Document Shows Aggressive Strategy To Make Epic Games Store Profitable
The Epic Games Store, which is now losing hundreds of millions of dollars a year, will be profitable in three or four years, according to Epic. That is what Epic CEO Tim Sweeney says and that is also stated in strategic documents from the end of 2019.
The document, released from the lawsuit between Epic and Apple, describes two strategies for the future of the Epic Games Store. An aggressive model is based on heavy investments in exclusive games and with that, Epic would make a profit from the download store for PC games for the first time in 2024. Under this model, sales would exceed $1 billion as of 2023 and the download store would have 125 million users, 50 million of which are active.
The second strategy describes a winding down model in which investments decrease and many fewer users are added. The costs are therefore lower and that should yield a profit from 2023.
It is unknown whether Epic is currently actually following the strategy outlined in the document, but all indications are that the company is pursuing the aggressive model. During the trial said Epic Games CEO Tim Sweeney that the download store is now making a loss and indicated that the store is expected to be profitable in three or four years. This also corresponds to the aggressive strategy outlined.
According to the aggressive model, there should be about four Tier 1 exclusives annually in the Epic Games Store. By this the company means games that generate at least $ 60 million in revenue. With the aggressive model, Epic Games expects to make up to 50 percent of the sales of the entire PC gaming market, provided Steam doesn’t respond and lower its commission. If Steam does, Epic Games expects to reach 35 percent market share.
Spend less on free games
Both strategies are based on phasing out free games. Every year less is set aside for this. According to the document, the budget for buying out publishers to give away games for free in 2019 and 2020 was $34 million per year. In subsequent years, that budget will be $15 million.
It is not known whether Epic actually spent $34 million in 2020. It concerns a strategy that was drawn up at the end of 2019. In the first nine months of 2019, Epic spent about $11.7 million on free games, documents previously revealed. Presumably, Epic paid publisher Take-Two in 2020 for giving away GTA V, but details about that have not been disclosed.