Monday, August 9th 2021
Epic Games Store Keeps Losing Money, Expected Unprofitable Until 2027, Even with a Massive $500 Million Investment Behind It
Epic Games Store, one of the many products of the Epic Games company, is the current number one contender of Steam game store, which used to be Valve's monopoly in the gaming market. Having another contender is nice and competition is always welcome, however, it doesn't seem like running a games store is a cheap venture. In the recent legal dispute between Apple and Epic in California state, we have discovered some interesting details about Epic Games Store (EGS) and its financial background. According to the documents appearing in the court, EGS is not considered profitable until 2027, at least.
Apple has told the court that "Epic lost around $181 million on EGS in 2019. Epic is projected to lose around $273 million on EGS in 2020. Indeed, Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with 'significant' growth, only $401 million in revenue for that year. Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021." This information shows that Epic has sunk a lot of cash in the store, however, the company expects EGS to become profitable at some point, where the original investment will be returned.
Source:
via PC Gamer
Apple has told the court that "Epic lost around $181 million on EGS in 2019. Epic is projected to lose around $273 million on EGS in 2020. Indeed, Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with 'significant' growth, only $401 million in revenue for that year. Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021." This information shows that Epic has sunk a lot of cash in the store, however, the company expects EGS to become profitable at some point, where the original investment will be returned.
172 Comments on Epic Games Store Keeps Losing Money, Expected Unprofitable Until 2027, Even with a Massive $500 Million Investment Behind It
Maybe my 12-mile example was a little radical. Here's another one: I drive a Ford Fiesta ST. People have asked me why I don't drive a "normal" car like a Corolla to commute and something like an MX-5 (Miata) for weekends? My answer is simplicity: having one car that does it all is easier to maintain (and cheaper too, but that's another story).
Or my phone: I have a Samsung Galaxy A20e. When it dies, I'll probably buy another cheap Samsung. Am I a Samsung fanboy? No. I totally hate the way they refresh their whole range every year just because they can. My reason is the seamless transferring of apps and data between Samsung phones. Do I think there are other good phones on the market? Totally! Do I want one? No (I don't even want another Samsung to be fair).
Or my graphics cards: I currently have an RTX 2070 in my main PC, a GT 710 in my HTPC, and another GT 710 and a GTX 1050 Ti in the drawer. Did I buy them because I'm an nvidia fanboy? No. I found the 2070 cheap on ebay, the 710 is a category that's totally alien to AMD nowadays, and the Palit 1050 Ti KalmX is one of the fastest cards with passive cooling - a real curiosity. I didn't buy them because they're nvidia. I bought them because they are/were the best GPU available for my intended purpose. To prove my point: I also had an RX 5700 XT and I loved it. Do I want one again? No. I'm currently happy with the 2070.
Just because I'm happy with with what I have doesn't make me biased towards any brand. First I had Steam and I didn't need anything else. Then came GOG with their good old games that I used to love as a child, with DOSbox integrated into their client and no copy protection. I had no idea I needed something like that, but when it hit, I thought it was brilliant and I absolutely loved it (and still do). The point is: you don't have to fulfil a need. You need to find something that people secretly want. I know it's terribly hard, but that's the key to success. Being mediocre isn't. And why exactly would I need just another generic storefront to clutter my PC when I can do the exact same things with GOG or Steam? I acknowledge this as a valid argument, though a weak one. Most people don't care where the money goes. They only care about two things: how much do I pay, and what do I get for it. Besides, there's no guarantee that what you pay on EGS actually reaches the developers. Revenues can be a marketing gimmick too. I personally do not believe that any reseller has any other purpose than making money. The only way they differ is their methods: Steam is omnipresent, GOG offers lots of old-school games and no DRM, and Epic makes titles exclusive to make sure you don't have a choice. To me that's dirty AF.
This strategy is necessary because it is effective. Epic (or any emerging storefront) needs to accumulate an user base in order to become a competitor to Steam. Epic offering the exact same thing as Steam will change nothing. Due to magnitude of monopoly that Steam has, more aggressive methods are required.
You don't like exclusives. Fine. I'm going to ask you point blank. What is your suggestion for an alternative strategy that would be as effective but "less shady"? What would YOU have done in Epic's place?
