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Friday, December 1, 2023

Epic Games Was Almost Acquired by Tencent and Google in 2018

Epic Games has taken tech giant Google to court, alleging an illegal app store monopoly and driving up app prices on its Play Store, but it seems like it all could have been avoided if Google had acquired the company. As per new information coming from the Epic vs. Google trial, Google wanted to acquire the Fortnite maker by teaming up with the Chinese video game giant Tencent in 2018.

Google and Tencent Discussed a Potential Epic Games Acquisition

Google wanted to acquire Fortnite maker Epic Games back in 2018.Google wanted to acquire Fortnite maker Epic Games back in 2018.
Google wanted to acquire Fortnite maker Epic Games back in 2018.

Google was once trying to break into the video game industry, largely because of its cloud gaming service Stadia. The now-terminated service was first released in 2018 and made huge waves. Google wanted to take this further with the acquisition of Fortnite maker Epic as it had discussed teaming up with Tencent to buy 100% ownership of the company.

According to new information from the Epic vs. Google trial in the form of an email, Google executives Phil Harrison and Dav Sobota discussed the potential acquisition of Epic. As reported by The Verge, ex-Stadia head Phil Harrison had proposed to invest in Epic, citing different reasons. Here’s what Phil Harrison wrote about acquiring Epic or buying a stake in it:

I‘ve taken a stab at a high-level strategic rationale for an investment in Epic. Fortnite is (or can be) the leading business driver for Google across:

YouTube (already 100M+ increase in game watch time MAU)

GCP (to shift 130M+ players from AWS and build an anchor tenant in games)

However, the company failed and proposed to invest $2 billion to buy a 20% stake in Epic. Dave Sobota replied with potential alternatives to buying Epic’s shares from Tencent to get more control over the company or joining the Chinese video game giant to acquire Epic. Here’s what he wrote:

As a potential alternative, Phil is proposing we consider approaching Tencent to either (a) buy Epic shares from Tencent to get more control over Epic (unclear how that helps us without a majority share) or (b) join up with Tencent to buy 100% of Epic (and then of course we do a lot of deep commercial things with Epic).

Google wanted to do plenty of commercial things to boost the growth of its cloud service and make a place in the gaming industry with Fortnite, the battle royale, which was a phenomenon at the moment and had banked around $5.5 billion in revenues. It was also believed that the acquisition could contribute to other businesses of the company, including YouTube.

However, nothing came of its interests, as the Chinese giant still owns about 40% of Epic, and Sony has also invested to acquire about 5% stakes in the company. Epic has been valued at over $32 billion as of April 2022, and its popular battle royale Fortnite has earned over $26 billion in revenue till now and over $6 billion in 2022 alone. Tim Sweeney is the largest shareholder in Epic as of now, owning more than half of the company’s stocks.

Google wanted to partner with Tencent to buy 100% ownership of Epic.Google wanted to partner with Tencent to buy 100% ownership of Epic.
It wanted to partner with Tencent to buy 100% ownership of Epic.

This information came from the Epic v. Google trial, as Epic has filed a lawsuit against the company alleging that it enjoys an illegal monopoly on its Play Store as it requires developers to give a cut of the payments. The case originated after Fortnite was taken off the Play Store, as it bypassed the payment processing systems and allowed players to directly make purchases from its payment system.

Google has denied all the allegations and said that Epic’s demands compromise Android’s ability to offer a secure user experience and would also hinder competing with Apple. Epic did the same with Fortnite on Apple’s App Store, and App also removed Fortnite from its store. Epic also sued Apple twice over this, but the court did not find any evidence of anything illegal.

In other news, Epic has currently been facing backlash as it introduced age restrictions on cosmetics in Fortnite, which did not go down well with the community. The company later responded, saying that the update did not “hit the mark” and that it is working on new options for the game.

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