as engine developments seem more important. And I have a feeling it might well compete with the Microsoft and Sony consoles that sales bots (and rarely, people) can buy, and the OLED Switch should do well when your other choice for something new is the new Xbox mini fridge from Microsoft.
Sony hit back with a short State of Play event highlighting the unveiling of Moss: Book II, the sequel to Polyarc’s award-winning Moss of 2018. We had to take a tour with other new games like Deathloop. And, of course, Microsoft celebrated that because it came from Bethesda, which Microsoft now owns. Each week, these companies like to play little shots at each other.
Machinery’s move came as a surprise, with an engine focused on programming needs and a preference for a modular, hackable product. It represents another choice in the market beyond Unity and Unreal, and it has a chance to gain a foothold.
On the open source engine side, it’s no surprise that Amazon has chosen this path. The Lumberyard engine failed to compete with Unreal and Unity. It had Amazon’s own game studios as users, but one of its biggest customers, Roberts Space Industries (the maker of Star Citizen) still hasn’t shipped its flagship game. Many interpret the delays as bad news.
Amazon’s own studios have also had some tough times, with a number of cancellations over the years, such as a recently canceled game based on The Lord of the Rings and the short-lived Crucible title. Amazon Games still offers other titles such as the massively multiplayer online game New World. But with such mixed results, it’s no surprise that Amazon threw in the towel on a proprietary engine and converted it to open source, where dozens of companies could help improve it.
Insiders said they believe his main goal at Amazon is to get the gaming industry to use Amazon Web Services, which was easily integrated with Lumberyard. And if we remember that important point, Amazon Games San Diego studio chief John Smedley once said that former Amazon CEO Jeff Bezos told game makers he wanted them to create games with “ridiculous calculations”. Guess that means they really cared about Amazon Web Services, and they can still make a bigger cash cow out of it even if they don’t own the engine.
I think if you look at the competition it makes sense that open source will eventually become relevant in the engine market, as it has transformed sectors such as the mobile operating systems market (iOS vs Android) and the PC market (Windows and MacOS versus Linux). Open source always maintains the honesty of other commercial providers and offers freedom of choice to those who appreciate it.
It’s hard to say if Amazon’s decision will put a lot of pressure on Epic Games and Unity.
For Epic Games, Fortnite has generated huge revenue that eclipses what the company is making from the Unreal game engine. Thanks to Epic vs. Apple antitrust lawsuit, we know that Epic’s internal documents show it made $ 3.8 billion in revenue from Fortnite in 2019 and only $ 98 million in royalties from Unreal Engine. The fledgling Epic Games Store, launched in 2018, is expected to exceed 25-year-old engine division revenue by 4: 1 in 2020. Where once games were designed to express what the game engine can do, the engine now exists for the company to generate disproportionate revenue from blockbuster games like Fortnite.
By the way, it was interesting to see Denis Dyack, CEO of Apocalypse Games, as the banner manager for Open 3D Engine. Dyack once sued Epic Games while at Silicon Knights in 2007, alleging that Epic withheld its most advanced version of its engine from licensees such as Silicon Knights. Dyack lost the lawsuit, but became a figure in the game engine war by supporting the Open 3D Engine.
Yet game engines can be strategic. On the one hand, they can be kingmakers for small platforms. Engine programmers do this by porting a game engine so that a game created on it can run on a wide variety of platforms. As I noted in 2014, Unity was successful early on in convincing platforms to give it money to run its engine so that games made with Unity could run on designated platforms. The smaller platforms would do this so that they can get more games on their platforms and get a reduction in that revenue.
This portability of game engines is important because it fulfills the mission of the engine, which is only a tool for game creators. It allows developers to offload the hard engineering work of porting their games to many different platforms. And these game developers can just focus on improving their games, writing it once and running it on multiple platforms to maximize revenue. It helped Unity gain recognition as a kingmaker and enabler, and it did good things for Unity’s evaluation. It was released to the public last fall and is worth $ 29 billion.
Epic Games charges a 5% royalty on hit games, while Unity charges a fee for each copy of its engine used by developers. Unity’s model gets harder to do with Epic’s tactic of giving grants to startups that use its engine (although it does give money to non-Unreal startups). Epic and Unity are widening the revenue pie by reaching new markets, like movies and other entertainment. But Unity is making more money through its Unity Ads platform, which integrates advertising into games, for a fee.
We’ll see how much O3DE embraces over time, but I see good things coming from increased competition in all areas of the gaming market, including the engines and tools market. And let’s not forget that engines are only important in the absence of games like Fortnite. Epic Games recently raised $ 1 billion for a valuation of $ 28 billion.
Why is it worth so much? Well, the engine is quite important for companies that want to use tech tools to create the metaverse. And Unreal Engine 5 is coming soon, and that should allow for a new generation of games, including new games from Epic itself. And so, you see, another DeanBeat column goes back to the notion of metaverse, the universe of virtual worlds that are all interconnected, as in novels like Snow accident and Loan Player One.
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