One of the biggest storylines in the gaming industry over the past year is how Epic is going after Steam with its own store and paying for exclusives. Now, Epic founder Tim Sweeney has offered some insight into why the company is pushing so hard.
In a Twitter thread, Sweeney spoke about how Epic believes pursuing exclusives is the “only strategy” to change the current 70/30 revenue split between publishers and storefronts. The 70/30 model is considered to be the industry standard, with 70 percent of revenue going to developers/publishers and 30 percent to the storefront.
However, Epic’s new Epic Games Store only takes 12 percent, giving 88 percent to publishers/developers. This makes the story theoretically more attractive, and on top of that, Epic is paying some studios to release their games as timed-exclusives.
“We believe exclusives are the only strategy that will change the 70/30 status quo at a large enough scale to permanently affect the whole game industry,” Sweeney said.
Sweeney went on to say that other independent games retailers have done “great work” in recent years, but none of them have been able to even hit 5 percent of Steam’s scale (outside of the stores run by huge gaming publishers). While Epic’s pursuit of exclusives might make the company unpopular with some subset of Steam users, the strategy of pursuing exclusives does work, Sweeney maintains.
Sweeney went on to say that the 30 percent “store tax” can erase any profits a developer might see, which creates a “disastrous situation.” If the Epic Games Store can become No. 2 behind Steam, or if it can spur change on Steam with regards to its revenue split, the result would be a “major wave of reinvestment in game development and a lowering of costs,” he said.
Ultimately, pursuing exclusives as Epic has done is a benefit to gamers in the long-run, according to Sweeney. It may not be easy to get to a new, better place, however. “There are LOTS of challenges along the way,” Sweeney admitted.
You can read Sweeney’s full comments on exclusivity below.
One of the latest Epic Games Store exclusives is Shenmue III, and like with other titles that took Epic’s money, people are not happy about it.
Tim Sweeney Statement On Epic Games Store Exclusives
“We believe exclusives are the only strategy that will change the 70/30 status quo at a large enough scale to permanently affect the whole game industry.
For example, after years of great work by independent stores (excluding big publishers like EA-Activision-Ubi), none seem to have reached 5% of Steam’s scale. Nearly all have more features than Epic; and the ability to discount games is limited by various external pressures.
This leads to the strategy of exclusives which, though unpopular with dedicated Steam gamers, do work, as established by the major publisher storefronts and by the key Epic Games store releases compared to their former Steam revenue projections and their actual console sales.
In judging whether a disruptive move like this is reasonable in gaming, I suggest considering two questions: Is the solution proportionate to the problem it addresses, and are gamers likely benefit from the end goal if it’s ultimately achieved?
The 30% store tax usually exceeds the entire profits of the developer who built the game that’s sold. This is a disastrous situation for developers and publishers alike, so I believe the strategy of exclusives is proportionate to the problem.
If the Epic strategy either succeeds in building a second major storefront for PC games with an 88/12 revenue split, or even just leads other stores to significantly improve their terms, the result will be a major wave of reinvestment in game development and a lowering of costs.
Will the resulting 18% increase in developer and publisher revenue benefit gamers? Such gains are generally split among (1) reinvestment, (2) profit, and (3) price reduction. The more games are competing with each other, the more likely the proceeds are to go to (1) and (3).
So I believe this approach passes the test of ultimately benefitting gamers after game storefronts have rebalanced and developers have reinvested more of their fruits of their labor into creation rather than taxation.
Of course, there are LOTS of challenges along the way, and Epic is fully committed to solving all problems that arise for gamers are for our partners as the Epic Games store grows.”