• Light/Dark
  • Ever wanted an RSS feed of all your favorite gaming news sites? Go check out our new Gaming Headlines feed! Read more about it here.
  • We have made minor adjustments to how the search bar works on ResetEra. You can read about the changes here.

New court filing shows Epic has lost more than $450 Million on the EGS in the past 2 years and other interesting facts

CommodoreKong

CommodoreKong

Member
Oct 25, 2017
7,710


This new court filing is a very lengthy read at over 300 pages but there are some interesting bits of information:


  • Currently EGS has more than 160 million registered users and more than 56 million monthly active users
  • EGS has 400 games published by more than 200 developers
  • EGS currently supports 29 different currencies and has pricing in more than 190 countries and 30 regions
  • EPIC expects EGS to become profitable in 2023
  • At present, EGS has not yet achieved profitability because it has increased a lot of costs in order to gain market share
  • The 12% distribution amount charged by EGS is sufficient to cover the operating costs of EGS
  • EPIC lost approximately US$181 million on EGS in 2019, approximately US$273 million in 2020, and estimated losses of approximately US$139 million in 2021
  • Apple uses the application review process to give priority to its own applications to pass the review, and use this to compete against competitors
  • Apple does not use all its own rules for its own apps

There's also this useful bit of information:

1vxWkaF.png


This suggests that most EGS exclusives aren't selling very well if they aren't hitting their minimum sales guarantees.



Personally I think EGS being profitable by 2023 is being very optimistic unless they seriously plan on cutting back on exclusives and freebies, and even then I have serious doubts that people picking up free games or being forced to buy from the EGS are going to buy stuff on EGS over other superior storefronts/platforms.

Edit:
Some additional notes and information about EGS profitability by Senj and Spam Musubi:

senj said:
Is your confusion here that you don't understand what it means to cover operating costs, and how that differs from profit? Or do you think they have some other source of revenue beyond the 12%?

Your question doesn't really make sense.

Revenue is all the money they take in, which as the document is at some pains to spell out, is 12 % of sales + (optionally) 12% of IAP.

Operating costs are everything it takes to run the store – salary, servers, payment processing fees, etc, excluding deals with developers and publishers they cut to grow the market.

Profit = revenue – operating costs. Normally, businesses want to be profitable (ie make more money than it costs to keep the lights on) so that they can invest the profit into running the business. This is all business 101 stuff.

If they're saying "hey, our revenue is only enough to cover variable operating costs but growth costs mean we aren't profitable" (and they say this in several places, including the pull quote in OP but also page 141 scribd, 135 in the doc, although they contradict themselves on when they think they'll finally be profitable), then by definition they're saying exactly what you're asking – 12% is only break-even.

But it's actually worse, because there they're carefully saying that the 12% covers variable operating costs – meaning they're excluding fixed costs like salary and benefits for employees. So there they appear to be tacitly admitting they're not even break-even without spelling it out.
Click to expand...
Click to shrink...
spam musubi said:
"Epic decided to charge developers 12% after it concluded […]" is purely based on their initial projections. The store launched with that number, so it's not based on their sales data. It's their initial guess. It doesn't not reflect backwards on the reality of the store.

Additionally, it's claimed that innovation and investment is covered by this amount. However, it's clear that they are losing money on their investments, as per the other evidence in the document. And "innovation" is moot. The store has barely progressed since launch, and is still lacking in basic features most of its competitors have. Clearly innovation is not something they are seriously investing in. In fact, given all the data, one could argue that the reason the store is so bare bones is because it barely covers their operating costs and they can't justify spending more money on improving the experience.

Finally, the 12% number is a bit misleading, considering, unlike other stores, they offload payment processing costs to the customer.
Click to expand...
Click to shrink...
senj said:
No, it's not included. "Variable operating costs" has a specific meaning in accounting contexts that explicitly excludes salary and other fixed operating costs. These are universal definitions across the US. When they say "customer service" as a variable operating cost they mean things like processing fees on refunds that vary based on sales, not CS rep salary, which doesn't fit in that cost category.



Do note that they're being very, very precise with their wording in these 2 statements. The first doesn't say that the 12% does cover distribution and growth – it just says they decided on 12% after concluding it would. That first statement is true even if they turned out to be wrong about what the 12% covers, which given their other declarations, they're kind of dancing around admitting.

