Phoenix Point Fig backers have accrued 191% return to date - can we calculate the Epic moneyhat?

Remachinate

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Oct 27, 2017
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EDIT: Monkey Gland Sauce corrected my math on page 2, the correct total is approximately $2.25M, not $3.3M.

I received the below email from Fig today:

It got me excited not only because my investment has already paid off so well, but also because being told these results before the game is released means we can try to guesstimate how much Epic paid Snapshot for its 1-year exclusivity deal. So let's jump into the analysis!

  • Here are the the Form 1-K filings Fig made with the SEC for the years ended September 30, 2017 and 2018; I'm going to reference them a couple of times in this post.

  • First, some background on the mechanics of game investment through Fig. Investors don't invest in the developer itself, but rather in preferred shares of Fig. For each game, Fig enters a license agreement with the developer agreeing to a revenue split on all revenue from the game, in exchange for which Fig runs the crowdfunding/investing campaign and certain other services. Fig then agrees to provide dividends to the individual investors out of their share of the revenue at a certain percentage--85% in the case of Phoenix Point.
  • How do we know that the only revenue earned for Phoenix Point so far is from Epic? What about the Microsoft Game Pass deal? Well apparently Microsoft isn't paying in advance, because the news for that deal emerged in June of 2018, but from the above table, we know that as of September 2018 no revenue was earned for the game.

  • So in order to get from the investor return to the total revenue from the Epic deal, we need to know the revenue split between Snapshot and Fig. The license agreement isn't filed with the SEC but we can back into this proportion based on the below chart from the Fig page discussing investment returns on Phoenix Point. It indicates that the sales breakeven point for investors is 48,033 units at a $34.99 price point: total gross sales of $1,680,675, and net revenue to Snapshot of $1,176,473 after the 30% cut to Steam (this was before the deal with Epic).
  • Phoenix Point was willing to accept up to $500,000 (1,000 shares) of investment from individual investors through Fig, of which they collected $495,500 (991 shares). For simplicity's sake we'll assume the full $500,000 was met, since the difference has a minimal effect on the results.
  • For the investors to collectively break even on their $500,000, Fig would need to receive $588,235 ($500,000/.85). This means the split between Fig and Snapshot is 33.33%/66.66% 50%/50% ($588,235 /$1,176,.473).

  • Now instead of just $500,000, the investors are getting $955,000 (191% return). At a 85% dividend rate, that means Fig collected $1,123,529 in royalties. If Fig's share is 33% 50%, then that would mean the total amount paid by Epic was a whopping $3,370,587 $2,247,058(approximately).
Not too shabby, especially considering the only money put into the game so far, aside from whatever Snapshot had to begin with, is $500k from investors and $766k from backers. One thing I'm not sure of, though, is whether this is a no-strings-attached payment, or if this will act as an advance on sales of Phoenix Point on the Epic store. Obviously if it were the latter, incremental revenue from PC sales will be much smaller.

What do we do with this information, if anything? That I'm not really sure of, but I found it to be an interesting exercise, and I think it helps give a better perspective as to the decisions facing the developers who have taken the Epic exclusivity deal. Can you say you'd reject that kind of payday as a developer, just for the sake of supporting consumer storefront convenience? Especially before your game is even done and without having to make any assurances of quality?
 
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True Prophecy

Member
Oct 28, 2017
937
Assuming your numbers are correct that is interesting. I have always understood why some publishers and developers have taken the money.

I think in the pheonix point case the money went straight to the development team? Which is better than going to a publisher.

But the way they screwed over backers is really really fucked. One can argue they would never have got that deal if it was not for backers in the first place...

I get that guaranteed money for doing mostly nothing is a safe bet but it still leaves a bad taste given how it all went down.
 

Maneil99

Banned
Nov 2, 2017
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3.3m for it. Wonder how much Division got? 10-15m?

Is this going to be a 59.99 title? If so that’s not many copies.
 

