Epic committed $444m to exclusives in 2020 – Apple claims store won’t be profitable until 2027

With Epic Games Store (EGS), the Fortnite-creator is undoubtedly targeting Steam’s market dominance on PC. But the store has now been drawn into the legal fight between Epic and Apple as well.

In court papers for an upcoming hearing, spotted by PC Gamer, Apple uses EGS as an example of how much time, money and effort go into to creating a successful online store, a fact that it’s using as part of its defence against Epic’s claim that Apple’s 30 per cent fees amount to a monopoly.

EGS charges just 12 per cent, undercutting both Steam and Apple significantly, and so becoming a weapon in Epic’s arguments that the industry-standard 30 per cent rate is outdated for such stores.

However, Apple argues that EGS’s recent huge losses undermine that argument. To which end it has released at idy summary of figures. Apple stated that:

EGS lost $181m in 2019
EGS is projected to lose $273m in 2020
EGS is projected to lose $139m in 2021

The large majority of those losses come from ‘minimum guarantees’ as part of exclusivity deals. Effectively Epic promising that developers/publishers will earn out a guaranteed minimum from selling their game on EGS rather than Steam.

Epic committed $444m in minimum guarantees in 2020 according to Apple’s submission. While some of those will have been met from actual sales, Apple says Epic has paid out $330m in ‘unrecouped costs’ to date.

It’s not surprising that Epic has pumped hundreds of millions of dollars into setting up EGS as a competitor to Steam over the past few years. And it’s notable that a large amount of the money spent on doing so has come from Fortnite profits and gone to a wide variety of developers and publishers in the industry.

And such shifts in finances look set to continue. With Apple claiming the store will not be profitable until 2027, although Epic has claimed that date to be 2023 in its own submission.

Epic CEO Tin Sweeney noted in a tweet in reply to news of the ‘losses’:

“That’s right! And it has proven to be a fantastic success in reaching gamers with great games and a fantastic investment into growing the business! … Apple spins this as “losing money”, but spending now in order to build a great, profitable business in the future is exactly what investment is! It’s equally true whether you’re building a factory, a store, or a game.”

Is any of this really relevant to the bigger picture of whether Epic will succeed in breaching Apple’s walled garden of in-app purchases? Most probably not, that battle is set to run and run, with some kind of compromise being the most likely outcome.

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