Fortnite is following the blueprint of the most profitable video game of all time
- Fortnite has successfully emulated Grand Theft Auto (GTA) Online's business model.
- Take-Two Interactive Software's Grand Theft Auto Online was one of the first games that continuously released new content and allowed users to play for free.
- The business model allows users to pay as much or as little as they want to enhance their experience. For example, GTA Online players can choose to spend money on virtual currencies and goods.
- Watch Take-Two Interactive Software trade in real-time here.
Fortnite, a battle royale-style game owned by Epic Games, has taken the video game community by storm in recent months. The game captured audiences with its "freemium" business model that allows players to run the game 100% free on consoles and pay for add-on purchases. The game is also available to play on mobile. In March alone, Fortnite raked in $223 million in revenue across all platforms, according to research firm Superdata.
Before Fortnite, there was Grand Theft Auto Online which helped lead the video game industry towards a subscription-like business model. Though Grand Theft Auto V and Grand Theft Auto Online were jointly released in 2013, the two games continue to bring in more than $6 billion in revenue to holding company Take-Two Interactive Software.
"[Grand Theft Auto V] is the biggest and the most profitable, it's the highest grossing entertainment product of all time,"Jefferies analyst Timothy O'Shea told Business Insider.
The game, developed by Rockstar Games and owned by Take-Two Interactive Software, has sold more than 95 million units. Each of the units included access to GTA Online which let users play for free but charged extra for any add-on features, creating the "freemium" model that Fortnite currently follows. O'Shea estimated GTA Online alone contributes $1 billion in revenue to Take-Two Interactive Software.
"Prior to GTA 5, no one really knew how to encourage users to spend real money on virtual goods," O'Shea said. "So Rockstar came up with GTA Online."
GTA Online constantly keeps users engaged by dropping new content for free and users keep coming back to play, he said. Eventually, users become comfortable enough to start buying virtual currency with real money rather than earning it the slow way. GTA Online essentially found a way to enforce perfect price discrimination, he said.
Grand Theft Auto V was released under the traditional model that charged a flat $60 fee for each individual unit, but the GTA Online access that was gifted to buyers as a bonus introduced the now popular freemium model. GTA Online users could pay as little or as much as they wanted for additional features on the game, giving Take-Two Interactive Software a wider range of customers.
Since the release of GTA V and GTA Online, Take-Two Interactive Software has been profitable every single year, O'Shea said. He also noted that though the last Grand Theft Auto game was released five years ago the franchise still accounts for 40% of the company's revenue.
"The more they play, the more they pay," he said.
Take-Two Interactive is up about 2% this year.
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