Remember the virtual world "oasis" in the story background of the movie "Top Player", Musk’s shocking computer simulation world theory, the black mirror series of TV renderings between virtual and reality switching back and forth, the series of parallel universes, etc. Those mind-opening theories resonate with countless people with the imagination of the virtual game universe.

Perhaps we will evoke endless imaginations about the time and space we live in when facing the starry sky; perhaps one day we will find that the universe in which we live may be simulated by a computer made by some intelligent creature. This is not just a scene in a novel or a movie. With the development of deep learning technology and the upgrading of the basic facilities of VR and 5G hardware, the concept of the virtual world has gradually recovered.

Part 1 - Unreal - Build A Virtual World Ahead of Reality

The supreme virtuality is reality, and the sense of substitution and immersiveness is the highest praises that can be obtained, and it is also the Garden of Eden that countless celebrities pursue. Unreal Engine that developed by Epic Games is undoubtedly the closest product to reality in the game field. The release of Unreal 5.0 in May last year ignited the excitement of major gamers. 

MetaHuman Creator, a member of the Epic family, has been able to create a high-quality digital human this year, whose quality has reached the standards of next-generation platforms and high-end virtual production.

• Metahuman can capture various expressions, movements and other details of digital humans in real-time through the animation directly generated by 3D modelling

• It uses Lumen, a fully dynamic global illumination solution, to react in real-time to scene and lighting changes.

• Nanite（nuanced geometric details rendering technology）to directly show the ultra-high-precision model of film and television level in the game

• The use of these seemingly black technologies has greatly reduced the time required for the steps of light mapping UV and baking in traditional game design. Other black technologies include Chaos physics and destruction system, Niagara VFX, convolutional reverberation and ambient stereo rendering, and migration between new and old versions.

Using a game engine such as Unreal Engine is discovering a whole new world. The Epic Games has also played a cross-border mix and match style. Recently, a pilot project was launched in cooperation with the multimedia studio Moment Factory, which combines video, lighting, architecture, sound and special effects to create a dreamlike atmosphere and lead the audience into an immersive digital world. 

The man behind Epic Games

Its founder, Tim Sweeney, is also a typical geek entrepreneur who showed amazing talent during the American information revolution in the 1990s. He started computer programming when he was 9 years old, sold floppy disk games in his parents' basement via email, and dropped out of school to start a business before graduation. 

At first, the four founders of Epic Gamess lived in a small apartment to develop their games and played other games in their spare time to relax, they realized the importance of developing a game engine. At that time, Epic only had experience in developing small games such as "Epic pinball" and "Jazz Bunny". Naturally, they couldn't compete with industry leaders, id software. But Tim Sweeney has a spirit of challenging the giants. He develops and debugs game engines day and night. The new engine integrates the editor and engine and liberates the work of game designers, functionality and a high level of user-friendliness. 

In the 2019 Forbes US 400 list, Tim Sweeney (ranked 150) also surpassed the boss of Valve (Steam company) Gabe Newell (ranked 239), becoming the number one richest person in the US video game industry.

Part 2 Epic Games Growth History

Since Epic Games is so powerful, how does it become the representative of high-end EA game engines? Let us go through its development history.

Back to the starting point of Unreal, the initial funding relied on the release of new games. Signed a distribution agreement with GT Interactive Software, Epic Games secured a large sum of funds for game development. However, the high standard of details always impedes game release. It was not until Tim grouped the employees to the Canadian Digital Extremes studio to develop together, Unreal finally debuted in 1998. It was extremely popular that year.

To gain GaaS (Game as a service) experience, Epic Games partnered with Tencent to conduct service operations in the game industry. In June 2012, Tencent acquired approximately 48.4% of Epic's issued share capital at the time for USD 330 million. The first round of financing was opened in October 2018 with amount of USD 1.25 billion. After 2 year, in the period of June to August 2020, three rounds of strategic financing were carried out at lightning speed, total USD 2.78 billion. The investors included industry leaders such as Sony and KKR.

Part 3 Unity - the first 24 billion dollars IPO of the game engine

Is there any other game engine in the industry that can challenge its position as the number one player?

Compared with Epic Games' high-end veteran position, Unity was created in 2004. Starting from a basement in Denmark, three-game lovers discovered the pain points of game engines and inspired them of creating a useful and cheap development engine. They speeded up the development and released the first product in 2005. This game engine, Unity, gradually became the number one player in low-end mobile games.

Unity not only makes game engine software, but it can also help users create their own games. Among them is Pokémon Go,which has been popular all over the world for many years. Games such as Honor of Kings and Arknights are all developed through Unity. In 2019, more than half of mobile, PC and console games were made with Unity, and 53% of the top 1,000 games on the Apple Store and Google Play platforms also adopted Unity. Engine.