I'm asking because a criticism without a suggested solution is just whining. No, I am not. Nowhere did I mention neither Windows, nor Linux. You are creating a straw man argument.
I was pointing out that Epic's launcher, while not as feature rich as Valve's, is perfectly capable of doing the main thing any game launcher should be able to do, which is sufficient for many users.
It seemed to me that you were presenting the lack of additional features as something objectively negative that impacts all users who create an Epic account, which it isn't. It is subjective, as not everyone needs the extra features that Steam offers. I myself am one of them. I acknowledge that Steam offers more functionality but I don't need it. Of course, just because I don't, doesn't mean others don't either, however, this goes both ways: just because there are people who use Steam's extra features doesn't mean that everyone else does or should.
On a side note, I'm convinced that a large portion of Epic's detractors who claim underdevelopment would simply find way to dismiss the addition of any missing features. For example, if Epic added a friends list, people would say that it's just copying steam or that other, better solutions exist (like Discord). Thus further proving that some people are not really criticizing but are just whining or even downright hating on competiont.
Speaking of which, it may be prudent to start many discussions on the topic of Steam and Epic with a question to all of Epic's critics if they believe competition is a good or a bad thing, because based on many user's opinions and arguments (or lack thereof) I'm starting to suspect that a good portion of Epic's opponents may believe competition is not necessary or maybe even detrimental.
The strategy is obvious, and I'm not telling anyone to change it or recommend another one. I'm stating the EGS is underdeveloped in comparison to other stores and doesn't offer a full featured experience in comparison to Steam. For that reason, there is no reason to use it.
You are also assuming I want EGS to fail or I am against them. That's not the case either. I am simply stating I am not going to use the platform because it offers me nothing additional due to its current state. If they improve by 2027 as the article states, then I will reconsider and will likely reconsider multiple times before then. It may also be the case that Epic releases a game that I truly find fun to play, other than Fortnite which I think is a flavor of the month type game that is becoming diulted due to every AAA offering the same game mode now.
GOG is a perfect example: they started out by offering near forgotten classic games with no copy protection. It's something that no one has done before and still no one does. It made a difference in the market and it's genius.
Epic needs to find that secret need that gamers want but don't know about yet. They need to offer something extra. They need to carve a new slice out of the market instead of trying to take a piece out of someone else's slice. That's it.
Stop projecting your preferences and opinions on other people. That is a pretty vague suggestion. Would you mind elaborating a bit?
Also, the bolded part further cements that even if Epic's launcher reached parity with Steam's functionality, it would still be deemed unworthy. "Damned if you do and damned if you don't", I guess. GOG is great but it's hardly a Steam competitor. Yes, it has its niche and audience, but it cannot challenge Steam's entrenched position, and it doesn't seem to be trying either. It seems CDPR are content with how GOG has been positioned on the market. If that is the case, awesome! My point is that the innovation GOG provided did not result in it being a true competitor to Steam.
I suspect Epic's goals go beyond having a small niche, which is fine and even welcomed. Any suggestions or ideas? No?
And no, they cannot carve a slice of the market without taking from someone else's. A person who purchases a game from one store would most likely not purchase it a second time from another. If a user purchases a game from Epic and not Steam, that is essentially Epic taking from Steam's slice.
To me a "new slice" would imply that Epic need to find new customers, those who are not already Steam's or anyone else's customers, which basically means people who have just discovered that gaming and game stores exist. While there are undoubtedly such people, it is incredibly naïve to believe that they would be sufficient to allow Epic to become a true competitor to Steam.
So again.. judge the games, not the stores.
IMO, none of EGS's "beta-ness" matters much. If it does to you, I would love to hear how and why. If not, then I'll have to assume you're blowing things out of proportion, as I have nothing else on which to base my beliefs.
