The price of taking on Steam - Epic Games loosing money with EGS according to Apple

[Thaldor]

Summary

Epic Games vs. Apple has brought out another interesting facts about Epic Games; How much Epic Games is loosing money on exclusives to combat Steam. According to Apple Epic Games has put $444 millions into exclusives only in 2020 alone and in the end-of-the-year report Epic stated that the total sales of EGS in 2020 have been $700 millions from which $265 millions came from third-party sales. With simple math that is minimum $135 millions losses from exclusives since that $265 millions includes also non-exclusive titles. According to Apple Epic Games has made $330 millions of losses with exclusives in 2019-2020.

 

Quotes

Quote

 More precisely, that's $444 million on "minimum guarantees" for games that release on the Epic Games Store but stay off of Steam for a year. A "minimum guarantee" is just another way to refer to an advance: It means that Epic guarantees the publisher a certain amount of money whether or not their game actually sells enough to cover it. For example, Epic put down $10.45 million for Control

 

In its end-of-year report, Epic said that players spent $700 million on the Epic Store in 2020, but third-party game sales only accounted for $265 million of that spending. That $444 million in advances to third-party devs isn't close to being recouped, then. Some of those deals must be for exclusives releasing in the future, but according to Apple's learnings, Epic is going to eat "at least $330 million in unrecouped costs from minimum guarantees alone" if you also consider 2019's deals. 

 

Tim Sweeney rushes to state that Epic sees these losses as investments and costs to gain market share and that instead of Apples calculated year 2027, EGS as a whole would turn up profitable in 2023. And on that note Apple estimates the whole EGS has made around $600 millions in losses by the end of 2021 from the beginning. But According to Tim Sweeney, all of this is a success.

 

 

My thoughts

Like probably any sane person I didn't think Epic was going to make profits with EGS for few years and that those exclusives would be expensive. But with AAA jun... games and huge titles I didn't think they would be sinking that much and dipping into the red that much. So not really a surprise but the scale is a bit surprising, like I was thinking EGS making losses with exclusives since many indie titles probably generated a lot of flak and didn't sell that good because broken promises and so on but those big titles like Metro, Borderlands, Control and so on would cover a lot of those small losses.

 

But these numbers must be taken with a salt crystal lamp instead of grain of salt, after all these have been collected and made for a court case and not just to boast with success.

 

Sources (used to write this)

PC Gamer

 

Further reading:

IGN

YongYea's video report

[SorryBella]

I have to say, its all on EGS fault. Instead of fleshing out the store side (they still dont support credit cards in SEA by the way, what the fuck), they really want that freeloaders traffic. Talk about self-harm.

[Fatih19]

4 minutes ago, SorryClaire said:

I have to say, its all on EGS fault. Instead of fleshing out the store side (they still dont support credit cards in SEA by the way, what the fuck), they really want that freeloaders traffic. Talk about self-harm.

Instead of making the store as feature-rich as our competitor, we're just going to pay ludicrous amount of money to make games exclusive. What an idea.
As for credit cards in the SEA, eh. I appreciate their integration with various commonly used local payment method in my region.

[Stahlmann]

It's funny how blind the decision makers actually are. Instead of making their store better (or at least competitive) in terms of features, UI, etc. they invest millions into stupid exclusivity deals that only throws negative press their way in most cases.

[Mark Kaine]

7 minutes ago, Stahlmann said:

It's funny how blind the decision makers actually are. Instead of making their store better (or at least competitive) in terms of features, UI, etc. they invest millions into stupid exclusivity deals that only throws negative press their way in most cases.

I'm pretty sure that's on purpose,  they want to sucker people in, with the least possible amount of "pro consumer" stuff... 

 

I'm sure they'll improve the store over time but only as much as absolutely necessary. 

 

 

And also they don't care about "bad press" ,all news is good news in this case,  that's just how market, and mind share works... and people don't care either,  they care about "free games" though. 

 

 

I mean it's a bold strat and I don't know if it'll work, but it's really extraordinarily bold and that's why it'll may actually work out. 

 

 

 

 

 

[Dabombinable]

I only use EGS for the free games so...eh.

[RejZoR]

I only use EGS for free games too. As for exclusives, I just waited for Borderlands 3 to come to steam and bought it there. I just don't want to use EGS really. Steam and GOG are enough. Hell, even Origin is a massive annoyance as is and I only use it for Battlefield, Dead Space and Need for Speed games. Outside of that I often don't even install it.

