When Unreal launched in the U.S. for a hefty $50, it still managed to debut at No. 3 on the computer game charts for the week of May 23, 1998. One week later, it climbed to No. 1. By the end of May, Unreal had cemented itself as one of the year’s top sellers—just behind StarCraft, which dominated the charts. For months afterward, the two games—one a first-person shooter, the other a real-time strategy classic—traded the crown back and forth.

By early August, GT Interactive reported that Unreal had sold more than 500,000 copies worldwide. Over the entire year, it moved 291,300 units and earned roughly $10.96 million in revenue, making it the 13th-best-selling PC game of 1998, with an impressive average retail price of $38.

According to Game Daily, by January 1999 U.S. sales had reached 350,000 units; by September 1999, global sales topped one million; and by November 2002, that figure had grown to 1.5 million.

In 1997, Epic poured every ounce of its resources into the Unreal project. The team, scattered across various cities, gathered in Waterloo, Canada, to complete the final push together. Waterloo—home of BlackBerry—was bitterly cold in winter, something that left Tim Sweeney and the crew half-frozen and half-amused.

When Unreal finally shipped, they barely paused to celebrate before diving into its online version. The original release had been criticized for lacking multiplayer support, and for a small studio like Epic MegaGames, listening to player feedback was a matter of survival.

By the summer of 1998, work on the new update was fully underway, with the goal of adding online multiplayer, new maps, and fresh gameplay elements. But one major issue quickly surfaced: communication. Digital Extremes was still based in Waterloo, while most Epic developers were in North Carolina. Collaboration was awkward—relying on email, phone calls, and occasional trips to Ontario.

That experience convinced the team to transform Epic from a loose collective into a real company. “For such a small group, you don’t really need a lot of management,” Sweeney once said. “If you hire great people who are self-motivated, you can get by with almost none.” But as the studio grew, that informal model no longer worked.

So in September 1998, Epic packed up and moved to Raleigh, the capital of North Carolina—known as the “City of Oaks.” Compared with Waterloo or California, Raleigh felt like paradise.

“I love this area,” Sweeney said. “The cost of living is low, and we can attract talent from all over. With a decent game developer’s salary, you can buy a beautiful house. In California, that same salary barely gets you a one-bedroom apartment. Raleigh’s a great place—hiking trails, good weather, mountains, beaches… all of it.”

Digital Extremes’ James Schmalz shared the sentiment: “Unreal was built by developers spread around the globe, but when we finally came together in North Carolina, that’s when the magic truly began. The entire Epic team was now under one roof.”

With the relocation complete, development of the new title kicked into high gear.

Programmer Steven Polge, who had joined Epic in 1997, became lead coder. Before joining the company, he’d earned a master’s in computer engineering and worked at IBM. His Reaper Bot mod for Quake—the first computer-controlled multiplayer opponent—had earned a Guinness World Record. Within Epic, he became key to the development of Unreal, integrating advanced AI behavior that evolved from his earlier work.

As development expanded, the team realized the project had grown far beyond a mere update. After discussions with publisher GT Interactive, designer Cliff Bleszinski and producer Mark Rein suggested releasing it as a standalone product. In December 1998, the project received a new name: Unreal: Tournament Edition.

By February 1999, Epic MegaGames officially announced its new headquarters in Cary, North Carolina—and shortened its name to simply Epic Games. The studio no longer needed to hide behind a scrappy label; it had become a legitimate business.

The Unreal Tournament team consisted of about sixteen people, most of them veterans from the original Unreal. One new face was Brandon Reinhart, who discovered a user-made mod called UBrowser that enabled multiplayer matchmaking. After showing it to Schmalz, Epic quickly hired the mod’s creator, Jack Porter, and integrated UBrowser into the game itself. Meanwhile, Sweeney focused on engine code while Polge handled AI and gameplay systems—both working late nights and long weekends.

Lacking in-house artists, Epic contracted Steve Garofalo to create character skins and textures. The workload was immense, and UnrealEd—the team’s in-house level editor built in Visual Basic—was riddled with bugs. Still, progress continued.

Unreal Tournament made heavy use of UnrealScript, which allowed developers to add or tweak features without breaking the core game. Tools like Microsoft Visual Studio and 3D Studio Max rounded out the pipeline, while the audio engine supported Creative Labs EAX 2.0 and Aureal 3D 2.0 HRTF positional sound—cutting-edge at the time.

By the time it shipped, Unreal Tournament had cost Epic roughly $2 million to develop, with more than 350,000 lines of C++ and UnrealScript code written over a year and a half.

Then came Hurricane Floyd. On September 16, 1999, as the storm battered Raleigh with torrential rain and widespread blackouts, the team had just completed the demo build. Polge rushed the game home to upload it over ISDN, only for the network to fail. Desperate, he drove through the storm to Rein’s house and worked until dawn to finally get the demo online.

The next day, the response was explosive. Epic knew a major hit was coming. Updated demos supporting both OpenGL and Direct3D followed on September 28. The full retail version—simply titled Unreal Tournament—arrived in North America on November 22, just ten days after Quake III Arena.

While Quake III emphasized pure speed and technical precision, Unreal Tournament brought style, accessibility, and a distinct sense of spectacle. In 2000 and 2001, Infogrames ported it to PlayStation 2 and Dreamcast, expanding its reach even further.

By the end of 1999—just two months after release—it had already sold over 100,000 copies. By early 2000, that number climbed to 128,766, and by November 2001, global sales reached two million, generating over $10 million in profit for Epic.

Critics were ecstatic. Computer and Video Games called it “a miracle of technology and gameplay—blissful, time-devouring joy.” GameSpot praised its “beautiful character models, superb level design, and impeccable weapon balance,” concluding that “in a crowded FPS field, Unreal Tournament stands apart.”

