Epic is expected to lose at least $ 330 million to compete with Steam in the PC games market, a position the company’s management is taking.

The bitter fight between Apple and Epic is mainly focused on the mobile gaming scene and Apple’s control of the iOS App Store. But recent court filings in this case also gave the public a rare glimpse of how much money Epic is spending at the Epic Games Store (EGS) as it struggles to break into the PC market.

The preliminary numbers, as shown in the Proposed Facts and Law Conclusions document that Apple provided last week, show significant losses incurred and anticipated to the Epic Game Download Center, which launched in late 2018. Epic’s own documentation and certifications show a loss of $ 181 million for its store at 2019 and expected losses of $ 273 million in 2020 and $ 139 million in 2021.

You might think Epic is incurring those losses because the company has chosen to take only 12% of the revenue for third-party games (when the standard in the industry is a 30% commission on other digital storefronts). This does not appear to be the case because Epic, in its court documents, claims that 12% of the revenue was sufficient to cover distribution costs and allow more innovation and investment in EGS.

On the contrary, the main driver of EGS losses is the generous Epic program with minimal guarantees. These include prepayments that Epic has used to get many exclusives on its storefront and apparently also covers the free games that Epic provides to Epic Games Store users every week.

These types of transactions can be very costly for Epic; 505 game publisher games Controlling, Reportedly received more than $ 10 million in guaranteed down payments from Epic for its EGS game exclusivity. And during a game like Controlling Can cover that amount (which would require about 200,000 full price sales), Epic will likely fail to make up for many of the lesser-known exclusive offers.

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Epic also said last year:

There are now more than 160 million PC users on the Epic Games Store. Daily active users rose 192% to 31.3 million daily active players, and CCU usage peaked at 13 million players simultaneously this year (up from 7 million in 2019). The number of monthly active users increased in December from 32 million in 2019 to 56 million.

This rapid growth of players also increased purchases and playtime! In 2020, PC customers at the Epic Games Store spent more than $ 700 million, of which 37% was $ 265 million for third-party games. Last year, the Epic Games Store community played 70% of overtime, with a total uptime of 5.70 billion hours in 2020 compared to 3.35 billion hours in 2019.

We are making progress in bringing more titles to the store by engaging more developers and introducing their titles into the Epic Games ecosystem. The Epic Games Store has gone from 190 games in 2019 to 471 in 2020. We released 103 free games weekly that were a large part of the titles that made their way to the store. In 2021, we will rapidly expand the catalog of new titles available on the Epic Games Store by providing developers with EGS self-publishing tools and will publish details of these specific plans shortly.

According to the chart available, EGS users would have ordered more than 749 million copies of the free games in 2020. These games would cost billions of dollars if they were sold normally, even at low prices.

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Add it all up, and Epic ended up paying $ 444 million minimum guarantees in 2020, according to Apple’s court record (although that number could theoretically include future exclusives or free-to-play deals). In contrast, Epic announced last year that players only spent $ 265 million on all third-party Epic Game Store games combined in 2020. In court documents, Epic also said it had paid out over $ 700 million from third-party EGS developers. This indicates that Epic has only earned $ 95 million of its record share of EGS’s 12% revenue.

Spending $ 444 million on a minimum collateral in one year to earn only $ 95 million in a little over two years may not seem relevant. In fact, Apple notes that Epic has acknowledged that the incentives and investments it has made in trying to develop EGS will result in … at least $ 330 million in non-refundable costs from minimum guarantees alone.

But Epic Games lawyers made it clear, for their part, that this position is just part of the company’s financial plan, which initially wants to invest the maximum amount to provide the Epic Games Store with games and get the largest possible audience. So Epic Games thinks they can be profitable from 2023.

Moreover, when asked on Twitter about the bulk of this information, Tim Sweeney, president of Epic, confirmed it. In the statement, Epic is expected to lose at least $ 330 million in its battle for market share on Steam, mainly due to offering exclusive games and free titles on the Epic Games Store, he replied: It’s true! And it has proven to be a great success in reaching players with great games and a great investment in growing the business!

Epic doesn’t spend all of that money for fun. The publisher sees temporary exclusives and free games as the best way to convince PC gamers to give the new Epic Games Store a chance.

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There are two ways to entice users to something, said co-founder and CEO of Epic Games Tim Sweeney in 2019, right after launching the Epic Games Store. You can run ads on Google and Facebook and pay them big bucks. But we actually found paying developers cheaper [une somme forfaitaire] To ditch their game for free for two weeks … we can actually win more users for less by doing all these goodies for amazing people instead of paying Google and Facebook.

Resources : Airtight documentAnd the Epic gamesAnd the Tim Sweeney

And you?

What do you think about the Epic Game Store?
What do you think about Steam?
Are you a fan of games on mobile phone, PC or others?
What do you think of the company’s strategy for paying developers? [une somme forfaitaire] To distribute their game for free for two weeks instead of running ads on Google and Facebook and paying them huge sums?

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