To take advantage of Steam, Epic Games has spent the past two years shelling Fortnite money at the Epic Games Store. 100 exclusive deals And give up Free games every week. We knew Epic was spending a lot of cash to get customers to its store, but it didn’t have many details yet. Thanks to Epic’s big legal battle with Apple, this week we learned that Epic committed nearly $ 444 million to exclusive deals for the Epic Game Store in 2020 alone. Phew.
More precisely, this is $ 444 million on “minimum guarantees” for games that are released on the Epic Games Store but stay out of Steam for a year. A “minimum guarantee” is just another way of indicating an advance: This means that Epic guarantees a publisher a certain amount of money whether or not its game has already sold enough to cover it. For example, put out Epic $ 10.45 million for Control.
in that Year-end report, Epic said gamers spent $ 700 million on the Epic Store in 2020, but sales of third-party games accounted for only $ 265 million of that spending. So, the $ 444 million in advances made to third-party developers is nowhere near recoverable. Some of these deals are definitely for games that will be released in the future, but as per Apple’s knowledge, Epic would eat “at least $ 330 million in non-refundable costs from minimum warranties alone” if you were considering the 2019 deals as well.
Regarding how much the Epic Game Store will lose in total by the end of 2021, taking into account exclusivity and all other expenses, projections are to be less than $ 600 million. Just a little money spent, then.
These estimates come from Apple’s (very warm) summary of the arguments it will bring to court next month as it defends its policies in the App Store and iOS against Epic’s antitrust complaint (I have Download the PDF here). As part of its defense, Apple’s army of attorneys wants to show that the Epic Games Store is incomparable to its iOS App Store, and so it has included everything Epic has said about how not winning the Epic Games Store is.
Citing deposits from Epic Games Store VP, GM Steve Allison and Epic VP business development Joe Kreiner, Apple says Epic lost $ 181 million at the Epic Games Store in 2019, and forecast a loss of $ 273 million last year, and expects another loss of $ 139. Dollars. Million this year. Additionally, the Epic Games Store will need an estimated $ 600 million refund before it will be profitable overall. Apple notes that Epic doesn’t think this will happen until 2027.
In his new file (PDF here), Epic puts a happier face into its business plan, saying it expects the Epic Games Store to start making annual profits in 2023. What Apple calls “losing money”, Epic might call “investing money.” Epic says all this spending is part of the plan, and a 12 percent revenue cut will ultimately be enough to maintain the store, something it has been saying since it launched at the end of 2018.
“EGS is not yet profitable in its current scope and development stage because it has incurred the costs of marketing and user acquisition to gain market share,” the Epic file said, quoting CEO Tim Sweeney.
Other fun things Epic and Apple have to say about each other
All this excitement between Epic and Apple ended with the way transactions are handled on iPhone and iPad devices. Apple gets developers approval to sell iOS apps on its app store, and also mandates the use of the payment processing system for in-app purchases, giving Apple a 30 percent revenue cut. Epic says this is unfair, arguing that Apple and Google have all the power when it comes to smartphones, so developers have to pay their fees if they want to create successful mobile apps. Epic wants to accept money from Fortnite iOS players using its payment processor, bypassing Apple’s (which it is best known for) fees. He did without permission To start this entire battle), while Apple wants to continue to receive 30 percent of Fortnite’s revenue on iOS.
Epic has bigger plans than Apple’s fee overrun in Fortnite. It wants to put the Epic Games Store on iPhones and sell mobile games with its own pay system, and to compete with the App Store itself, and she hopes US courts will rule that it would be anti-competitive for Apple to stop it.
Epic argues that iOS developers cannot innovate and provide the security features they want due to Apple’s arrogant policies, and Apple has spoken of not winning the Epic Games Store in part to attack the notion that Epic is already doing these things. Apple’s lawyers wrote (echoing large parts of Reddit): “By its own admission, the Epic Games Store – two years after its launch – is missing” significant “features.
In a mostly revised section, Apple calls “significant security breaches involving EGS,” and may refer to A. 2019 breach Fortnite. It also says that Epic’s customer support team is inferior to the Apple team, citing an internal email sent by Sweeney asking “what happened with the community team” that was supposed to provide customer service to people who complain online. Sweeney wrote, “I saw nothing.” “Literally zero, while we’re bombarded endlessly with claims of problems that Epic doesn’t answer.”
During the trial, it may also appear that Epic is not making developers use their payment processing for in-game purchases It Shop. This is true of Ubisoft games at the Epic Games Store, for example, which have their own in-game transaction system. Apple does not want the court to think the App Store and Epic Games Store are the same, saying in-app purchases are comparable Part of the iOS platform, And not just some of the store’s features, and that the first iPhone didn’t even allow third-party apps (read: You must thank us!).
Throughout the document, Apple more or less says: Epic, your store is a fire pit money, all players are angry with you, and if we let you escape, you have caused security breaches on our phones. You need our App Store to make $ 700 million in Fortnite revenue on iOS, unfaithful geeks!
I doubt the comparisons between the Epic Games Store and the App Store will be a big part of the case, after all. Epic’s problem with Apple is not Just She runs a store with a mandatory fee. Epic’s complaint is that Apple is making this store and in-app purchase system inevitable on a large portion of the world’s smartphones. This makes it an antitrust issue, in Epic’s view.
Part of Apple’s refutation is that Microsoft and Sony are doing the same thing with Xbox and PlayStation. No, it’s not the same, Epic says, because game consoles “don’t include general computing features like smartphones,” they’re not very portable and don’t connect to cellular networks. “Smartphones are important platforms for developers,” says Epic, and since many of them are iPhones, developers have no choice but to abide by Apple’s rules. This is not true, Apple says, “consumers can move away from iOS devices to Android devices,” and a lot of people play Fortnite on multiple platforms, so it is actually he is competitor.
Companies raise many points and counterpoints in these latest filings, which consist of about 500 pages together. For example, Apple says again that Epic tried to negotiate a side deal with it (which means that the Epic open platform is actually self-serving), and Epic accuses Apple of burying competing apps in the App Store search.
Contrary to my expectations, Apple is the most aggressive of the two documents, which makes it the most interesting. Here are some tidbits from Apple’s interpretation of the evidence:
- Average Fortnite users decreased per month between 2018 and 2019, and Epic noticed when #RIPFortnite was trending on Twitter. (See the developers hear you. Then they develop detailed plans to sue Apple.)
- Epic thought Fortnite could be revitalized by turning it into a platform for creators, but felt that platform fees, such as App Store fees, might hinder the plan.
- Epic described its plan to go after Apple and Google as “Project Liberty”. Sweeney was “in the loop” on that “100 percent”. (I mean, he’s clearly tweeting about it all the time.)
- 100-200 Epic employees participated in “Project Liberty”.
- Epic realized that audiences wouldn’t necessarily sympathize with her when she defied Apple’s rules, and was concerned that she would look like “bad guys.” I paid a public relations firm $ 300,000 to work on Project Liberty.
- Epic has made more than $ 700 million just through Fortnite transactions on iOS. (This is one reason why Epic Games Store losses are not such a big problem.)
Epic and Apple go to court on May 3. It must be fun! Journalists will not be allowed into the room due to the Covid-19 restrictions, but there will be live voice.
This article was updated April 10, 2021 to add more details about the filings and the case.