LewieP

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Oct 26, 2017
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Sounds about right to me. I wouldn't be surprised if it was more (or there will be more money coming down the line).

I expect that it is indeed either entirely or mostly an advance on sales.
 

Decado

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Dec 7, 2017
576
Could there be money that went to development that wasn't included in that figure?
 

ASaiyan

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Oct 25, 2017
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Sounds about right to me. I wouldn't be surprised if it was more (or there will be more money coming down the line).

I expect that it is indeed either entirely or mostly an advance on sales.
Hmm. Somehow I hadn't thought of that.

You think Epic will come to collect their money back if a moneyhatted game flops?
 

chaobreaker

Member
Oct 27, 2017
910
Hmm. Somehow I hadn't thought of that.

You think Epic will come to collect their money back if a moneyhatted game flops?
Epic's not aiming to get a direct profit from these exclusive deals. The endgame for all this money their throwing around is a loyal userbase that will stick to their service and buy more games long after these deals expire.
 

LewieP

Member
Oct 26, 2017
6,973
Hmm. Somehow I hadn't thought of that.

You think Epic will come to collect their money back if a moneyhatted game flops?
No. My best guess would be that it is an advance, whereby they are getting paid upfront for the first x number of sales. So when the game comes out, they won't get any additional revenue for the copies that they've already been paid for, until they reach the sales threshold where they've covered their advance, then they'd get paid.

In this scenario, were the game to sell zero copies on Epic store, or any amount less than their advance, they would not owe Epic anything.
 

ASaiyan

Member
Oct 25, 2017
6,863
No. My best guess would be that it is an advance, whereby they are getting paid upfront for the first x number of sales. So when the game comes out, they won't get any additional revenue for the copies that they've already been paid for, until they reach the sales threshold where they've covered their advance, then they'd get paid.

In this scenario, were the game to sell zero copies on Epic store, or any amount less than their advance, they would not owe Epic anything.
I see. Still, it adds an interesting dimension to these deals I hadn't thought of before [if, indeed, they are structured this way of course].
 

BeImonkey

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Dec 9, 2017
1,173
Given this sort of info, you might also be able to attempt to roughly calculate how many sales would be needed on Steam to break even. For example, assuming the game is $60, the price remains the same on each store, and Epic takes 12% and Valve a 30% cut:

60 x .88 x Y + 3300000 = 60 x .70 x Z

Y = sales on Epic store
Z = sales on Steam

In the case of 200k sales on the Epic Store, 330k would need to be sold on Steam. Or you could phrase it the other way: if it was going to sell 330k on Steam, it would have to sell at least 200k to be worthwhile on Epic. And the more it sells on Epic, even more sales are needed on Steam to break even because of the higher cut per game.

Of course there is more factors involved, but just thought it was interesting in a vacuum.
 

BronsonLee

it me
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Oct 24, 2017
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I'd say they probably just said fuck it and paid 4 mil for the game.

3.3m for it. Wonder how much Division got? 10-15m?

Is this going to be a 59.99 title? If so that’s not many copies.
My shitty math would say around 15, yeah, maybe more. They probably paid the most for Borderlands 3 by far.
 

BeImonkey

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Dec 9, 2017
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I'd say they probably just said fuck it and paid 4 mil for the game.



My shitty math would say around 15, yeah, maybe more. They probably paid the most for Borderlands 3 by far.
With that kind of upfront money, it does seem like an easier choice to go with Epic. Assuming 15 million was paid for Division 2, a $60 game, if the game sold ~1 million on PC (assuming Epic's 88% cut only), it'd have to sell something like 1.6 million on Steam (~60% more).

Although that's not getting into the specifics of more people buying on Uplay for a higher cut, and the increased cut on Steam for a high profit game.
 
Oct 29, 2017
3,487
That's a huge amount of money for such a minor title!

Jesus! Can't even imagine how much money they're throwing around in total here... Tencent and those Fortnite whales must be pumping insane amounts of cash into Epic!
 

