Tim Sweeney on EGS' Impact [Jun 26, 2019, 11:18 am ET] – Share – Viewing Comments
A lengthy
series
of tweets from Tim Sweeney looks to address some of the concerns gamers have
expressed over Epic Games Store exclusives and other issues:
This question gets to the core of Epic’s strategy for competing with dominant storefronts. 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.
grudgebearer wrote on Jun 27, 2019, 00:30:CJ_Parker wrote on Jun 26, 2019, 23:47:
If you are very short-sighted then you might arrive at such a simple conclusion, yes.
First, the self-publishing devs obviously get the full 88% or even 93% if their game uses the Unreal engine. More income for a self-publishing dev could definitely result in growth, thus in higher quality games and/or allow a dev to maintain their independent status instead of being forced to seek external funding.
The dev could also be a selfish asshole and buy a yacht but that's hardly in Epic's hands to decide. All that Epic can do and *are* doing is create the opportunity for devs to earn more which equals the opportunity for a developer to invest in their future because that is what profits are for in classic 101 economics: Profits -> investment -> growth -> more profit -> more investments -> more growth and so on.
Secondly, in a classic dev/publisher relationship the publisher could increase the budget for games due to a higher income. The publisher could also fund the development of more games in parallel which would help them diversify their risks which is always good, both for the publisher as well as all developers depending on a certain publisher's funding.
Similarly, the developer could negotiate a better deal if they know that the publisher is getting to keep a higher cut. It gives the devs more leverage in negotiations. They could even demand that the publisher at least co-publishes the game on EGS in addition to other storefronts in order to maximize profits which would result in receiving royalties sooner.
Re royalties: Due to the common royalties against advance model, the dev would definitely always benefit from maximized publisher profits because the sooner the publisher breaks even, the sooner the royalties begin to flow.
You don't seem to have a very good understanding of the imbalance of the publisher/developer relationship in the gaming industry.
Most devs are paid up font on royalties in a prepay structure from the publisher, and quite often royalty payments from the actual game sales are nonexistent until the publisher recoups all of their advance on royalties to the developer.
Um, I know that and that's pretty much exactly what I said. The "recoup" part obviously happens a lot SOONER if the publisher gets a HIGHER cut, i.e. if LESS money goes to the middle man.
So, the SOONER the publisher breaks even, the sooner the dev sees royalty money so, yeah, the developer benefits from EGS' lower cut even in a classic dev/publisher relationship.
The EGS 88/12 split, unless a dev is acting as their own publisher is not guaranteed to aid the developers in any way. Not even Sweeney has been so stupid as to claim that publishers through their benevolent altruism have restructured their agreements with developers to give them more money because the publisher has a better revenue split on the Epic store. The publisher has literally zero incentive to renegotiate an already in place contract with the developer, it's actual terrible business to do so.
I never talked about "renegotiating" deals so it'd be great to not put words in my mouth. I talked about negotiating deals, i.e. when a developer finds a publisher and they negotiate a deal.
If the EGS split (either due to EGS' rising popularity or other stores matching EGS) becomes more common it gives devs an OPPORTUNITY (my exact words) to maybe use that as leverage in negotiations. There are no guarantees in life for nothing except death.
The EGS is creating opportunities for developers, e.g. the opportunity to get royalties faster because the publisher will lose less money to the middle man or an opportunity to negotiate better contracts.
The first part is "guaranteed" by the way. Less money lost to middle man = faster recoup for publisher = royalties get paid to dev sooner is all but guaranteed if the publisher plays honest.
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