With the twin successes of Unreal and Unreal Tournament, Epic Games had officially arrived.

The Birth of the Unreal Engine

From his earliest days, Tim Sweeney had dreamed of building reusable game technology. “Every game I’ve written was, to some extent, an engine,” he explained. “My first shareware game was a simple text-mode action title, but it had a built-in editor that let players create their own levels. ZZT, released in 1991, wasn’t technically advanced or a huge commercial hit, but thousands of people made levels for it and shared them online.”

Unreal became Epic’s first true commercial triumph. Sweeney admired id Software but thought their habit of rebuilding everything from scratch was wasteful. “My idea,” he said, “was to build something once and use it across many games.”

After Unreal launched, other studios began asking to license its graphics technology. Mark Rein saw the business potential and quickly struck multiple deals. In fact, Unreal Engine began generating revenue before some of Epic’s later games even shipped—MicroProse and Legend Entertainment had already licensed it back in 1996.

Thus began the rise of one of the most famous engines in gaming history: the Unreal Engine (UE).

Sweeney found more joy in building technology than in designing games themselves. He personally wrote about 90% of the engine’s code, expanding support for both OpenGL and Direct3D as GPU technology advanced. “The renderer is always the hardest part,” he said, recalling how he repeatedly rewrote its core algorithms. “But building Unreal Engine 1 was an incredible education.”

Even his rival, id Software’s John Carmack, acknowledged its impact: “The Unreal Engine raised expectations for what players would demand from future games. The visuals it introduced became the new standard.”

By late 1999, sixteen games—including Deus Ex, The Wheel of Time, and Duke Nukem Forever—were already using the Unreal Engine. While id Software sold bare-bones source code licenses, Epic offered full technical support, albeit at a higher price. For a $3 million game, licensing UE cost around $350,000.

To streamline development, Sweeney introduced UnrealScript, a flexible scripting language meant to allow near “zero-code” game creation. “Licensing the engine lets studios focus 100% on game design instead of reinventing technology,” he explained. “But it’s just a tool. If your gameplay isn’t good, a licensed engine won’t save you.”

His long-term goal was clear: “We wanted a codebase that could evolve across multiple generations of games. That meant clean, general-purpose architecture and extensibility. When we realized how valuable that was for licensing, it became a core part of our strategy.”

From then on, Epic was no longer just a game developer—it was also a technology company.

As the console wars among Sony, Nintendo, and Microsoft heated up, Epic saw huge opportunity. Unreal Engine 2, released in 2002, powered America’s Army, one of the first large-scale multiplayer military shooters. Soon after, Epic brought Unreal Tournament to Xbox—among the earliest titles to support Xbox Live.

UE2 introduced a wealth of new tools: cinematic editors, particle systems, export plugins for 3D Studio Max and Maya, and the skeletal animation system first seen in the PS2 port of Unreal Tournament. UnrealEd was rewritten in C++, which Sweeney called “the best version yet.”

Then came Unreal Engine 3, Sweeney’s crown jewel. Its renderer, physics, audio, and tools were all rebuilt for a new era. Unlike UE2’s fixed-function pipeline, UE3 was built for fully programmable shaders—lighting and shadows calculated per-pixel rather than per-vertex.

The first UE3 title was Gears of War, released on Xbox 360 in November 2006. The game cost around $12 million to develop and grossed over $100 million, solidifying Epic’s dominance.

Epic made it a tradition: release a flagship game alongside a new engine. No one else in the industry operated quite like that.

UE3’s reach expanded rapidly—first Windows, PS3, and Xbox 360; then iOS and Android. Infinity Blade became the first iOS game built with UE3, earning massive profits, followed by Dungeon Defenders on Android.

The engine continued evolving: destructible environments, advanced physics, crowd simulation, iOS optimization, Steamworks integration, and real-time global illumination. Epic even partnered with NVIDIA to push real-time rendering forward and optimized UE3 to run on Tegra-powered netbooks—right as iPads began reshaping the market. “I believe the iPad will succeed,” Rein said. “And I want our engine running on it as soon as possible.”

Defining the engine as a tool, and ensuring it supported the widest possible range of hardware, became the key to Epic’s lasting success.

Unreal Engine 4 and 5

By 2012, anticipation was building. “When people see Unreal Engine 4 later this year, they’ll be stunned,” Rein teased. Epic unveiled UE4 at that year’s Game Developers Conference, marking a major shift: UnrealScript was gone, replaced entirely by C++.

Sweeney recalled, “We kept asking ourselves, ‘What would it take to make UnrealScript competitive in the future?’ Eventually we realized that everything we wanted to add already existed in C++. So we dropped it. C++ gives us performance, debuggability, and total control.”

Two years later, at GDC 2014, Epic launched Unreal Engine 4 with a bold new model: full access to source code on GitHub, for $19/month and a 5% revenue royalty. The first UE4 title, Daylight, released on April 29, 2014.

Then, in March 2015, Epic went even further—making UE4 completely free, with only a 5% royalty on products earning over $3,000 per quarter. Sweeney noted that usage skyrocketed ten-fold after the subscription launch, and he expected the free model to bring millions more developers into the fold.

Finally, on May 13, 2020, Epic unveiled Unreal Engine 5, built for the next generation—supporting everything from mobile to PlayStation 5 and Xbox Series X/S.

From Unreal to Gears of War to Fortnite and beyond, Epic Games’ journey—from a handful of frozen dreamers in Waterloo to the world’s leading game-technology powerhouse—stands as one of the great success stories in modern interactive entertainment.