BronsonLee

it me
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Oct 24, 2017
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With that kind of upfront money, it does seem like an easier choice to go with Epic. Assuming 15 million was paid for Division 2, a $60 game, if the game sold ~1 million on PC (assuming Epic's 88% cut only), it'd have to sell something like 1.6 million on Steam (~60% more).

Although that's not getting into the specifics of more people buying on Uplay for a higher cut, and the increased cut on Steam for a high profit game.
To be honest, I think Ubi's been raring to bounce from Steam entirely for a while now, and Epic just cut a huge check to justify it so they were like 'lol peace'

That's a huge amount of money for such a minor title!

Jesus! Can't even imagine how much money they're throwing around in total here... Tencent and those Fortnite whales must be pumping insane amounts of cash into Epic!
If Fortnite died tomorrow, they have billions on tap. Not all for the store, mind you, but they have a lot of cash available.
 

collige

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Oct 31, 2017
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That's a really clever OP. Well done.

To be honest, I think Ubi's been raring to bounce from Steam entirely for a while now, and Epic just cut a huge check to justify it so they were like 'lol peace'
Yeah, they could've easily just gone uPlay only and been fine. I'm not really sure why Epic thought it would be a good deal for them, especialy since Ubi had a kickass pre-order bonus for buying Division 2 on uPlay.
 
Oct 31, 2017
2,227
To be honest, I think Ubi's been raring to bounce from Steam entirely for a while now, and Epic just cut a huge check to justify it so they were like 'lol peace'
More than anything there's the fact that Tencent helped Ubisoft to fend off Vivendi's aggressive takeover with a significant injection of cash.
It's easy to guess that they own them a few favors in return.
 

keidash

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Jan 31, 2018
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This game is also announced for gamepass, maybe all the money isn't from epic's pockets...
 

Alastor3

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Oct 28, 2017
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Honestly, i wish we had some sort of epic launche4 but for books. It's crazy so little % (around 5%, at least in Canada) we get as author when we sell a book to break even...
 

AbsoluteZ3R0

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Feb 5, 2019
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I wonder how much they paid for Borderlands 3, I would assume at least 10 mil judging by how much they paid for phoenix point
 

nynt9

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Oct 25, 2017
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If this is the amount they got, no wonder the devs seemingly hastily took a deal and then poorly planned some ways to deal with it and had really bad PR. Seems like they were blown away by the amount and took the deal quickly.
 

Jawmuncher

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Oct 25, 2017
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Ibis Island
Can’t really fault anyone for taking money like that. Even if it’s a bad look (In this case, it should’ve been like Anno where only backers get the steam release now) that kind of money is covering a lot in indie dev.
 

SeanBoocock

Software Engineer at EA
Verified
Oct 27, 2017
111
Austin, Texas
How do we know that the only revenue earned for Phoenix Point so far is from Epic? What about the Microsoft Game Pass deal? Well apparently Microsoft isn't paying in advance, because the news for that deal emerged in June of 2018, but from the above table, we know that as of September 2018 no revenue was earned for the game.
I don’t think this is a valid assumption. There could be a minimum guarantee associated with the gamepass inclusion that was only paid or recognized after September 2018, regardless of the marketing of it.
 

Poimandres

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Oct 26, 2017
2,215
Epic are going to spend themselves out of the market if they are splashing this kind of cash everywhere. I think they really underestimated how cohesive PC gamers are in sticking to their guns. If they launched with a fully featured store and some brand new previously unannounced games maybe... But they went about it all wrong.
 

Rodjer

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Jan 28, 2018
4,735
I wonder how much they paid for Borderlands 3, I would assume at least 10 mil judging by how much they paid for phoenix point
10 million is nothing for AAA games, they probably got more.
Borderlands 3 is by far the most expensive moneyhat, they had to settle for 6 months instead of the usual 12.
 