Also ... I'm not defending EGS so much as I'm arguing against people arguing against it. The people you mention, die-hard Linux, anti-MS fans? Those are an equivalent to the "never EGS" crowd, no? I am neither avoiding anything, denying myself anything, or sacrificing anything. Rather, I am giving myself more options and more flexibility. That's understandable. But there's still a flaw in this logic: owning two cars, buying expensive phones, or buyinng expensive, premium GPUs has tangible consequences. More money, time, effort spent, in some way or other. Sure, they all have benefits, but also very tangible drawbacks. What are the tangible drawbacks from having another launcher? A tiny amount of system resources (if you let it run in the background when not needed) that isn't likely to affect performance noticeably. Which, then, isn't actually tangible at all. It doesn't cost you money, time, power, anything else. Because choice is beneficial in and of itself. More options means more possibilities for sales, bundles, etc. More options means more potential for competition. As for fulfilling a need you didn't know you had: you understand that there is a finite list of these, right? Also, arguing for the value of gimmicks is ... rather problematic. GOG didn't grow big(ish - they can't really be called big) on being "good old games" (sadly!), they grew big on preferential treatment from CDPR, and by branching out into high-profile AAA titles. No outright exclusives, but as close as you can get. But before they did that, they were a tiny (but beloved) niche store with zero effect on the overall games market beyond providing for that specific niche. They started with a gimmick and used that to build a solid and faithful user base, but that growth stalled rather quickly, with their current relative success being down to them expanding beyond this without sacrificing their core. The gimmick gave them a start, but did not make them what they are today. (Though their DRM-free mantra does attract another slightly different user base than the old games stuff does, so I guess they can say they had two gimmicks?) Your argumentation here is pretty problematic though. "There's no guarantee that what you pay on EGS actually reaches the developers" - sure, but that's equal across the board. Publishers, engine vendors and others will take their cuts no matter what, and independently on where the sale takes place. What does change is if that cut comes from 70% or 88% of the sales price - sure, that will also increase what those third parties are paid (if their cut is based on revenue after the store takes its cut, which is likely), but developers will still get more no matter how that equation plays out. There is no situation in which developers don't gain from this. And whether you care or not, you can't deny that this is factually a good thing. EGS doesn't need to have any purpose beyond making money, they can still (intentionally or not) provide a better payout to developers than their competitors. I don't think EGS is even fractionally more "good" than Steam, but the consequences of their policies have tangible benefits to developers, `which is good.
And you're of course free to feel that exclusives are dirty. But I still question why. Yes, sure, they're taking choice away from you in those cases. But was that choice meaningful to begin with? Does this action actually harm you? (And, of note: if that harm comes from things like "my Steam friends refuse to join EGS, so I can't play with them" - then that's on them, not on EGS.) Not to mention that before this, nearly every game was a de facto Steam exclusive, and couldn't be found on any other storefront - as the developers didn't judge the effort needed to put them there as worth it due to the small customer bases. This is the near-insurmountable hurdle that makes things like exclusives necessary to bring real competition to an entrenched incumbent like Steam. If the vast majority of customers will always check Steam first, there is no way for anyone to overcome that hurdle without taking Steam out of the equation. And no, there are no "innovative features" that would overcome this, as buying the games is the core element here. Ancillary features are ancillary, and the chance of a single one of these convincing a significant amount of people to jump ship is essentially zero. Even at full feature parity and with some revolutionary feature that Steam doesn't have, Steam's massive install base and mindshare would still mean the vast majority of people would buy from them. The core issue here is that you're not accepting the realities of the power relations in play here, and are instead focusing on selective moral reasoning. Sure, exclusivity deals are a bit morally iffy. But are they more morally iffy than Steam by their sheer momentum (size, install base and mind share, ++) maintaining a de facto monopoly? I would say no, not really. Steam has no moral right to a monopoly. But accepting your argument means accepting that they do.
EGS is clearly playing a long game, and it's difficult to judge the outcome this early. But what we do know, which is indisputable, is that they are paying developers generously for (timed or not) exclusives, they are funding development, they are indirectly providing job and income security for workers in a highly volatile industry, and they are (again, indirectly) safeguarding the development of future games from these developers. It is of course entirely possible that some of these games would have made more money if they were on Steam from day one. That's a possibility. But all of them? Not a chance. So the net outcome is that more developers are getting paid more, have more job security, more creative freedom (less pressure to follow the latest trends to try to survive), and can think ahead a bit. This might not last whatsoever, of course. It might end tomorrow for all we know. But at least it has happened. And it is a good thing. Again, that doesn't make EGS "good" - they're a corporation, so by default their only interest is gettting money from people. But at least the actual real-world consequences of this set of actions is to the benefit of game developers and players alike.
