It is possible to both think that Steam has been a remarkable and amazing part of the gaming ecosphere, and still be excited that they’re no longer getting a free ride.
I’m not kidding. Steam is great. It’s the first thing I install on any new computer I acquire. It’s intuitive at what it does, full featured, and run by a generally responsible organization. It probably single-handedly saved PC gaming, definitely has been the engine that drives indie gaming for the last decade, and will be a pillar of the industry for years to come.
That being said, I’m super excited by the Epic Store as a developer, and I hope they get more exclusives. I summarized my theories in this thread – this blogpost expands that thread.
Let’s back up. This week, it was announced that Gearbox and their publisher would release the PC version of Borderlands 3 on the Epic Store as a six month exclusive. This prompted the easily excited outrage monkey portion of the video games audience to lose their shit — I mean, really stupid shit. So let’s break this down a bit.
The economics of the games industry are dumb. AAA games have cost $60 bucks for a long time. It’s a weird purgatory – the price hasn’t increased with inflation, largely because the beancounters think that if you go higher than $60, a game is more expensive that something that Grandma will want to buy little Timmy for Christmas. On the flip side, and I swear this is true, gamers are so used to $60 price tags for games that they immediately suspect that any game with a lower price tag is automatically lower quality. So AAA games have stuck at $60 as the default price for a while.
You ever wonder, when you spend $60 bucks for a AAA game, where it goes? Here’s one breakdown. If you buy the game at Best Buy, less than half of that ($27) goes to the developer/publisher. If the developer and the publisher aren’t the same entity, the developer gets a small portion of that – 20% maybe. So call it $5 bucks, and the developer doesn’t see a cent until the development costs of the game are recouped.
Eagle eye observers will note that a lot of these costs just don’t APPLY to Steam. Steam games (and all box PC games) don’t pay platform royalties. They don’t have to print CDs. The costs of handling unsold inventory are unnecessary. So while Steam demands a slightly higher percentage (30%) than Best Buy (25%), the lack of other costs meant that Steam was a better deal for developers. Put another way, Activision makes about $27 selling a Playstation Call of Duty at GameStop, and about $42 selling a PC CoD to you on Steam. That’s… pretty awesome! Developers vastly preferred it if you bought their games on Steam, because we like paying our mortgages. Yay Steam!
In late 2018, Steam improved that number dramatically for AAA developers (because screw indies, amirite?) so that once you sell more than $10M, their cut drops to 25%. Sell more than $50M, their cut drops to 20%. Suddenly a megahit like Call of Duty is earning $48 per copy (once they sell a few hundred thousand copies). Outstanding! And you also get Steam features like Cloud Saving.
But then Epic upset the apple cart.
The Epic Store deal is really good. Epic is undercutting this deal significantly, taking only 12% of a cut. Suddenly, devs/publishers are splitting nearly $53 per box. You don’t have to meet any kind of minimum threshold to get this. This is really good. REALLY good. Yay Epic!
But it’s more than that. Sales on the Epic Store also wave the licensing cost of the Unreal engine if that’s your engine of choice. I believe that Borderlands 3 is using the Unreal engine. If that’s the case, that’s another 5% in their pocket that they don’t lose if you buy on steam. Put another way, Take 2/Gearbox puts $52.80 cents in their pocket for every copy they sell on the Epic Store, and only $39-$45 for every copy you buy on Steam.
According to Steamspy, Borderlands 2 sold 5-10 million copies on Steam. Now then, not all of those copies were actually sold on Steam and certainly some of those copies were sold at discount prices during Steam Sales and the like. Still let’s do some back of the envelope math here and pretend that B3 ‘fails’ by only reaching the lowest number there (5 million)
- If 5M people bought the game on Steam, Gearbox/2K would enjoy a royalty rate of 30-20%, and they’d have to pay a 5% engine licensing fee to Epic anyway. They’d get $222 Million, or $44.4 bucks per copy
- If 5M people bought the game on Epic, no engine licensing fees, and a 12% cut, gets them $264 Million, or $52.8 bucks per copy.
So in the worst case scenario, Borderlands stands to make $42 Million more dollars for 2k/Gearbox. That’s a LOT of enchiladas. I don’t know if Epic paid Gearbox/2K for the right to exclusively launch on the Epic store but they didn’t really NEED to – If Epic launched on both, they’d lose about 9 bucks per copy of Borderlands 3 sold on Steam.