Uzzy

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Oct 25, 2017
4,174
Can’t really fault anyone for taking money like that. Even if it’s a bad look (In this case, it should’ve been like Anno where only backers get the steam release now) that kind of money is covering a lot in indie dev.
I don't blame them, and it's certainly better in this case that the money is going straight to a dev team rather than into publishers and shareholders pockets, but it's still disappointing. It's disappointing because with the advent of direct funding sources such as Fig, Patreon and Kickstarter, we've seen an explosion of independently developed products in all sorts of sectors, getting away from the usual publisher bullshit, but things like this are dragging it back.
 

Dance Inferno

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Oct 29, 2017
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This is probably structured as an advance on their revenue if I had to guess. In other words Epic would keep the first $3m of revenue earned and then only after that would the developer start earning revenue. So if Epic thinks it'll make more than $3m they aren't really losing any money, but it does help de-risk the developer.
 

Spoit

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Oct 28, 2017
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With that kind of upfront money, it does seem like an easier choice to go with Epic. Assuming 15 million was paid for Division 2, a $60 game, if the game sold ~1 million on PC (assuming Epic's 88% cut only), it'd have to sell something like 1.6 million on Steam (~60% more).

Although that's not getting into the specifics of more people buying on Uplay for a higher cut, and the increased cut on Steam for a high profit game.
A AAA game like that is probably hitting the revenue levels to get to the 20% tier anyway
 

BeImonkey

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Dec 9, 2017
1,173
A AAA game like that is probably hitting the revenue levels to get to the 20% tier anyway
Definitely, I was just too lazy to factor that part in, and I was unsure what the dev's cut would look like spread across multiple storefronts.

This is probably structured as an advance on their revenue if I had to guess. In other words Epic would keep the first $3m of revenue earned and then only after that would the developer start earning revenue. So if Epic thinks it'll make more than $3m they aren't really losing any money, but it does help de-risk the developer.
Oh yeah, that would make sense based on something they said in the past. So in the case of a $60 game with 88% cut, the devs wouldn't get anymore beyond 3.3 million until about 62.5k sales. That seems like a fairly low risk for Epic.
 
OP
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Remachinate

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Oct 27, 2017
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I don’t think this is a valid assumption. There could be a minimum guarantee associated with the gamepass inclusion that was only paid or recognized after September 2018, regardless of the marketing of it.
Can you elaborate why you think that would occur? If Microsoft were to pay an advance before release in the same way that Epic did as part of the Game Pass deal, then what business reason would there to be to withhold payment months after the deal was inked? Snapshot obviously would want any advance as early as possible, and any requirements Microsoft would have before being comfortable paying would have been met before the deal was signed and announced. It's not like Microsoft has a cash flow issue on the order of a few million.
 
Oct 25, 2017
3,915
That's way more more than I thought, honestly. Just goes to show how much money Epic is throwing around. I expect way more games to be exclusive.
 

Nzyme32

Banned
Oct 28, 2017
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LOL @ people who requested refunds because of the EGS key.
Oh - how so?
Being an investor is a completely seperate option on Fig that being a backer alone
Chances are the vast majority investing are not looking at a single platform - vs the backers that specifically wanted the game on the service they paid for and were told they would receive.
 

Lashley

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Oct 25, 2017
25,276
If they paid this much for a relatively small game, how much are they paying for these AAA games?!

Fucking hell
 

demondance

Member
Oct 27, 2017
1,252
More than anything there's the fact that Tencent helped Ubisoft to fend off Vivendi's aggressive takeover with a significant injection of cash.
It's easy to guess that they own them a few favors in return.
I dunno dude, someone in one of these threads previously told me Tencent throws cash around and expects nothing explicit in return, maybe they were just being nice
 

demondance

Member
Oct 27, 2017
1,252
75k copies paid for, I don't blame them for taking it
Neither do I. My personal problem has always been the soaring narrative of "it's better for the market, competition, it's saving devs!" blah blah blah. You got paid to be an exclusive on a storefront that doesn't allow open market reselling and is explicitly gatekeeping out actual no budget indie devs who don't already have massive hits under their belts, your choice is your choice but don't try to spin it.