Epic CEO Tim Sweeney Is Very Excited About The Epic Games Store Losing A Ton Of Money

Epic CEO Tim Sweeney Is Very Excited About The Epic Games Store Losing A Ton Of Money
Screenshot: Epic Games

Epic is going to lose at least $US330 ($433) million as a result of all those Epic Game Store exclusives and free games. But on Twitter, Epic CEO Tim Sweeney considers this an investment and seems surprisingly excited about losing hundreds of millions of dollars.

This information was spotted and reported by PC Gamer from new court documents that have emerged from the ongoing legal fight between Apple and Epic. While these two big companies battle each other in court, we all get a new insight into the Epic Game Store’s financial situation. It’s not great!

Epic spent $US444 ($582) million on grabbing up exclusives and free games for the store. This money went towards a bunch of “minimum guarantees” for publishers and devs. These minimums were paid out to publishers regardless if a game sells well enough to cover it, which is why so many companies took Epic Game Store deals. A guaranteed bit of cash is better than a possible loss. For example, to get Control on the Epic Game Store as an exclusive Epic paid out $US10.5 ($14) million. If we look at Epic’s own 2020 end-of-year report and do some maths, we discover that players spent $US700 ($918) million on the Epic Games Store in 2020, but third-party games, the ones Epic made deals for, only accounted for $US265 ($348) million of that big number. So that leaves $US444 ($582) million in advances and minimums that Epic has yet to recoup.

According to Apple, in total, including pricey exclusives, free games, and all other expenses, the Epic Game Store will cost the Fortnite developer about $US600 ($787) million in losses by the end of this year, and that the store won’t become profitable until 2027.

Epic, in a rebuttal, spins this a different way. Its lawyers explained that this is all part of the plan. That this is just a big (VERY BIG) investment into growing the store and userbase rapidly. Epic also claims that even with its smaller 12% revenue cut of transactions the store will start turning a profit in 2023.

In response to IGN reporting on the massive losses, Tim Sweeney seemed fine, even excited about all the money Epic was losing. “That’s right!” said Sweeney, “And it has proven to be a fantastic success in reaching gamers with great games and a fantastic investment into growing the business!” He also tweeted a big ol’ infographic which looked nice but also didn’t include how much money Epic was losing on the store.

The ongoing legal battle between Epic and Apple started back in August 2020 after Epic quietly added in a feature to Fortnite that allowed players to buy in-game V-Bucks via its own payment system, bypassing Apple’s system and the phone maker’s usual cut. This is a big no-no and soon after doing this the game was ripped from both the Apple App Store and Android’s Google Play Store.

Since then it’s been a back and forth in court between the two companies. Epic says it and other devs should be free to sell their own apps and services on devices like the iPhone without Apple’s involvement. Apple says nah. And so the legal fight continues.

Comments

  • Of the 265 Million in third party sales, Epic is only earning 5% to 12% of that in sales commissions. $13 million to $28m in third party sales revenue for Epic.

    They would need to sell $3.7 billion dollars in third party titles to break even with 12% cut to recover $444 million.

    • They’re wasting all this money on exclusives that they could instead spend on making their storefront not shit instead. But hey, if they want to kick themselves out of the market, I don’t think many will be sorry to see them go.

    • Pretty sure thats not how it works. Its a guarantee, not a flat payment. Epic would be taking far more than 12%, at least from initial sales, to recover that amount. They certainly wouldnt be relying on getting it back from commissions. That makes absolutely no business sense whatsoever.

      To use Control as an example, they paid $10m for exclusive rights. If they relied on that 5-12% commission to recover that, they expect the game to sell $100-$200m on their platform alone depending on the commission. Thats insanity to rely on that just to break even needing 5m sales @$40. It sold 2m over all platforms and is widely considered a successful game.

      I would expect them to be taking far more than 12%, possibly even 100%. At least right after a games launch. When that guarantee is paid back, then yes they are only getting 5% to 12% in commissions, but until that point it will be far more. Thats how it will work.

      • For the bigger AAAs I can see some sales, but the smaller indie games like Ooblets that’ve dropped off the planet due to developer hostility more than the Epic deal itself? Whatever they’re paying these smaller developers is what’s bleeding them, since the indies overwhelmingly have had the worst PR approach when taking a deal from Epic, to the point where I (and others it seems) have lost interest in buying them on any platform. I wonder how they’d be doing if they cut the chaff.

        • Oh absolutely. I was just using a game thats been successful to show how it works. If that cant make the money back, what chance does a small game have? If you focus on the successful games, such as Borderlands 3, you wont see the flaws.

          But their model is based on buying the exclusivity then getting it back in sales. If they moderate the indies out it wont work. Their game base would just be too small for people to care. They NEED the smaller games to flesh out their library.

          What annoys me is that they could have been effective if they didnt try to buy their way to success. Their 12% model should have been enough. If they were genuine about putting pressure on Valve about commissions, that would have been walking the walk.

          If they had done that, and not bribed games to be exclusive, the haters wouldnt hate. I’m not a fan of exclusies myself, but understand there are times it works. Platform exclusives (think Gran Turismo), and looking after your own product (think Blizzard) are different to choosing one digital store over another on the same platform.

          Its a conscious choice to limit your market, and thats bad for everyone.

          • Exactly and with the indie studios who largely aren’t as experienced as the larger developers, the pitfalls in their business approach and releases makes it even more of a problem. While Epic does have to fill out their library, throwing money directly at unknown and unreliable developers to keep people busy while the next AAA release comes in doesn’t feel like it’s viable for the long term when the developers themselves handle it so badly. Nintendo doesn’t seem to offer incentives and plenty of indie games end up on Switch anyway.

            I’m perfectly fine with exclusives when they’re commissioned, i.e. Sony pays a studio for something to be made. That’s fine, that’s their right since they’re paying for it. My problem is when Epic sails in with a deal after other investors or Kickstarter funded the game as a non-exclusive, which breaks promises with the backers in a really disingenuous manner. That’s scummy on everyone’s end and I’m reluctant to trust any developer that’s engaged in that behaviour.

            As you said, the competitiveness on the fees alone should’ve helped them gain market share from Steam, but the other problem is Epic’s refusal to include the storefront features that Steam is expanding on (Steamlabs is really neat) and that’s my main reason for not liking Epic. I will forever be leery of a platform that’s been banning people for buying too many games during sales, not having a proper basket of shame, lack of reviews etc. It’s an extremely bad first impression. When it comes down to it, the price can as great as they like, but if the storefront is terrible, I’m not using it regardless of the free stuff or prices.

          • “If they had done that, and not bribed games to be exclusive, the haters wouldnt hate”

            Hah

          • “Their 12% model should have been enough.”

            12% of nothing is not the most attractive proposition.

        • For an indie, that guarantee is sweet incentive to mitigate risk of failure, but for games to be truly successful they still need Steam and Nintendo… EGS is not doing good promoting and supporting their exclusives post launch, besides giving them money.

          Hades found success after their EGS exclusive ran out.

          • “but for games to be truly successful they still need Steam and Nintendo”

            Yeah, which is exactly why EGS is paying.
            Games will never be successful on EGS if EGS never has a decent size user base.

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