Spending now to profit later
Epic and Apple’s legal feud overFortniteis still ongoing, and more details are being brought to light as it carries on. In a new filing, it’s shown that Epic is set to lose at least $330 million in minimum guarantees alone.
As reported byPC Gamer, a new filing from Apple (found here) goes into detail over Epic’s spending to establish the Epic Games Store. According to Apple’s filing, Epic committed $444 million in minimum guarantees for 2020 alone while projecting $401 million in revenue for the year.
Epic also lost $181 million on the Epic Games Store in 2019, and Apple’s projections suppose that the Epic Games Store will not be profitable until 2027.
It’s already known that Epic has been paying for store exclusives, includingspending more than $10 million on Remedy’sControl. Third-party games have been selling on the store, but in abreakdown released earlier this year, they made up 37% (or $265 million) of over $700 million spent on the PC Epic Games Store in 2020.
For all the money spent though, Epic CEO Tim Sweeney seems unfazed. Heresponded on Twitterto these reports, saying they were right and “it has proven to be a fantastic success” in both reaching gamers and an investment in growing the business.
“Apple spins this as ‘losing money,’ but spending now to build a great, profitable business in the future is exactly what investment is,” saidSweeney in a follow-up. “It’s equally true whether you’re building a factory, a store, or a game.”
Epic hasalready filed in responseas well, saying it expects Epic Games Store will start earning annual profits in 2023. It also reiterates Sweeney’s comments about investing, saying it has “front-loaded its marketing and user acquisition costs to gain market share.” It’s also worth noting that Epic generates enough revenue to absorb these losses.
Apple and Epicwill go to trial in Mayover a feud that started withFortnite‘s implementation of a way to directly pay Epicthrough the in-game store, bypassing Apple’s cut on the App Store. Apple took the game down from the App Store, leading to Epic filing suit. It also resulted in abizarre parody of the old Apple commercials, this time inFortnite.
