In its legal fight with Steam, Epic Games has been spending the big bucks. From free game offers to exclusive sign-in deals with third-party developers, Epic could effectively attract customers towards its platform, however, it cost a lot. Details given in Epic’s court filings in the lawsuit against Apple reveals a $181 million loss in 2019 and $273 million in the year 2020 on the Epic Games Store alone.
Epic Games and Apple’s legal fight is continued since last August. Previously, Apple planned to pull off Fortnite from the App Store following an alternative payment method introduced by the developer to avoid App Store’s 30% cut. While preparing for the next trial, scheduled for May 3, 2021, both Apple and Epic have filed their respective “Proposed Findings of Fact and Conclusions of Law,” revealing some interesting data.
In 2019, the Epic Games Store (EGS) lost about $181 million, but in 2020, while the expected loss is even more which is about $273 million. As for the current year, the projected loss is expected to cut 2020’s figure by half, to around $139 million.
To compensate for the three-year losses, about $600 million, according to Apple, it will take Epic Games at least six years. In contrast, Epic forecasts that it will soon become profitable, in 2023. The “EGS’s 12 percent transaction fee is sufficient to cover the variable costs of running EGS, including payment processing, customer service, and bandwidth,” Epic reported.
The reason behind these losses of the company is related to its timed exclusive deals. The filing shows that Epic Games paid game developers $444 million last year in minimum guarantees. A minimum guarantee is an amount paid in advance to a developer or publisher that agrees to make it’s game a timed-exclusive at the EGS. One such instance is Epic’s payment of $10.5 million to Digital Bros for 1-year exclusivity of Remedy’s control in its store.
Epic Games generated $700 million as revenue from EGS last year. However, only $265 million were from third-party games. When comparing these figures to the $444 million from minimum guarantees, the exclusivity deals seem to pack quite the punch in Epic’s finances.
The filing also provided details that “the incentives and investments it has made in an attempt to grow EGS will result in ‘unrecouped costs’,” from which $330 million are from minimum guarantees. This amount suggests that many games didn’t break in fact.
Moreover, the company states that all this spending is part of its business plan. The developer expects that it is nothing like losing money, it is investment. When someone considers the Epic Games Store is just 3 years old and already has 160 million registered users and 56 million monthly active users, Epic’s plan might be working effectively.