The very nature of the Steam Revenue split encourages exclusives. Look at the revenue split for AAA again. You only get the GOOD revenue split if you hit $50M in revenue. My back of the napkin math means that you need to sell 834K copies before you start getting that number — on all copies AFTER that. What this means is that, if you’re on Steam, every copy you sell on Epic Games or Discord or whatever is a copy that’s not pushing you to that threshold.
The guys who came up with it probably thought they were encouraging developers to choose between one platform or the other. They were probably right. They’re probably just surprised as to which direction developers (especially those around the Metro-Borderlands size) are going to decide is the logical direction to go.
Exclusives are how platforms are sold. People keep saying ‘Epic should compete on its own merits, and not have to depend on exclusive content’ but, um, exclusive content has always sold new platforms – and that’s definitely what this is. It’s a cornerstone of console gaming, for example, with great exclusives like God of War, Horizon Dawn and Spiderman being a cornerstone of why Playstation is kicking XBox’s butt this generation. Console developers do this by buying studios entirely usually. But yeah, paying for the privilege of exclusive content is NORMAL.
And unlike exclusives for PC, there is a $400 price tag on the console if you want to play Horizon on top of the cost of the disc.
It’s not just games. Exclusive content is the cornerstone of the business model of HBO and Netflix for example. And let’s face it, Steam has thousands of de facto exclusive games, because that’s the only place those games can be played.
In the absence of exclusive content, players will typically choose the platform that has the most inertia. And to repeat, every copy of Borderlands 3 that is sold on Steam costs Gearbox/2K about 9 dollars.
Gamers should want more of the money they DO spend to go to game developers and publishers. Games are expensive to make, and they get more expensive every year, as salaries rise, technical complexity increases and the costs of making content go up. And yet, the box price of games has stayed constant.
If more of this box price goes to the people who design, art, engineer and market these games, it reduces the need for us to have to resort to sell sparkle ponies and loot boxes or to increase the costs of the games in order to cover those increased costs.
People who think that the Epic Store means significantly fewer sales than Steam are probably deluding themselves. First off, Borderlands is a huge, well-respected and beloved IP. People will seek it out. Selling your small, funky indie title on the Epic Storefront may not be a great idea because the store doesn’t yet have a critical mass – it’s not a place people go to shop for games yet. But if you have a big, well-anticipated game like Borderlands (Borderlands 2 is still in the top 10 for daily plays on Steam), players will go and seek it out. Being a seperate launcher didn’t hurt Starcraft, or Destiny, or the Sims. Players will find Borderlands 3, wherever it lives.
And where it lives is pretty good. Epic has the ability to drop an ad for Borderlands 3 in front of 250 Million Fortnite players with over 78 Million Monthly Active Users. This is actually greater than Steam’s 67 MAU, although Steam still has a higher daily concurrency and everyone who opens steam is coming to shop, not play Fortnite. Still, the people who think Devs selling on the Epic store think it will have a much smaller reach are probably in for a disappointment.
But still, the proof is in the pudding. And we have one test case so far, where Epic’s first exclusive (Metro Exodus) did 2.5 better on the Epic store than its predecessor did on Steam. And to some extent, you have to wonder if the relative sparseness of the Epic Store is helping. Epic’s store is currently a highly curated experience of high quality titles. In Steam, Metro was competing against dozens of similar titles, some years old.
Yes, this is capitalism — and the audiences are what’s being sold. A lot of gamers are saying things like Epic is trying to be ‘monopolistic’ or that this isn’t capitalistic. That’s because they’re mistaken about which customers are what are being fought over here.
This is an EXTREMELY capitalistic, EXTREMELY competitive dance happening. But the customers being courted are developers/publishers like Gearbox/2K and 4A Games. What is being sold is the playerbases. YOU’RE the product.
Steam’s sales pitch is a 30%-20% revenue split, with the strongest PC customer base in the world and a robust, full featured back end and well-integrated payment systems that work with almost any payment system on planet earth.
Epic’s sales pitch is a 12% revenue split, with an audience that is as large (but unproven spenders), a free engine license and a much more curated store. And did I mention just a 12% revenue split? Did I mention that Borderlands is looking at somewhere around 40 MILLION DOLLARS in additional revenue that goes to game creators and publishers instead of the store?