[leadeater]

40 minutes ago, Dabombinable said:

I only use EGS for the free games so...eh.

Not even that for me lol

[Stahlmann]

1 hour ago, RejZoR said:

I only use EGS for free games too. As for exclusives, I just waited for Borderlands 3 to come to steam and bought it there. I just don't want to use EGS really. Steam and GOG are enough. Hell, even Origin is a massive annoyance as is and I only use it for Battlefield, Dead Space and Need for Speed games. Outside of that I often don't even install it.

Yeah it's already annoying to have so many launchers. In my case it's steam for most games, Battle.net for Diablo, Uplay for Assasins Creed, Origin for Battlefield, GOG for Witcher/Cyberpunk, etc... I'm at a point where all the different games i played recently needed their own launcher.

 

There was GOG 2.0 that promised to bring all the different clients together and launch all your games from one app. But you still have to run ALL these apps in the background if you want GOG to launch these games.

 

I really try to get everything on steam and avoid the other platforms as much as possible. The only one of these that is allowed to automatically launch on my PC startup is steam. The main reason why i have games on the other platforms are because either they are simply not available anywhere else or i bought a key online and didn't watch out for what store it was.

[Fatih19]

1 hour ago, RejZoR said:

I only use EGS for free games too. As for exclusives, I just waited for Borderlands 3 to come to steam and bought it there. I just don't want to use EGS really. Steam and GOG are enough. Hell, even Origin is a massive annoyance as is and I only use it for Battlefield, Dead Space and Need for Speed games. Outside of that I often don't even install it.

Not even free games for me because they don't even have a Linux client lmao. Yeah I waited a year for Afterparty to come to Steam.

[TetraSky]

No surprise there.

Fortnite is losing momentum since it peaked in 2018, so they no longer have unlimited resources to throw around, yet they act like they still do with these exclusives that they keep getting.

[Taf the Ghost]

Steams rates weren't high. They have always been lower than Physical. Competition only changed a bit of cost structure, and that had more to do with keeping the bigger publishers happy. The frank answer is notice everyone moved over to Steam after the great Launcher Bubble? Maintaining a CDN and Launcher service isn't free. In fact, it's kind of expensive.

[Taf the Ghost]

It should be noted, Epic has made it fairly clear, without outright saying it, that EGS is basically already on the glidepath to just existing. They don't care about competing with Steam. They knew that failed a while ago. What they're upto is Platform & Infrastructure built with-in UE5. I.e. they're just going to put their cut of the purchase inside the games rather than the front-end.

 

EGS was always an example of a company having a massive pile of cash attempting to roll it into other products and basically seeing what sticks. EGS basically didn't stick. Backside infrastructure with UE5 should. That's where the real money will be.

[PCGuy_5960]

4 minutes ago, TetraSky said:

No surprise there.

Fortnite is losing momentum since it peaked in 2018, so they no longer have unlimited resources to throw around, yet they act like they still do with these exclusives that they keep getting.

I think people are underestimating how popular fortnite still is. Sure, its popularity has plummeted among people over the age of 15 (outside of competitive players), but there are tons of little kids who play fortnite religiously and spend all the money they get on vbucks, perhaps even more than in 2018. Especially the past couple of months with most of the game's content being skins from popular movies/shows/artists, their revenue is as good as ever.

[Zulu-Cheese-Alpha-IV]

Only used it for free games and most of them I have not played in several months.

Come to think of it, EGS is not even installed at the moment on my 2 weeks fresh Windows 10 install, forgot it existed.

[Brooksie359]

1 hour ago, PCGuy_5960 said:

I think people are underestimating how popular fortnite still is. Sure, its popularity has plummeted among people over the age of 15 (outside of competitive players), but there are tons of little kids who play fortnite religiously and spend all the money they get on vbucks, perhaps even more than in 2018. Especially the past couple of months with most of the game's content being skins from popular movies/shows/artists, their revenue is as good as ever.

The revenue has declined im pretty sure the last time I checked. That being said it's still over 1 billion dollars so can't say it's a small amount of money they are making on fortnite still. Honestly I don't think the game will ever really go away just like games like csgo or league of legends. Sure the popularity might fall but not to zero. Multi-player games have incredible replay ability which is why they are so popular and because the fortnite is free it is easily accessible to all while also having good ways to monetize it. 

