Epic Games, the company behind the hugely popular video game Fortnite, faced major financial troubles ten weeks prior to recent staff layoffs, as revealed by its CEO Tim Sweeney. He unveiled this information during an unexpected declaration at Unreal Fest. Despite Fortnite's vast revenues, it seems the company had severer financial challenges than publicly known, leading to the dismissal of 830 employees.

Sweeney explained the layoffs as being necessary for survival and to stabilize the company's finances to continue the creation of the metaverse - an immersive virtual world. Fortnite, Epic Games' main source of revenue with $9 billion earnings in two years and 400 million users, had been supporting the company heavily. Despite its success, Epic has been spending more than it's been earning, partly owing to its significant legal battle with Apple.

Another contributing factor to Epic's expenditure has been its generous revenue splitting. These include offering 40% of Fortnite earnings to creators using the Unreal Editor for Fortnite and offering third-party developers to keep all profits from new games sold on the Epic Games Store for a limited time. Further, Epic charges developers only a 12% fee, compared to the industry norm of 30% on platforms like Steam, for games released on its digital storefront.

To counter these financial challenges, Epic plans to raise the price of the Unreal Engine. However, unlike other game engine providers, it does not plan to place the burden on game developers. Instead, the company will adopt a 'seat-based' software pricing model, where customers pay according to the number of people with access to the software.