As Epic and Apple battle out their massive legal case a myriad of documents and information has been released to the public.
One of the statements that Apple’s lawyers made in court that is very interesting: “Epic Games Store is unprofitable and not comparable to the App Store, and will not be profitable for at least multiple years, if ever.”
Looking at the numbers, that seems to be true. Apple’s lawyers continued on with just how unprofitable the Epic Games Store is: “Epic lost around $181 million on EGS in 2019. Epic projected to lose around $273 million on EGS in 2020. Indeed, Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with ‘significant’ growth, only $401 million in revenue for that year. Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021.”
All of this adds up to an investment on Epic’s part of $493 million since 2019, and Epic itself has acknowledged that these costs will amount to at least $330 million. “At best, Epic does not expect EGS to have a cumulative gross profit before 2027.”
This all makes sense however with what Epic seems to be trying to do with their store. They are an extremely profitable company in many other areas and respects. They can afford these massive losses as investments to the future of the Epic Games Store. If this investment pays off, they may one day become a profitable company and a key player in digital game distribution, able to compete with the likes of Steam. Given enough time they may even become highly profitable, but not at least until 2030, a long way off. Epic is playing the long game, losing money now to obtain games and gamers, so that later on it can make even more money in the future.
This strategy is not unlike the one Amazon uses, where multiple sectors they have dipped their toes into are unprofitable and losing money (such as Prime Video), supported only by their online shopping sector. This loss of money is a way that they make money in other ways to cover the cost, like a horribly expensive advertisement, but with the intention of making profit in the future as well. Epic seems to be doing something the same, covering the losses with their massive piles of cash in order to try to compete in the future.
We will have to wait and see who wins the court case, and if Epic wins, they may be able to scale back their time frame and become profitable sooner, as being on Apple devices will surely boost their sales and stock prices.