Valve could end this quickly if they REALLY wanted to. Their install base is hugely attractive. If their revenue split were suddenly match Epic’s – or even get close – choosing Epic would be a very hard choice. But doing so would mean losing a HUGE amount of revenue. Valve is, I believe, taking a ‘wait and see’ approach to see if Epic congeals into a serious threat to their bottom line.
Anyway, if Red Dead Redemption also goes the Epic route, things are going to get heated very quickly.
I don’t want Epic to ‘win’ this war. That would be just as bad as Steam keeping a monopoly on the marketplace. I don’t want any one store to have a monopoly everything. I want competition. I want these guys competing for games to publish. I want these guys to compete for customer eyeballs.
Competition is GOOD. I’m happy that we may end up in a situation where there are two stores competing to make lives easier for game devs. I’m happy that Steam will be forced to clean up it’s act, and that Epic is hungry to offer innovations. And I’m disappointed that gamers are pissed off about it, and that some observers are milking this outrage for clicks and views.
`Competition is GOOD` but this is not competition when one side is just forcefully buying all the publishers while ignoring the actual users.
The customers that Steam and Epic are currently competing over are not gamers. It’s developers.
ON POINT. But thats the more reason why im mad. I seriously couldn’t give a flying crap about how much more money devs are gonna make with Epic versus Steam. First off, i don’t go to a restaurant and decide to or not to eat there based on how much does the people on the kitchen makes at the end of the month, and i asure you 99% don’t care either. Besides lets be honest here, most of that money is going to the publisher if not all of it. You want me to believe devs are making more thanks to epic? Show me the paychecks of 4A Games devs after the shitshow made by Metro exclusivity deal. Letme compare the devs paycheck to the corporate paycheck and lets see how much more money did the devs makes from all of this. Until then, im not buying this “its better for the devs” bs.
Developers don’t make money from those deals and smaller cut, greedy publishers already worth billions do. The fact that you are an ex-dev on apparently some pretty big AAA projects, and you still conflate the two, is frankly a bit concerning.
Or are you arguing for Trickle Down Economics like Tim Sweeny does?
You know, an argument that conservatives politicians have used for decades to exploit the poor, and that literally never worked?
Do you believe that the extra profits for the publishers will go the the devs?
What makes you think that, when the extra profits from going digital didn’t, and the extra profits from MTXs didn’t?
It’s really wierd to see a mostly liberal industry, arguing for conservative arguments like Trickle Down Economics.
In a typical third party relationship, the developer gets a royalty cut of whatever the developer takes in — usually about 20%, although this varies wildly from deal to deal. So getting significantly more revenue for the publisher absolutely results in significant more revenue for the developer.
Dude, that’s just plain stupid, that war is maybe about devs/pubs, but we are GAMERS not devs ffs we gain nothing from it. We don’t give a damn about what devs/pubs want (especially those who sold their soul to Epic despite the fact they already have shit tones of money), because WE the GAMERS are the one PAYING. It is OUR money who goes in their/your pockets. So we GAMERS have the right to say/think whatever we want because WE PAY FOR IT !
The gaming industry should works for the sake of gamers, it is not just us who should give you our hard owned money whithout asking question…
That’s an excellent write up and a nice break down of what advantages Epic offers, however, there’s a few things I’d like to add.
First of all, Borderlands 2 being in the top 10 now is due to the HD remaster. It’s always held pretty high, but a lot of people have been revisiting the 3 previous games now, and all 3 climbed the ranks.
Second, I believe the Metro Exodus numbers were a bit bogus when revealed: not only is the Metro franchise much more popular and anticipated now than it was back then (was still fairly unknown when Last Light came out), but the numbers they revealed for pre-orders were total, which also included anyone rushing to buy it on Steam before it was gone.
Lastly, I agree that exclusives sell platforms and makes sense for companies to chase them, but Epic has gone at it the wrong way. Other platforms such as Origin, GoG, and even Discord have exclusive titles in their stores, but it’s fine because they were already announced as part of said platforms. Whereas Epic has been doing a lot of “oh yeah, that game you want that was going to Steam? Well it’s not anymore”. That includes Borderlands 3, which despite being announced directly as an Epic exclusive, is still a franchise that’s long been in Steam. It’s the equivalent of the new God of War being a Switch exclusive when it’s been a Playstation franchise for many years. Fans would be understandably seething.
Even their CEO openly said he’s going to actively start pulling previously released games off of Steam. They are just painting themselves voluntarily as the villain, so it’s perfectly understandable people are mad.
