Tech Guide

How Apex Legends, the hottest new video game taking on Fortnite, makes money

Key Points
  • EA's new game Apex Legends has sent shares of the company skyrocketing after reporting rapid player growth in its early days.
  • Apex Legends is similar to Fortnite, allowing players to fight to the last player standing.
  • Apex Legends is free to play, but players can buy virtual items, which is how EA will make money.
Playing Apex Legends.
Todd Haselton | CNBC

EA's new game Apex Legends sent the company's stock skyrocketing 16 percent on Feb. 8 when the company announced that it had 10 million players within 3 days of launch. Then, on Feb. 12, shares jumped again, 8 percent, when EA said the game had reached record 25 million players. The new free-to-play shooter is growing faster than the massively popular Fortnite, and investors are excited about its potential to earn EA big bucks.

Wall Street loves these types of games because they're free for anyone to play, which attracts huge numbers of players, but can earn publishers millions of dollars through "micro transactions" where players spend a couple of bucks here and there on virtual items.

All of this spare time spent gaming scares other companies fighting for our free time. Netflix said in January that it's more afraid of Fortnite taking viewers away than streaming video competitors like YouTube and Disney, for example.

And there's lots of money to be made. Fortnite launched in July 2017 and by July 2018 had passed more than $1 billion in in-game sales. It brought in $100 million in the 90 days after it launched on the iPhone.

So why is Apex Legends taking off? Here's what you need to know about the hottest new video game and its potential to boost EA.

What is Apex Legends?

One of several characters to pick from in Apex Legends.
Todd Haselton | CNBC

Apex Legends, like Fortnite, is a free-to-play shooting game where you fight through a field of competitors to be the last player standing. It's available for the PC, Xbox One and PlayStation 4. Unlike Fortnite, you can't play it on smartphones or tablets yet. And it doesn't have cross-platform support, meaning you can only play against people with the same system you have. (One of Fortnite's biggest advantages is it lets anyone play against each other no matter what device they're using.)

Apex Legends feels more like a traditional first person shooter game, like Call of Duty or Battlefield, the latter of which has been a big EA franchise, but it gives these games a sci-fi twist. Fortnite has a more cartoonish look.

If it's free, how do Apex Legends and Fortnite make money?

Getting ready to enter a match.
Todd Haselton | CNBC

Both games allow players to buy different "skins" or characters that you can use in the game.

These skins and other paid add-ons, allow you to show off a different style to your online competitors. Think of it as a fun costume or a "cooler" looking player than someone who hasn't earned anything at all.

This is where you spend money in Apex Legends: on Apex Coins.
Todd Haselton | CNBC

You buy these virtual goods with V-Bucks in Fortnite or Apex Coins in Apex Legends. 1,000 coins costs $9.99 in real money on both platforms, but you get more for your buck the more you spend. For example, if you buy 10,000 coins in Apex Legends for $99.99, you get 1,500 coins free. You get a bonus 13,500 V-Bucks for $99.99 in Fortnite. This is the key component for how these games make money from players.

Importantly, these aren't pay-to-win games, though.

No matter how much you spend, there's no way to buy power or skill to make you "better" than another gamer out there -- your character just looks different. That's what makes them more appealing than other games, which might let players buy weapons or armor that physically augment a character to make them stronger or more deadly on the battlefield.

What can you buy with V-Bucks and Apex Coins?

Some of the gun skins you can buy in Apex Legends.
Todd Haselton | CNBC

In Apex Legends, you can buy different skins for your guns, which means they look different but perform just the same as any gun anyone else can get. You can also buy Apex Packs, which cost 100 Coins each and give you a chance at getting "legendary," "rare" or "epic" items that can't be bought on their own.

One of several characters to pick from in Apex Legends.
Todd Haselton | CNBC

In Fortnite, you can buy different parachutes that drop your character onto the battlefield. You can also buy different character costumes and different axes, which you use to chop wood for resources. These can also be earned by playing the game, so you don't always have to pay for stuff. You buy all of this stuff with Fortnite Bucks.

Finally, both games have a subscription pass called a "Battle Pass." This gives you access to a seasonal system of items. Fortnite's Battle Pass costs 950 V-Bucks, or just under $10 in real money. Apex Legends, at the time of publication, hadn't announced the price of its pass yet, but it's coming soon.

Will Apex make a lot of money like Fortnite?

I need to find a weapon.
Todd Haselton | CNBC

Investors seem to think so.

Shares of EA tanked 13 percent on Feb. 6 after it cited "intense competition" in gaming and reported a revenue miss for the fiscal third quarter of 2019. But investors seemed to forget all about that just two days later when EA said millions of people were flocking to play its new game.

Apex Legends has the foundation to make EA hundreds of millions of dollars, or even more than a billion, just like Fortnite has for its publisher, Epic. That consists of a high-quality, free game that millions of people like to watch and play. And Apex Legends has an ecosystem where people can spend money if they want to, but, importantly, don't have to in order to win.

But there are still a few areas where Apex Legends needs to pick up ground.

Fortnite kept people coming back by tweaking gameplay, battlefield maps and generating a story around the game and characters. Apex Legends is so new that we don't know what value it will offer gamers long-term. It also needs to add cross-platform support and launch a version for phones so people can play whenever and wherever they want, just like they can with Fortnite.

Still, it's a big milestone to attract 25 million players to such a new game. Now EA needs to show investors that they're coming back and, more importantly, spending money.

Market too reactive to video game stocks, says Bespoke's Paul Hickey
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