[icezolation]

I kinda get that aggressive marketing has to be done to meet your competitor(s) (Steam, GOG) eye to eye... but as far as I can see, Epic didn't invest anything for developing their store front and launcher.

 

Thinking of all the people who are grabbing the free games, defending the store by saying 'Of course Steam has more features, it's been out there for so long!', then seeing Epic playing their exclusivity-deal bs - well, the numbers of loosing money are not surprising.

 

I'm all for competition by the way. But that's not how it should be done.

[jagdtigger]

3 hours ago, Stahlmann said:

GOG for Witcher/Cyberpunk, etc..

Actually you dont, game starts fine without it unlike the other launchers.....

 

As for the epic (fail)store i dont use it and mever will.

[lewdicrous]

So, if I'm not mistaken:

1. They made people hate them because of exclusives.
2. They made their wallets hate them because of exclusives.

Sounds like a sound business plan to me.

[Zodiark1593]

3 hours ago, Stahlmann said:

Yeah it's already annoying to have so many launchers. In my case it's steam for most games, Battle.net for Diablo, Uplay for Assasins Creed, Origin for Battlefield, GOG for Witcher/Cyberpunk, etc... I'm at a point where all the different games i played recently needed their own launcher.

 

There was GOG 2.0 that promised to bring all the different clients together and launch all your games from one app. But you still have to run ALL these apps in the background if you want GOG to launch these games.

 

I really try to get everything on steam and avoid the other platforms as much as possible. The only one of these that is allowed to automatically launch on my PC startup is steam. The main reason why i have games on the other platforms are because either they are simply not available anywhere else or i bought a key online and didn't watch out for what store it was.

I pretty much stick to GoG as the games don’t complain about being offline all the time, or a game I want to play single-player outright stop working due to “needing” a multi GB update. 
 

I don’t even use the launcher. I just downloaded the standalone installs. I’d really love for more PC titles to go standalone as well. Some of my favorite games regrettably are only available on Steam (or console). 

[Giganthrax]

I like EGS for the free games. It's not a good store by any stretch, but it's a million times better than Uplay, Origin, Bethesda launcher, and that horrible Microsoft Store.

 

I even bought Borderlands 3 on EGS at a massive discount.

 

I hope they wont fail too hard. I want them to keep the freebies coming.

[Brooksie359]

32 minutes ago, Giganthrax said:

I like EGS for the free games. It's not a good store by any stretch, but it's a million times better than Uplay, Origin, Bethesda launcher, and that horrible Microsoft Store.

 

I even bought Borderlands 3 on EGS at a massive discount.

 

I hope they wont fail too hard. I want them to keep the freebies coming.

I would say that is highly debatable. EGS is really not better than orgin or basically any launcher. Its simply bad and doesn't compete well with steam and gog. It really has nothing going for it over any of the other mediocre launchers other than exclusives and free games which isn't really an indication of the quality of the launcher. 

[Mark Kaine]

1 hour ago, jagdtigger said:

Actually you dont, game starts fine without it unlike the other launchers.....

 

As for the epic (fail)store i dont use it and mever will.

I would actually love to try out fortnite just for the heck of it, but then I'm reminded i would have to install the epic launcher... so it'll just never happen lol...

 

 

[wanderingfool2]

1 hour ago, lewdicrous said:

So, if I'm not mistaken:

1. They made people hate them because of exclusives.
2. They made their wallets hate them because of exclusives.

Sounds like a sound business plan to me.

Getting exclusives is a sound business plan (assuming you can ride it out).  The argument you proposed glosses over cause and effect.  Loss leaders exist for a reason, just like exclusives exist for a reason.  The way to look at it, would there have been the $265 million in sales if it weren't for the exclusives (otherwise who would be incentivized to go with EGS)

[lewdicrous]

Just now, wanderingfool2 said:

Getting exclusives is a sound business plan (assuming you can ride it out).  The argument you proposed glosses over cause and effect.  Loss leaders exist for a reason, just like exclusives exist for a reason.  The way to look at it, would there have been the $265 million in sales if it weren't for the exclusives (otherwise who would be incentivized to go with EGS)

I know there are nitty gritty stuff, that was just meant to poke fun at their expense, I guess.

 

It's not that much of a lose if their investors are happy.