All I'm saying is, in its current form, I don't find EGS attractive in any way, and I don't blame people who feel the same way.
These "exclusivity deals, guaranteed minimum payments to developers, free game giveaways, and other strategies to attract developers and customers both."
are not gifts from EPIC.
They had to make these arrangements otherwise NO ONE would use their underdeveloped platform.
These arrangements are straightly tied to "How many ppl will use EGS" = income
No arrangements = No one uses EGS = no income
No matter how you tried to make them sounded pretty.
All the things you have mentioned are expenses of EGS and their income cannot cover their expenses.
It is that simple.
The data just shown you how little 12% isn't gonna cut it to support its daily operations and the cost of necessary arrangements to attract developers and customers.
You're right in saying that the cost in computer resources is tangible, but if Steam costs you let's say 1%, GOG another 1%, EGS another 1%, XYZ Store another 1%, DEFGH Store another 1%... you know what I mean? Where do you draw the line and say no thanks to Generic Store 3957396? Choice is beneficial. My choice is to keep my ever-expanding list of games as organised and in one place as I can. If a game I want gets banned from everything other than EGS, or any new store I'm not registered for, it essentially denies me this choice.
And no, there isn't a finite list of implicit (not clearly expressed or visualised) needs. 500 years ago you would have listed totally different needs for your daily life than you do today. If people have only ever acted upon fulfilling their explicit (clearly stated) needs without using their imagination, we would still be shooting arrows at mammoths. That sounds all nice and rainbowy, but like I said, the average person is paying for products and services, not ideas. Also, there's zero guarantee that the system works the way Epic preaches, or that Epic's market share gain really does lead to more creative freedom. There's also the developer who may or may not increase salaries by a significant enough amount to keep their most creative employees. Some people like to say "if the cake gets bigger, the crumbs get bigger", but I see the exact opposite in the real world: as companies get richer, they get more exploitative and uncaring towards their employees, only increasing the wealth of the top leaders, not the company as a whole. With this perspective in mind, Epic is undergoing the underdog effect: people aren't buying from them because they are better, but because hating on the richer (and more seasoned) competition is fashionable. As for me, I have no reason to "fuel" any company with my choices. If one offers a product or service that I'm happy with, I'll buy it. That's it.
Not to mention that the most paying titles nowadays are esports games which are mostly developed using near zero creativity, so their revenues contribute very little to artistic freedom in general. That's just how things are. If you're the first, all you need to do is be there. I remember how crap the first smartphones were, but they evolved. Try to release an equally crap smartphone now. Nobody will buy it. ;)
There are deals happening all over the internet every single day. I have not noticed any difference since Epic launched their store. The hate is the result of paying publishers for timed exclusivity, which is a dickhead move. If they want exclusives, they should develop their own games. Microsoft and Sony have already learned this lesson, for the most part.
Their client app is inferior to Steam in every single way, just like all the other clients. But I have no problem with using Uplay or Origin to play their games. If Epic ever releases their own games that I want to play, I will install their client. Until then I see no reason to.
The comparison for Linux or MS is straight forward and only to be used in terms of people who use Linux even when it puts a crutch on them, or to say they are so anti-MS that they will fault their own productivity or experience just to be anti-MS. Their may not be a crutch on you, but in general underdeveloped and lacking features can result in this experience.
Epics interface is fine to me. I'm not a fan of steams. So that's preference to the individual.
Make a good and polished game, allow me to buy it wherever I want and I can pay full price at launch. But if they do bullshit like timed exclusivity (or a crappy port), I will buy it at a low price later. I still get to play it, but they barely get any money from it. Who loses more in that situation?
Remember the Metro dev, who said something like "if you do not buy our game on EGS, you will not get a sequel". One of the most pathetic statements I have heard.
That's also where your Linux diehard comparsion falls flat: I'm not denying myself anything. I'm choosing to avail myself of all options. The ones refusing to use EGS are the only ones denying themselves anything. I'm not - I use Steam and have nothing in particular against it. I can't say I particularly like it either - as an application it's quite a mess, but it does have some nice features, and covers the basics well. For my main use - as a game library and store? It's ... fine. The search engine is weird AF and the library takes a lot of work to organize sensibly. GOG Galaxy is far better there IMO. Of course their selection of titles is unmatched, and they have very good sales.