And then again, with the second statement: there's no reason to say "12% covers our variable operating costs" rather than "12% covers our operating costs" unless it's not covering fixed operating costs.
Click to expand...
Click to shrink...
 
Last edited:
Dest

Dest

Has seen more 10s than EA ever will
Coward
Jun 4, 2018
14,053
Work
That's a pretty big hit, but I'm sure they're able to offset it with V-Bucks, yeah? Might be a benefit if they're able to get more people on the platform.
 
Lashley

Lashley

<<Tag Here>>
Member
Oct 25, 2017
59,987
I didn't even realize we could post things like that document up top

On topic however, I wonder how long they're willing to eat this loss, especially as it's a bigger loss in 2020 compared to 2019?
 
nsilvias

nsilvias

Member
Oct 25, 2017
23,775
the fact that they lost more during covid when everyone else is booming is writing on the wall for egs
 
plagiarize

plagiarize

It's not a loop. It's a spiral.
Moderator
Oct 25, 2017
27,546
Cape Cod, MA
UnderTheKillingSun said:
That's alot of V-Bucks.
Click to expand...
Click to shrink...
Well, kind of yeah. That's what they're doing. They're knowingly investing all the fortnight millions into growing the userbase. If the fortnight bucks slow down, so will the exclusives and the publishing deals etc. They're hoping it'll be sustainable before that happens. That's why they don't need to recoup the money lost.
 
OP
OP
CommodoreKong

CommodoreKong

Member
Oct 25, 2017
7,710
Lashley said:
I didn't even realize we could post things like that document up top

On topic however, I wonder how long they're willing to eat this loss, especially as it's a bigger loss in 2020 compared to 2019?
Click to expand...
Click to shrink...

The media option let me post it which is pretty nice.

Yeah even with Fortnight Epic isn't going to be willing to eat the EGS loss forever, at some point they need to start making money.
 
Sabin

Sabin

Member
Oct 25, 2017
4,621
Bold to expect they will profitable by 2023 when 2020/2021 are pretty much the best years gaming have ever seen in terms of revenue and EGS still lost hundreds of Million.
 
dex3108

dex3108

Member
Oct 26, 2017
22,602
They can't keep paying for exclusives and be profitable. Maybe 1-2 big ones per year but not at the current level. And they can't keep giving 10$ off coupons because they lose money on each sale below 90$ that way. And when you remove those things they will become just another store and issue is that instead of selling keys for other platforms that handle rest they will need to handle everything so they won't earn that much money from it.
 

Deleted member 28523

User requested account closure
Banned
Oct 31, 2017
2,911
2020 was the biggest year for pc gaming ever and they lost more money than before. might need to rethink their plans.
 

Raigor

Member
May 14, 2020
15,146
This is funny, half a billion losses in 2 years and counting.

GabeN laughing at this.
 
Mattmo831

Mattmo831

Featuring Mattmo831 from the Apple v Epic case
Member
Oct 26, 2020
3,302
Don't worry they make that money back in Vbucks in a month
 

Deleted member 34788

User requested account closure
Banned
Nov 29, 2017
3,545
What a shocker, not.

Sweeney is driving this company down and needs to step back for a moment and re focus.

Half a bil dumped is fools money. Has done NOTHING to stop steams growth.


Also explains a bit more why the rumours of them going public, which isn't the right move for the company given this titbit of info.

Fuckin hell, when not even near bottomless Tencent money can sustain you.
 
SirKai

SirKai

Member
Dec 28, 2017
7,378
Washington
EGS not beginning to make profit until 2023 is insane, but the store as a whole not going to make cumulative gross profit on all the investment up to that point, until 2027, is utterly bananas. I know there's planning for the long game, but Jesus Christ.
 
Cactuar

Cactuar

Banned
Nov 30, 2018
5,878
Laugh all you want, a lot of companies you guys are loving are losing all that and more if you opened their books up too. It is what it is.
 
ArkhamFantasy

ArkhamFantasy

Member
Oct 25, 2017
13,545
So a company with the most popular and recognizable iP in the world right now is bleeding money from their store, and they want to try and force other stores to be more like theirs?

b38.jpg
 
dex3108

dex3108

Member
Oct 26, 2017
22,602
NekoNeko said:
They are investing a lot to achieve growth that's usually how it goes. We'll see if it works out in the future.
Click to expand...
Click to shrink...

