I don't think this strategy will flop.

AI is perfectly capable of doing all of the coding for games now, especially if you have your own engine (which Epic does), build around harnesses (which Epic does), and treat the job of making games like a job not a side-slop (which Epic does).

Maybe this will bring quality down, but I don't think so, at least not more than the usual crunch + Disneyification.

Either way, the more interesting effect of this is not Epic making another IP licensed shooter, but more people making/modding into existence the games they want. This is already happening. And that's probably what was the genesis of this policy from Epic.

It won't bring quality down, it'll just be the end of human understanding.