In an attempt to grow its own Steam-like marketplace, Epic Games has spent the past two years throwing money at the Epic Games Store by securing over 100 exclusive deals and giving away free games every week. According to a recent report which surfaced thanks to the ongoing Apple versus Epic lawsuit, Epic spent $444 million on Epic Game Store exclusivity deals in 2020 alone.
This $444 million includes games that released on the Epic Games Store and stay off Steam for at least a year after release. Epic calls these deals “minimum guarantee” and refers to select title deals where Epic guarantees publishers a certain amount of money after the deal whether or not their game actually sells enough to cover the cheque. In short, Epic puts down money to secure the game’s release on its marketplace.
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Every month, Epic is losing money by signing these deals with publishers. Apple says that in 2019, Epic Games lost $181 million on the Epic Games Store alone and projected another loss of $273 million in 2020. In addition, the company projects another $139 million will be lost this year by securing even more projects for the store.
That is almost $600 million that the Epic Games Store has costed Epic since its rollout in 2019. As for the return, the company says players spent $700 million on the store alone in 2020 but third party games accounted for only $265 million. The remainder is advances to third-party devs which Epic might never recoup. By the end of 2021, the company is projected to have lost shy of $600 million when factoring in exclusives, hosting and other expenses.
But while these amounts may seem high, Epic is not worried at this point. While Apple has called out Epic’s business approach as “losing money”, Epic says it is rather “investing money”. They claim that the losses and expenditure are both parts of a plan to grow the Epic Games Store into a sustainable model. Epic says that its 12% revenue cut will eventually be enough to keep the store profitable but the road to get to that point is going to cost them money.
“EGS is not yet profitable at its current scale and stage of development because it has front-loaded its marketing and user acquisition costs to gain market share.”
Of course, Epic is not worried at this point either. Fortnite rakes in millions in revenue every day. Even if the game’s popularity is dwindling at the moment. The free-to-play game has made Epic Games over $700 million in iOS microtransactions alone. Whether or not Epic Games will suffer down the road for all this overspending and lack of Fortnite support on iOS is still yet to be seen. The legal battle is still ongoing between the two companies after Epic launched its #RIPFortnite campaign last year and the game was pulled off the App Store.