Platform Payouts and Fortnite’s Unique Approach
Written by Eric Guan, a game economist at Taki Games, ex-Riot veteran, and Game Economist Cast co-host. Special thanks to Kegan Clark and Ben Steffler for their help fleshing out these ideas.
Games are diving into content platforms in the wake of YouTube, Spotify, and Netflix’s success. While game marketplaces like Steam and Itch.io have existed for a while now, games are experimenting with platforms where revenue is not directly attributable and the platform has to mediate creator payouts.
The two main flavors are subscription bundles (Xbox Game Pass, Apple Arcade) and user-generated content aka UGC (Roblox, Fortnite Creator). In this article, we’ll take a look at common platform payout models and Fortnite’s unique approach.
For those interested in a deeper dive into the challenges and triumphs of Unreal Editor for Fortnite (UEFN), check out our podcast episode featuring Pete Hawley (former executive at 100 Thieves, EA, Zynga, Lionhead, Sony, Telltale, and Mythical Games) and Alexander Seropian (founder of Bungie, Industrial Toys, Wideload, and Look North Games). They discuss the platform’s opportunities and limitations, offering expert insights on marketing strategies, player engagement, and technical aspects.
Direct and Heuristic Attribution
When revenue is directly attributable to content, payouts are straightforward. Creators receive payouts proportional to the revenue they bring in, with the platform taking a set cut.
For marketplaces like Steam and Etsy, the revenue is simply the prices buyers pay. For YouTube, advertising revenue can be directly attributed to videos. Video creators can opt to monetize their videos more aggressively by inserting more ads. Interstitial ads pay more than pre-roll or post-roll ads, but are more disruptive to the viewer, functioning like an inconvenience price. In these platforms, it is up to the creator to monetize their content.
When revenue is indirect, attribution becomes the key issue. Spotify and Netflix are two exemplars of this model. Users pay $10/mo for the entire content catalog, and it is up to the platform to attribute that $10 to the content. Usually, this is done with aggregate engagement heuristics.
For example, Spotify takes a big pool of subscription revenue and distributes it proportionally based on playtime. If Taylor Swift garners 10-fold as much playtime as Eminem, then she gets paid 10-fold more.
The implicit assumption is that playtime is proportional to revenue generation and that Taylor Swift drives 10x more subscription or churn reduction than Eminem. Game subscriptions like Xbox Game Pass and Apple Arcade are likely using a similar model.
Roblox has a hybrid approach, where creators are given “Engagement-Based Payouts” but are also able to monetize directly with in-game purchases. The biggest earners on Roblox like “Adopt Me” earn the bulk of their revenue from in-game purchases with tactics adopted from mobile free-to-play games.
Fortnite Skins are One-Size-Fits-All
Every game on Fortnite Creator is funded with skins revenue. Fortnite Creator does not allow game-specific microtransactions, likely to create a more kid-friendly environment free of aggressive monetization. Instead, Fortnite uses engagement-based attribution similar to Spotify and Netflix, divvying up a percentage of skins and battle pass revenue to creator games.
The upside for creators is that they do not have to worry about monetization. Free-to-play games are a complex beast, where gameplay and monetization need to be designed in tandem. Fortnite allows creators to circumvent the monetization component and focus purely on designing engaging gameplay while piggybacking on Fortnite’s existing monetization. This hugely reduces the barrier to entry for amateur developers, alongside free distribution and a $0 price point for players. Moreover, as the games are designed purely for engagement, they will avoid the corrosive effects of aggressive monetization.
The downside is that all games are shoehorned into the same one-size-fits-all skin model. Unlike Spotify where every subscriber pays $10/mo, Fortnite players buy a wildly varying amount of skins. This limits the variety of games that can effectively generate revenue for Fortnite. Avatar-based social games work great, as they highlight the conspicuousness of skins. However, games that do not push skins (such as an abstract puzzle game or a single-player narrative experience) likely do not drive revenue. Fortnite’s original payout formula did not account for this, as it paid all games entirely based on playtime.
Any heuristic payout will have misaligned incentives that create perverse behavior, as creators can artificially boost their stats. Spotify encountered this problem early on. Funk band Vulfpeck asked fans to listen to a silent album on repeat while they slept, netting them $20k before Spotify shut them down. This perverse behavior is also prevalent on Fortnite today. Many creator maps offer player rewards for simply staying logged in. For example, [GAME] rewards players with [REWARD] for playing for at least 20 minutes. This nominally boosts the game’s engagement stats, granting the creator a bigger payout, but it likely does not drive the positive downstream effects of true engagement like retention and monetization. This problem is exacerbated by the fact that Fortnite is free and many players do not spend at all. If Fortnite does not take into account player spend, then boosting stats by attracting masses of free players is even easier than in Spotify.
Fortnite is clearly aware of these misalignments. Their payout formula was recently updated to address these problems, attempting to attribute skin revenue and retention more accurately to games. However, with a new heuristic comes new potential misalignments. Is the updated heuristic good enough, or will Fortnite be stuck in a loop of edge-case whack-a-mole? Time will tell.
Liberalize or Centralize
Fortnite Creator is straddling the middle ground between a walled garden and a free marketplace. They hope to get the best of both worlds, with the curated quality of Game Pass alongside the explosive productivity of Roblox. To do so, however, they will have to tackle the central planner’s problem, setting proper policy while avoiding misallocation and perverse incentives. As Creator matures, it will be interesting to see whether they can walk the golden path or be forced to pick a side, liberalizing like Roblox or centralizing like Game Pass.
