Epic Sees 300M Loss with Online Store

Fighting Steam, the largest name in the digital video gaming business, the Epic Games Store always had its work cut out for it. As expected, the battle so far has been long and brutal, and recent reports have done nothing but consolidate that fact. According to Techspot, Epic has lost $454 million on their game store in the past two years alone. This would allow them to compete against their competitor, Steam, and in theory, would then allow the service to bring in a profit from 2023 onwards.

So, how does a store designed to sell games end up losing nearly a third of a billion dollars? There are two primary reasons, free game releases, as explored on many platforms, and Epic Game Store exclusivity. Free game releases are just what they sound like, in that Epic gives players on their store the ability to claim a rotating selection of free video games. Including major titles like Alien Isolation (April 2021), Rage 2 (February 2021), and Subnautica (December 2018), this process has been ongoing for some time. The caveat for Epic is that these games aren’t free for them, as it’s had to essentially pay the game publishers for each copy given away.

Game exclusivity on the Epic platform means that Epic has had to put down major money to guarantee that releases will appear only on their platform for a set amount of time. The game Control alone cost Epic $10.45 million, while in the fiscal year 2020, Epic was noted to have totaled around $444 million for exclusivity deals.

As for how they afford such enormous costs, the answer is one very well-performing title; Fortnite. Having reached over a billion dollars in revenue in May of 2020, Fortnite essentially acts as the cash cow that keeps Epic’s other efforts afloat. That said, complications revolving around Fortnite on the Apple and Google mobile stores might make a dent in this growth going forward.

Why does Epic Need a Store?

The major reason why the Epic Games Store, and others like the Origin and Bethesda stores exist is simple; to combat the effective monopoly of Steam. Essentially the oldest name in the business, Steam’s storefront first came online in September of 2003. Originally derided as an unnecessary idea, the convenience of Steam combined with growing internet speeds meant that online delivery soon exploded.

With Steam, users didn’t need to drive to the store to get the latest releases, and they didn’t need to worry about a lack of stock. Disk degradation was no longer a problem either, with users able to keep digital copies permanently and download them as often as they liked. It was a solution to a problem that most didn’t see coming, and Stream was in the right place at the right time.

Eventually, this led Steam to become the de facto home of online digital games. It grew to massive levels to the point where when the Epic Game store first arrived in 2018, Steam had taken home $4.3 billion in revenue for just that year. Just because Steam was the most popular, however, didn’t mean it was the best. Many aspects of Steam are frustratingly poorly designed, with features remaining broken for years. Combined with Steam taking 30 percent of game revenue and Epic taking just 12 percent, the advantages of a competitive market were made clear. Of course, this challenge in the digital space over existing platforms was hardly new.

Competition in a Digital Marketplace

Outside of video games, the competition of digital marketplaces has been a major factor in how the online age has taken shape. The most obvious example of this would be found in video streaming, which started slow but eventually surpassed the combined profits of both cable and satellite television. Hulu and Peacock are now often seen as preferable options, and they’re just the tip of the iceberg.

Also playing a major part in the digital market has been the development of online casinos such as Betway. With a wide selection of tables and even live titles like American and Multifire Roulette, new online opportunities lean on far greater convenience than their traditional offline routes. On a similar scale are online interactive experiences like crosswords and sudoku. While not on competitive terms with traditional experiences as video games are, such digital translations have opened up entirely new avenues of access.

The other major mainstream example could be found in music. While listening to music over radio waves is still popular, the arrival of services like Spotify and iHeartRadio have led to a massive systemic overhaul. Though the implications of these options on established forms of connectivity are complex for the medium, for fans and users, the advantages are too great to give up.

As for the Epic Game Store, it looks to be some time before the service becomes self-sustainable. Currently expecting to turn a profit in 2024, it’s going to be a few more years of struggle before the dominance of Steam might finally be challenged. Until that time, players can at least benefit from the free games that these and other systems offer, as we all add to our massive backlog of titles that we might never finish.

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