As for me, besides perceived scummy behavior, my main motive to dislike Epic (and I’m sure many others), is being tired of having 10 different launchers for different games, and having to either have them all open at once, or check one by one to see where and what your friends are playing. Steam makes the community aspect incredibly easy in that regard and many like it simply for that feature set.
>mfw people being fooled by 2.5x “early sales”
https://www.reddit.com/r/pcgaming/comments/b4gkc0/lets_debunk_the_idea_that_metro_exodus_sold_well/?st=jtlq077w&sh=fe9acda6
I’m a long time gamer, 35+ years.
What i see is EPIC destoying PC gaming completly.
I got just one thing to say, i will never ever in my life spend a dime on the EPIC store.
Not even for red dead 2 hell not even for Cyberpunk 2077 literally not a single exclusive deal could lure me to the EPIC store…EVER!!
So FUCK you and FUCK EPIC and most of all FUCK you Sweeney you FUCKING AUTIST !
Sweeney will go into the history books as the guy that ended PC gaming
and made you all maintream peasant goons.
Boy, you’re really invested in not having a second icon on your desktop.
In the short term, Epic may be able to inflict some pain on Valve due to buying exclusives. But the real competition will begin once games are being simultaneously released on both platforms at the same time. At that point, the consumers decision will be the ultimate decide of which champions. What it comes down to (imo) is that Steam is a platform, whereas EGS is just a storefront. People have built up years worth of friends, community content, investment in their own account, etc on Steam. Not to mention the features Valve offers to gamers for free. This is why their users have mobilised against EGS. EGS has none of that and — perhaps more importantly — Epic have railed against community features because of the potential for bad apples to be, well, bad.
Once you have Borderlands 4 available with a simultaneous launch, and the option is $60 for Steam or $60 for EGS, why are gamers going to opt for the EGS copy? That is what will matter in a few years time. Aside from knocking $10 off the EGS version, which would destroy the margin advantage for devs, I’m not sure why consumers would be going EGS?
This is what is will come down to in the end: exclusive deals are great way for distributors to attract developers and bludgeon the consumer into using their store in the short term. But once they end, the consumer will voice their real opinion.
If Steam doesn’t change their royalty scheme, there is no chance that Borderlands 4 will ship on it unless the Epic Store has utterly failed. The difference in revenue is millions of dollars.
People keep thinking that the key to competition is price. They’re RIGHT. However, while consumers are seeing no difference in price, developers and publishers are seeing a dramatic one. Again, stop thinking about yourself as the consumer in this situation. You’re as much a consumer of Steam/Epic in this case as you are a consumer for the guys who make physics engines or print CDs.
While you present interesting arguments, you’re not fully correct on some of them.
“On the flip side, and I swear this is true, gamers are so used to $60 price tags for games that they immediately suspect that any game with a lower price tag is automatically lower quality.”
Swearing something is true, doesn’t make it true. I don’t have any data on this (and neither do you it seems) but from personal experience this does not hold at all.
“Borderlands 2 is still in the top 10 for daily plays on Steam”. Wrong. It did, after Borderlands 3 was announced. People are hyped and replay Borderlands 2. Furthermore, the Borderlands franchise was on sale on Steam. Of course the more people play the game. Take a look at the data gathered on SteamDB: https://steamdb.info/app/49520/graphs/ and scroll down to see the change in the last three months. Around the announcement of Borderlands 3 there’s suddenly a rise in players, and it even had a free weekend on Steam. Your argument is incorrect.
“Epic has the ability to drop an ad for Borderlands 3 in front of 250 Million Fortnite players” & “Exclusives are how platforms are sold.”
Of course, these quotes are true. But Epic’s tactic is not that of competition. It’s that of hijacking. Multiple games have left the Steam store, even when they had lots of advertising on there (I mean, Steam does advertise AAA and popular games). This is of course a choice devs can make, I cannot blame them for it either. But I personally don’t see this as healthy competition, because games are bought by Epic to be on their store. It is true that there are many Fortnite players, but they are just that. It could go like Metro, but that is not a given nor is it any indication. Some games do better than others, regardless. Furthermore, to add to exclusivity on platforms, you are correct that it happens, but you reason that what Epic does is the same. It’s not. Netflix and HBO have exclusives because they make their own quality content. Game consoles have exclusives, because specific affiliated studios are contracted to do so or even the console’s developer (Nintendo for example) have a unique and qualitative design. Epic does nothing of the sorts. It buys out developers in order to force the customer on their platform. Of course they can do so and of course we’ll have to see if people want this.
