The gaming giant Epic Games may be set to lose at least $330 million in its battle to gain market share from Steam, mainly due to it offering exclusive games and free titles on its Epic Games Store. You heard me right, over $300 million in losses just from their exclusive titles. For nearly any other corporation or company in the world, that would spell disaster. Apparently hemorrhaging money is all part of Epic Games’ master plan for world domination.
Epic Games Major losses
According to a report released by Epic Games at the beginning of 2021, in 2020, PC customers on the Epic Games Store spent over $700 million of which third-party games represented 37% of the total at $265 million. Thanks to the current legal fight between Apple and Epic, we learned this week that Epic committed around $444 million to Epic Game Store exclusivity deals in 2020 alone. That is some serious cash.
The $444 million was spent on minimum guarantees. Essentially, these are advances paid out to developers or publishers for the right to release the game first on the Epic Games Store and then, a year later, release them on Steam. So, if you look at the $265 million dollars in spending by customers on third-party games and compare that to the $444 million spent on Epic Game Store exclusivity deals in 2020, something doesn’t add up. Outside of the Epic Games Store, they still have plenty of avenues to make money, even stretching as far as Fortnite Betting Sites.
The Epic business plan
You would think that these major losses would scare the top brass over at Epic Games, considering the danger it may have on the Epic Games Stocks but it doesn’t seem to be affecting them. In fact, in response to their projected losses on free games and exclusive titles, Epic CEO Tim Sweeney tweeted:
Speaking to Ars Technica back in 2019, Tim Sweeney spoke about their plans to compete with Steam in the PC marketplace:
“There are two ways to bring users into something. You can run Google and Facebook ads and pay massive amounts of money to them. But we actually found it was more economical to pay developers [a lump sum] to distribute their game free for two weeks… We can actually bring in more users at lower cost by doing all these great things for great people rather than paying Google and Facebook.”
How this may affect the court case
While this may be a drop in the bucket for a company that was valued at more than $17 billion last August after securing additional funding. It is certainly in the companies’ best interests for their senior leadership team to maintain an air of invincibility and attempt to convince the rest of the world that they are doing fine, especially during their current court case.
Epic has filed an anti-trust lawsuit against the tech company for kicking Fortnite off their App Store. This is more than a challenge over a single videogame, this is a major challenge to the entire walled garden ecosystem that Apple has built. Arguments that Apple have made public, show that they want to differentiate their App Store from the Epic Games Store. To do that they want to prove how unsustainable it is. The real issue is that Epic Games allows for in-game currency to be bought on their store without taking a cut. This could be a major blow to Apple.
As for Epic, again this seems to come down to the issue of cash, unlike the average company in the esports industry, Epic has a lot of money to burn. They can afford to spend hundreds of millions of dollars in the hope that their Epic Games Store might be profitable in a decade.