The Epic Games Store gives away free games every week – often good ones – and yet the company has never explained how it managed to hand out 749 million copies without going out of business. Until now. New documents published as part of the legal discovery process for Epic’s major antitrust case against Apple were published last week, and between this and a series of tweets from Epic CEO Tim Sweeney, we get our best look at how the company isn’t doing that very throw away billions of dollars.
It doesn’t spend as much as you might think
According to Apple’s “Proposed Factual Findings” document credit to Eurogamer to spot this on the weekend), Epic Games is Losing money – hundreds of millions of dollars in “minimum guarantees,” it pays many developers to give away their games and constantly offer new ones to keep players coming back. That money also covers Epic’s infamous exclusivity deals, so it’s not clear how much goes into the free games alone.
Regardless, it’s a significant portion of a billion dollars that Epic loses here: $ 330 million, it seems. “Epic has pledged $ 444 million in minimum warranties for 2020 alone,” Apple’s legal filing reads. “That includes at least $ 330 million in unrecovered costs from minimum warranties only.” But both numbers are much, much less than those games’ retail value: $ 17.5 billion, if you do the math based on Epic CEO Tim Sweeney’s chart below.
Apple considers this to be “losing money,” but spending now to build a great, profitable business in the future is exactly what an investment is! It’s just as true whether you’re building a factory, a store or a game.
– Tim Sweeney (@TimSweeneyEpic) April 10, 2021
How does it pay just a fraction of a billion for both exclusives? and freebies, when the freebies alone should cost many billions? Sweeney revealed on April 10 that Epic doesn’t actually pay any fee per game, let alone the full amount: “Our free game giveaways are negotiated with developers, where we pay them an agreed-upon dollar amount, not per copy.”
Epic and Sweeney are willing to invest hundreds of millions of dollars in the platform
As you can see in Sweeney’s other tweet above, Epic doesn’t expect to recoup that money: the studio has deliberately set aside that huge pile of nearly half a billion dollars to entice developers, and the company thinks it’s working just fine. Sweeney publicly stated his support for these charges on Twitter last weekend: “[The Epic Games Store] has proven to be a fantastic success in reaching gamers with great games and a fantastic investment to grow the business! “
Theoretically, the constant stream of new games could keep more players using the Epic Games Store and maybe even end up spending their own money on games there. The company claims it can already be seen, as evidenced by the store’s rapid growth, by saying players have spent more than $ 700 million on the store, of which $ 265 million has been spent on games. not made by Epic.
Fortnite is a cash cow
Although we don’t know exactly how much Fortnite made for Epic, that’s almost certain a lot of Money: Epic made over $ 700 million on iOS alone in just two years, according to Apple’s application.
This is roughly how any company seems to disrupt an existing market.
It’s worth noting that while Epic Store loses $ 330 million, Epic still generated about $ 3.85 billion in revenue and $ 1.54 billion in gross profit, according to a recent court document (thanks to Fortnite). https://t.co/VZrbsFkyme
– Daniel Ahmad (@ZhugeEX) April 12, 2021
And while the game is no longer available on iOS due to Apple and Epic’s ongoing feud, Fortnite is still on a lot of other platforms, and it seems like a safe bet that it’s still raking in a lot of money everywhere else, which earns Epic income as it gives away games on the Epic Games Store.