Epic Games, the store is at a loss, perhaps in surplus in years

Epic Games, the store is at a loss, perhaps in surplus in years

Epic Games

Epic Games is still losing money on the store side. The digital store, launched to compete in a market where the major and non-major publishers are already present (such as Electronic Arts and Ubisoft) is not generating profits and most likely, according to the documents viewed during the trial of the creators of Fortnite against Apple, this situation will last for several more years.

Madrid, Spain - August 15, 2018: Teenager playing Fortnite video game on PC. Fortnite is an online multiplayer video game developed by Epic Games Let's go in order. In the papers analyzed by the State of California for the lawsuit still pending, Epic Games claims to have injected about 500 million dollars into the coffers of its store. This is a monstrous figure, probably the result of some decisions such as the exclusivity of Ubisoft games (not present on Steam) and the client infrastructure, such as cloud saves, multiplayer and so on. In 2019 the losses amounted to around 181 million dollars, while in 2020 they increased to 273 million dollars. Data relating to fiscal year 2021 is still missing, but the figure reached in the previous two years amounts to approximately 444 million dollars, with a further loss of another 191 million expected just for this year. A money haemorrhage that will not stop for a very long time.

Epic Games, at least according to some documents presented in the trial, expects to make a profit. When? in 2027. This would mean another six years for Tim Sweeney and associates before we can see, at least in a small part, an economic return from the store. This is obviously not a state of health of the company, which continues to bill anyway. In fact, its revenues come from Fortnite, the royaltes for the Unreal Engine and above all for a series of third-party services dedicated to development: the executive board has in fact acquired, over the years, several companies that produce different tools, thus allowing the entry of secondary earnings.

Clearly Epic Games will aim to monetize its store as much as possible. Over the years, however, it is not excluded that something could change. Maybe the policy of free games every week could change into something different, as well as maybe they could increase the royalties for titles not developed with proprietary tools and in any case published on Epic Games. Certainly a thorny situation, which will take on more defined contours in a not too distant future.

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Epic Is Losing An Astonishing Amount Of Money Securing Games For EGS

The Division 2

Massive

Epic knew they’d be going through the X-ray machine for its case against Apple, and now some new, rather eye-popping figures have been released showing just how much Epic is losing in order to build up a game base for the Epic Game Store.


What’s shown in the chart below is Epic giving games a guaranteed minimum payout for being on the store, and then…failing to hit that minimum in almost every instance.


Of all the games listed there, only two made money past the minimum, Dauntless and Satisfactory, and only a tiny amount.


But looking at the shortfalls, some of these are just massive, like Metro Exodus being $22.2 million shy of its minimum guarantee and The Division 2 being $24.5 million under. The higher profile the game, the higher the guarantee was likely to be, and the bigger the misses were if they didn’t hit that mark.


Epic has repeatedly said they expect to lose money on the Epic Game Store for a while in order to establish it in the market. A linked report says that Epic has sunk $500 million in total into the Epic Game Store so far, and does not expect to be profitable until 2027, almost six years from now.


'Epic Games Store is unprofitable and not comparable to the App Store' Apple’s lawyers said, 'and will not be profitable for at least multiple years, if ever.'


They go into more detail:


'Epic lost around $181 million on EGS in 2019. Epic 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.'


So yes, it is these minimum guarantees that are costing them a fortune, and as we can see from that list, getting above those guarantees is proving to be almost impossible for them. Again, Epic views this as simply “investment” and they know it will take time to become profitable, and yet for as big as Epic is, and as much money as Fortnite and Unreal rake in, it’s not a certainty this will pan out in the long run. But I can’t see Tim Sweeney giving up either.


Epic has always been in a precarious place with this Apple case, but it’s fascinating to watch their inner workings laid bare in an industry so full of secrets. Much more to come, I imagine.


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