What I am is anti monopolies (whether actual or de facto), and I definitely don't like people blindly defending monopolies and presenting them and/or their controlling entities as virtuous - as is the case here. Steam, Valve and Gaben (increasing in mostly that order) are often treated as something so great, so good, so borderline holy that criticizing them is impossible, even heretical, and anyone doing so is terrible. We see that in every single thread covering EGS or something related to it. And those are the relatively moderate ones - you also have the ones who see not actively arguing for Steam being great as some sort of terrible transgression. No matter if EGS is a cynical corporation only out for our money - they obviously are, but so is Valve! - more cynical corporations fighting over customers is a benefit to those customers. To then see those customers vehemently defending one corporation's right to be their only choice? That makes me deeply sad, and worried for how these people relate to the powers affecting them in their day-to-day lives.
As gamers, we do not owe Steam, Valve or Gaben anything whatsoever. Do they deserve credit for the stuff Steam delivers? Barely. Most of the ideas implemented there are blindingly obvious (online games storefront, forums, cloud save backup, etc.). Some of them are good, and innovative - remote play (together), for example - but those are also niche features with relatively low use. But the crux of the matter: we have paid them for doing this. We have paid them a friggin' fortune. Gaben is a literal billionaire, and Valve's coffers are so fat they can afford to spend a decade without finishing a single notable game development project, instead cancelling everything. I guess they deserve some credit for bankrolling a push for VR, but if so, then Facebook does too (and yeah, vehement Steam fans do tend to hate Facebook to a similar degree in my experience). Valve have had far, far, far more than their due. All the while, most game developers struggle to make ends meet, studios go under with shocking regularity, the job security of people in the business is terrible, which in turn harms their phsyical and mental health and affects their families and friends, causing most people in development to change careers after shockingly short times, causing a constant loss of talent ... and the list goes on. So, when someone comes along and offers to pay developers better, even financing studios wholesale for a period of time, while offering me free games, an alternative storefront (=more sales and coupons), and still deliver the core of this competently? I see absolutely no reason to not take that offer. None whatsoever. If that makes me support a cynical corporation ... well, I've already been doing so by buying Steam games for the past decade and a half.
I'm not arguing that if I use one store, I won't use the other or can't use the other. I'm arguing EGS doesn't offer anything extra or equal to Steam beyond the ability to access Fortnite, and therefore I have no reason to use. I use Battle.net storefront for all Blizzard games, however, if they brought their games to Steam I would probably drop it. I don't find Fortnite to be a particularly good game, as battle royals don't particularly interest me, and they are basically a game mode in every AAA now.
The sign that you have bought in to the PR is obvious... The lower commission and the free games are the only way to attract developers/publishers to an underdeveloped new platform with a smaller userbase. You state that everything Gabe does is a holy grail in the eyes of Valve fans, well that's exactly how you reference Epic... as if they are world's equivalent of Robinhood. Tim can PR on Apple, MS, Sony, Valve, and brick and mortar all he wants, but at the end of the day that's where he is making his money.
At the end of day, pick the platform that works for you. I'm not here to change anyone's mind.
But that may just be me.
As for the Linux comparison: you're changing your argument as you go. You said that I, in choosing to also use EGS, was comparable to never-MS Linux diehards crippling themselves by consciously choosing away a more feature-rich option. I responded that I haven't chosen away anything. I use these features if I feel like it. Using EGS does not prevent me from doing so (except in the very few situations where a feature is directly tied to a game). Please at least have the decency to admit that your comparison didn't work, instead of trying to twist it into meaning something different from what you said.
And again: the entirety of your first paragraph here rests on the assumption that using EGS means not using Steam! I don't understand how hard it is to grasp that both can be used. Sure, I won't get to play my EGS games on the Steam Deck I have pre-ordered, but ... so what? I don't care much. I'm perfectly fine with playing only my Steam library in those cases - though if it's a game I'm particularly fond of I might buy another copy if it's cheap enough, or just find a way to play EGS games through Proton. But it's not a big deal. But ... you're using GOG. GOG Galaxy does all the organization for you. Every library, across PC and consoles. In one app. Shows where you own the games, lets you organize and categorize, launches them directly. It bypasses that problem entirely. No, it doesn't let you cross-shop, that's the one weakness.