Within my social circle, many if not all, are against Epic’s practices. They dislike the tactics Epic have to get games on their platform, but also dislike the platform itself due to its numerous problems (no the last their security surrounding creditscards: https://thenextweb.com/gaming/2019/01/17/fortnite-security-flaw-hack-profits/). Furthermore, Epic simply does not have the features to compete with Steam and so they can only do so with things they do have: money from Fortnite. Epic is not competing, because they don’t really have qualities that they can compete with. However, for developers Epic is very interesting. For users, not so much.
I’m curious how this article will age. I personally don’t think Epic will take off, but I do think it’s good there is someone who pushes Steam into perhaps a different direction: that is, if people actually do buy more on Epic. I wouldn’t be surprised if many people wait for Borderlands 3 to be released on Steam. That’s at least the consensus among my friends.
Thanks for sharing the article but I’d like to emphasize one thing that I think is important: at the end of the day it is about keeping your customers happy, because they want your games and your services. Doing them a disservice for monetary gain, has the chance to backfire. We’ll just have to see what’ll happen.
“Swearing something is true, doesn’t make it true. I don’t have any data on this (and neither do you it seems) but from personal experience this does not hold at all.”
It’s been pretty well documented by lots of people that when people see $30 dollar price point on a game, they assume it’s bargain bin trash. Major titles will typically only get that low after a year or two (or if they flop).
“Wrong. It did, after Borderlands 3 was announced. People are hyped and replay Borderlands 2.”
The graph you link shows Borderlands 2 being played by 10K people going back two years. It is far more popular than most games on Steam.
“But Epic’s tactic is not that of competition. It’s that of hijacking.”
Exclusives aren’t hijacking.
Living in a small city and being a small business owner myself, I feel that
offer and demand obviously take a role in any free market, but it also helps being active inside the community, trying to reach for the people and making them feel like you, as a publisher, as a developer, are one of them. On paper, Epic does seem to idealize some of these aspects, but to put it simple, they’re too edgy, they try too hard, thus giving the impression that they’re as artificial as it gets. PC gamers don’t trust them, they feel threatened by Epic Store, and that is not how you get what you want. Once people trusted small indie developers because they were gamers who wanted to create a game we all wanted to play, without any bullshit, but now it seems like there is a little bit of greed involved, even though you can spend all your day justifying your views.
Most gamers trust Epic and their store. It is, after all, the front end that millions of people use to play Fortnite every day.
Epic is evil for gamers, whatever it do to publishers. Why the hell I need to care? They ruin my digital library and my gaming experience for a few percent more cash in publisher’s already bottomless pockets. They can free go to hell already.
Epic has found a way to give the developers who build the games you love somewhere between 20-30% more money without costing you a single penny. Calling this ‘evil’ is going pretty grossly overboard.
You realize that this is a dumping scheme, right Schubert? That’s the problem. Epic isn’t cutting a sweet deal right now because they love everybody just so huggy muggy much. They’re spending money now to try and buy out a market, after which you can bet money that they’re going to recoup their costs, whether from consumers or publishers (both, more likely). There’s nothing in the Epic store’s DNA that makes it inherently better at solving the problems Steam has right now. The profit drivers that led Valve to abdicate any stewardship of their storefront are exactly the same, and there’s every reason to believe that a company willing to stoop to strategies as cynical as what we’re seeing now will descend to that level faster than Valve managed to.
It shouldn’t surprise you in the slightest to find people upset to be treated like chattel in this exchange, particularly when the disregard for their interests in this whole mess are so clearly and utterly below the consideration of the party moving the action. There’s nothing about the Epic store of any advantage to consumers and a lot for them to give up when compared to Steam. An honest competitor would be at least trying to deliver a product of interest to the market they’re trying to take money from. Epic doesn’t even have a damn shopping cart. That kind of says it all, and the fact that neither Epic nor the publishers seem to care in the slightest is the bit that offends people.
You are correct that Epic is trying to aggressively create a corner of the market. However, your belief that Epic is likely going to suddenly yank up prices or make that deal worse for developers later is based on nonsense. If they do that, the developers just go back to Steam.
Also, LOL at being ‘treated like chattel’. Get some god damned perspective before using the language of human slavery. You’re being told that if you want to buy Borderlands 3 on PC in the first few months, you have to install another icon on your machine. It’s not the apocalypse.