In September 2020, Unity Software was officially listed on the New York Stock Exchange under code U. The company's issue price was USD 52 per share, and its market value on the first day of listing reached USD 13.6 billion.

Although Unity started as a game development company, its engine can cover the far-end technologies such as cars, transportation and manufacturing, film and animation, architecture, engineering and construction, and ERP.

The service can be divided into four major categories: namely game enterprise services, general services, UPR services and customized services. The first three are key battlefields for Unity, including engine customization, technical art, project evaluation, official online question and answer services, and other supporting services.

For data collection, the UPR is the most comprehensive tool, with the characteristics of timely feedback, multi-dimensional analysis, strong compatibility and scalability, and it will be directly integrated with Unity Editor to form a one-stop intelligent solution. 

Also, the UPR is completely free for TOC game enthusiasts, while for TOB-side enterprise-level can expand to customized services and private cloud deployment, which can save a lot of time in game development, maintenance, and operation. Customized services have a wider reach, and provide special support for a specific AI technology, such as online services, development of world solutions, virtual city reconstruction with strong migration application capabilities.

In the field of automotive, Unity's real-time rendering technology can be applied to automotive design, manufacturing personnel training, actual operation of the manufacturing assembly line, driverless simulation training, and market promotion display. Customers include Volvo, BMW, and Lexus etc. In the field of movies, Unity has successfully used the real-time rendering of the Lion King and supports the animation "Bonfire", "Hero Dad", and "Jigsaw". Even in the architectural design of Mortenson and Marxtent, Unity has also played a role in reducing data loading time.

Part 4 - Business Model of Game Engines

Before the IPO on September 18, 2020, Unity has raised a total of USD 1.6 billion and listed USD 1.3 billionsince October 2009. Although the CAGR of total revenue from 2018 to 2020 is 42.43%, the CAGR of net loss is also 45.22%. The value created by Unity is disproportional to the charges it takes as its game engine charges are almost free.

(Source: Yahoo Finance)

The business model of game engines generally consists of one or multiple following types:

(1) Basic charges

When an engine developer purchases an engine, the price may vary with the version of the engine.

(2) Royalties based on the number of games sold 

Those middleware companies, Epic Gamesss and Zerodin Games namely, engine fees consist of 2 parts - basic payment plus the copyright fee subjected to the revenue. Normally it is 5% to 10% of the total revenue. 

(3) Fees for supporting multi-platform functions

Game payment fees increase following the number of supported platforms.

(4) Charges according to the developer

The creator of the engine requires the company that purchases the engine to pay the fee based on the number of developers.

(5) Engine update or service costs

For example, the price of the Zerodin game engine is roughly 350,000 to 700,000 USD, but you need to pay 50,000 to 100,000 USD every year for the updated engine.

(6) Charges of compatible software or libraries

For instance, KA3D requires a very expensive 3D modelling tool 3DSMax to generate high performance as Unreal Engine only provides commercial software 3DS Max and Maya export tools.

Apart from traditional business, ‘Digitalization’ sparks the light of blending reality and fiction, multi-dimension services may become the direction for engine service providers to create greater commercial value. 

The significance of the existence of game engine companies has long surpassed the game field, broke the barriers of different fields, and merged people's endless daydreams about the future of technology. For example, the digital twin technology can be used in the field of industrial applications, enables real-time data collection and modelling, and these models can map into certain products, processes or service, forming a digital real-world system.

In addition to factory management, Digital Twin provides visual information in urban planning and autonomous vehicle testing. 

·      Take urban planning as an example, with the gradual improvement of smart city planning, data on traffic flow changes and the millisecond accuracy can be obtained. These data can help city planners analyze traffic patterns and help deploy new traffic lights, shopping centres, office buildings, etc. The digital twin technology can check the feasibility of a plan and integrate the otherwise fragmented planning. 

·      For autonomous cars, digital engines can help to avoid blind spots 3D modelling, and combine the data from sensors with the speed, braking, so car users can understand the dynamics of the vehicle without the time and place limits; engineers can gain insights that are difficult to grasp otherwise.

"Things that can revolutionize an industry are rare, and things that revolutionize multiple industries at the same time may only appear once in a hundred years." Virtual Engine's Vee said, "Unreal Engine is the later”. With the continuous innovation of Digital Twin and AR/VR technologies, digitalization sparks the light of blending reality and fiction. The boundary between virtual and reality is becoming blurred, and countless entrepreneurs and development teams are technical leaders, connecting the endless imagination and real images seamlessly. The "virtual world" may be the future of mankind.

Research method

Synthesis articles on media press, Epic Gamess (Unreal company) official website, Unity website, Yahoo finance, Zhihu.