Also ... are you claiming to notice 1-2-3% performance differences? If so, that's pretty impressive. Most of us aren't even close to that. I guess I'm lucky in that regard? Resorting to 'slippery slope' style arguments is also a surefire sign that you don't have much of an argument to begin with. Unless you know of dozens of alternative game launcher/storefronts that are on the cusp of launching? If not: let me know when this goes from being a rhetorical device to an actual problem. Sorry, but no. That's you denying yourself that choice. That is also obviously a choice, but it's your choice, not someone else denying it to you. And, of course, boycotting a store is entirely fine - I just find the reasoning for people boycotting EGS to be particularly selective and hollow. At this point, you're saying "I like choice, but mainly I like the freedom to make the same choice every time". Which is ... rather odd. Nah, sorry. Those needs are still pretty basic. Food, shelter, safety, social relations, something to keep our brains busy/entertained. There are of course many possible variations on and specific instances of these, but as you go more specific (I'd say "online storefront+library application selling and distributingcomputer-run games plus various other features" is pretty specific (going something like 'games' -> 'videogames' -> 'videogames sold online' -> 'videogames sold and distributed online' -> 'videogames sold and distributed online in an application' -> 'videogames sold and distributed online in an application that also has various secondary features' - when the innovations you're asking for is in those secondary features, it's pretty difficult to implement anything radical), the list of possible future innovations shrinks. Of course it might all take a radical left turn and change entirely, but that's quite unlikely. VR and its niche long-term appeal is a good example of this. Do you have an example of someone radically changing how these needs are covered that doesn't constitute inventing an entirely new medium? 'Cause that's pretty rare.
Yes, we now heat our food using electricity or gas, which is transported through massive wire networks or tubes, trucks, trains, etc. But we still heat our food. That's the base need. The changes are in method, not in effect. The same goes for games - we now buy them online and download them rather than walk/bike/drive/whatever to a store and pick up some sort of physical storage medium. Yet you're asking for something radically new - what would that be? What Steam did was not radically new, it was the systematic application of relatively obvious ideas by a company with the resources and content to make this stick. Yet you're asking their competitors to pass a much, much higher bar. Why? This seems to be a rather underinformed view of the games industry. Most studios are small. Sure, the huge ones take the vast majority of profits (and to a large extent, sales), and there's little reason to support these. EA or Activision is no better than Valve or Epic, after all. But for all the small ones? That 18% increase, or EGS buying a guaranteed minimum copies of their game might be the difference between them going bankrupt or not. These studios don't generally have well-off CEOs or the like. I'm not talking about pay raises in big companies, I'm talking about small companies staying afloat and being able to pay their employees at all. The EAs and Activisions of the world will be okay nearly no matter what (and the ways in which they mistreat their developers are generally not pay related.)
As for "most people are cynical" (yes, that's a paraphrasing of your first sentence) ... is that an argument for ... also being so? If anything, it's an argument for the opposite, no? It's also rather weird to somehow project the evils of predatory capitalism solely onto Epic, as if they are somehow worse than Valve in this regard. But they weren't the first. That was the entire point. Steam grew big due to exclusives. In particular, HL2 and its derivatives. Also, comparing EGS to a decade-old smartphone ... I still haven't seen any actual descriptions of how using EGS makes for a worse gameplay experience. I would honestly love to hear some.
For certain customers/areas/payment methods, the surcharge cost is quite a big add-on.
Like the Steam payment cards, steam takes a 10-15% loss
www.resetera.com/threads/steam-wallet-cards-cost-valve-10-15-of-the-price.107147/
ofc not including the lawyers/legal work to make different payment options (like their own cards)
www.resetera.com/threads/what-cut-do-valve-actually-take-from-devs-is-it-really-as-high-as-some-people-think-lets-find-out.109435/
edit:
Oh wait, they still charge higher processing fees directly to purchasing customers :)
www.epicgames.com/store/en-US/about