Unless they offer something different for customers (and not developers like they are doing now) that growth wouldn't mean much. If you can buy game on Steam and on Epic Store day 1 at the same price what is benefit of buying it on Epic Store?
 
ratcliffja

ratcliffja

Member
Oct 28, 2017
5,914
I think it's worth it to them to have more people check out their store, which in turn means more people might try Fortnite on PC where 100% of transactions go to them.
 
Dyle

Dyle

One Winged Slayer
The Fallen
Oct 25, 2017
29,938
I wonder how much of the money they spent was effectively spent on me, so to speak.
 

Boogolo

Member
Nov 1, 2020
492
Having also been blocked from fortnite on IOS I wonder what their books are looking like? All of this has got to be hitting their profitably
 
Zomba13

Zomba13

#1 Waluigi Fan! Current Status: Crying
Member
Oct 25, 2017
8,936
Dyle said:
I wonder how much of the money they spent was effectively spent on me, so to speak.
Click to expand...
Click to shrink...

I'd like to know this too, like how with some third part Steam thing you can plug your account in and it gives an estimate of how much it's worth. I want to know how much sugar daddy Tim has spent on me.
 
GooberDooberCBC

GooberDooberCBC

Member
Sep 7, 2020
2,340
Often in order to grow, investment losses early are common. They are definitely playing the long game. They have invested alot recently buying devs, more office spaces in NC, etc.
 
speedomodel

speedomodel

Member
Oct 27, 2017
3,167
Really seems like they were using EGS to bully Steam and co into a better cut and then planned to drop it. That's a lot of money down the hole...
 
.exe

.exe

Member
Oct 25, 2017
22,233
Clearly they're invested in making it a part of the PC landscape. Just a shame that the user experience doesn't really show for it.
 

Deleted member 10737

User requested account closure
Banned
Oct 27, 2017
49,774
doubt they're gonna be profitable in two years.
pc gamers just generally are not buying games on EGS. unless something is free, heavily discounted/couponed or truly exclusive (meaning not coming to steam later), people aren't really spending money on there in a significant way. and there's only so much money to be made if most of the games on there aren't being bought by people.
 
Mukrab

Mukrab

Member
Apr 19, 2020
7,506
Idk about epic being profitable in 2 years. According to their numbers the average a user spent last year in third party games was less than 2 or 3$. Its more likely they shut down the store if the fortnite hype dies.
 
Dinjoralo

Dinjoralo

Member
Oct 25, 2017
9,148
Sabin said:
Bold to expect they will profitable by 2023 when 2020/2021 are pretty much the best years gaming have ever seen in terms of revenue and EGS still lost hundreds of Million.
Click to expand...
Click to shrink...
Yeah, I don't see what they can do to make it super profitable in 2 years when their numbers are going further down the red. How are they going to convert those 50-odd million people who're coming for free games into paying customers? Buying more studios for exclusively published games?
I guarantee, the day they cut the freebies and the discounts they eat the loss on, their active user count is going to start plummeting.
 

Zalera

Member
Mar 26, 2021
308
Not surprised. The EGS client is still a slow, laggy POS for me and they're lightyears behind on features. I only use it to claim free games I'll probably never play. Guess you could say that FOMO is the only reason I keep it installed.
 
JuniperAndSage

JuniperAndSage

Member
Dec 27, 2019
6,078
Seattle
vixolus said:
Except Game Pass has a return value (subscription cost), whereas EGS is just giving away free stuff to attract users + making exclusive storefront deals.
Click to expand...
Click to shrink...
The filing says game sales are fully covering their operating costs. So it's not like they're bringing in no money. They're just spending a ton beyond that on freebies and exclusives.

This is exactly what MS is doing with Gamepass. It's shitty and unsustainable in both cases. They're probably both eventually gonna cut back. Gamepass sub costs will rise, and Epic will either ditch the freebies and exclusives, or start taking a larger cut of sales. And in the meantime, all the free shit drives down prices for smaller indie devs that don't luck out and get chosen for these deals.
 
You must log in or register to reply here.