The EPIC Effect: Microsoft Changes Revenue Split To Match EPIC Store, Steam Holds Firm

from the competition-is-amazing dept

Way back when Epic released its Epic Store PC game storefront, the release of this new competitor to Steam focused on two major selling points. The first was timed exclusives that it shelled out tons of money for, allowing it to sell games the public couldn’t get anywhere else for a certain period of time. This pissed off lots of people, as the public generally doesn’t like exclusives. That said, Epic did mention that it would end its exclusivity practices if the rest of the gaming storefront world, especially Steam, mirrored the Epic Store’s second key selling point, which was a far more favorable split offered to game developers than the “industry standard” 70/30 split that sees places like Steam getting nearly a third of game revenue just for hosting the game on its platform. Instead, Epic’s store has a 88/12 split, meaning the platform is willing to take less than half of the revenue Steam extracts from gamemakers.

In other words, Epic positioned its exclusivity program as merely a method to get the other storefronts to take less money away from game developers, which softened the blow with the public and surely made it a great many fans in the gaming industry.

Well, Steam hasn’t caved yet. But Microsoft did just announce that it is moving to match the splits offered by the Epic Store, marking some movement in the industry and perhaps an indication of things to come.

“As part of our commitment to empower every PC game creator to achieve more, starting on August 1 the developer share of Microsoft Store PC games sales net revenue will increase to 88%, from 70%,” Head of Xbox Game Studios Matt Booty wrote on the Xbox blog. “A clear, no-strings-attached revenue share means developers can bring more games to more players and find greater commercial success from doing so.”

The move is the latest in a bit of a sea change for game revenues. In a survey released yesterday by the Game Developers Conference, only 3% of respondents thought the once-standard 30% take by a platform was justified. The Epic Games Store broke onto the scene by notably only taking 12% of the revenue. Over the last year, both Apple and Google have lessened their cuts for games making under $1 million. Steam, meanwhile, has held more or less firm on its 30% take, with the cut lessening the more money a game makes, a system that makes more money for larger, richer publishers, while penalizing smaller indies.

Funny what a little bit of competition can do. While it is certainly notable that Steam is watching all of these changes with its proverbial arms folded, doing no sort of splits-changing of its own, maybe that’s okay and maybe there’s a place for that. Or maybe the pressure continues to build and the Epic Store does end up being the preferred storefront for smaller titles and indie developers and Steam eventually does have to come down from the 70/30 split.

All I know for sure is that without Epic entering this arena and pushing the envelope, be it for altruistic reasons or otherwise, it seems unlikely that even Apple, Google, and Microsoft would have made any of these changes. That’s why, whatever you think of the Epic Store, the added competition certainly is nice.

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Companies: epic, microsoft, valve

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Comments on “The EPIC Effect: Microsoft Changes Revenue Split To Match EPIC Store, Steam Holds Firm”

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32 Comments
This comment has been deemed insightful by the community.
Anonymous Coward says:

Re: Re:

One does wonder why it takes 30% of the revenue to maintain a website offering the game & patches.

Part of it is because Valve hasn’t made worth crap to keep their empire afloat for years now. Essentially, Valve is a cloud provider now not a game development company, and has been that way for many years.

Another part is that running servers and maintaining security on the biggest platform for gaming has it’s costs. Especially when nothing else is coming in to offset them. Then you have to factor in their annual mega sales….

Another part is the time Steam was created. Keep in mind Apple has done similar splits with their App Store. Steam was also the first majorly successful online store service for PC gaming and therefore got to set the initial rate.

Not saying that the current rate is justified now, but the simple fact is that Steam has and continues to reign supreme in the service that it offers. Competitors were bound to show up eventually, and despite Epic’s efforts, it seems Valve hasn’t been phased by Epic’s disruption as much as Epic would have preferred.

*: Of course that also doesn’t account for Epic’s own poor offerings by comparison. It was an obvious cash grab attempt. Such as non-working or outright missing functionality expected from pretty much any modern online storefront regardless of industry. Blatant bribery to get publishers and developers to assign exclusive distribution rights to them. Outright hostility towards their customers. Lack of the community support services that Steam built over years and that gamers have come to take for granted. Etc.

Long story short, When you try to dethrone the current king you need to at the very least have similar offerings to the current one and have something that can justify others transition to supporting you. Epic didn’t have similar offerings and thought it could buy it’s support from gamers. Fortunately for the rest of the industry, Epic’s attempts failed.

Anonymous Coward says:

Re: Re: Re: Re:

Somebody obviously hasn’t played Half-Life Alyx.

One new game in the last 4 years doesn’t maintain a development studio no matter how much it sells. Let alone the cloud services Valve is much more interested in maintaining. Take away the card game, Dota community chess game spinoff, and VR tech demo and it’s last made game is a Japan-Only Left 4 Dead 2 arcade cabinet released in 2014.

I should also point out the need for said game’s requirement of a $2000.00 gaming rig with compatible VR headset on top of the usual $60.00 admission fee. That alone puts it out of reach for most of the market. (And then there is the puke fest to follow said purchase for most potential buyers….) What part of any of that makes Half-Life Alyx something that can keep Valve’s empire afloat? For a studio that hasn’t put out anything more complicated than a card game and tech demo for almost a decade, going all in on VR is kinda suicidal unless your core business is elsewhere.

Not saying Half-Life Alyx isn’t a good game. (You’re right, I haven’t played it. So I reserve judgement on it.) It may very well be, but it’s release doesn’t mean Valve is suddenly focused on game development again as a core business.

Samuel Abram (profile) says:

Re: Re: Re:2 Re:

Take away the card game, Dota community chess game spinoff, and VR tech demo and it’s last made game is a Japan-Only Left 4 Dead 2 arcade cabinet released in 2014.

That’s akin to saying "Take away the 2008 bust and the COVID-19 pandemic and we hadn’t had a depression since the 1930’s!" Dismissing exceptions-while making you look like you’re not ignoring evidence-is in fact, ignoring evidence.

Anonymous Coward says:

Re: Re: Re:2 Re:

I remember the time when Team Fortress 2 wasn’t just a bunch of shitposting memers trying to make every server a mess of Gmod "friendlies".

If it wasn’t for Rick May’s unfortunate passing I don’t think anyone would have bothered with the Soldier class, unless it was dressed up in a Painis Cupcake costume or trying to suicide with the trolldier set, then get the server to boot the engineer for daring to build a Level 2 sentry protecting the capture point on dustbowl that he can’t Market Gardener from halfway across the map.

This comment has been deemed insightful by the community.
Anonymous Coward says:

Re: Re:

Because running a feature rich store/client/platform such as Steam or GOG is expensive.

You can check CD Projekt’s latest financial statement to see the costs involved in running GOG:
https://www.cdprojekt.com/en/investors/result-center/

When converted to US$ ~$90m was spent on GOG last year and with a 30% cut GOG only made ~$7m profit from revenues of ~$26m.

Which means if GOG was forced to take a 12% cut they would have lost $10m last year.

It’s also interesting that Microsoft only reduced the cut for PC Games, the Xbox is keeping the 30% cut which suggests Microsoft know full well a 12% cut is barely if sustainable.

This comment has been deemed insightful by the community.
Scary Devil Monastery (profile) says:

Re: Re:

"You did the hard part but without us you can’t reach customers so hand over a large share of the income."

Scale.

Epic is losing cash here. Lots of it. If we assume their projections are valid (and given Epic’s record that’s a major if) they’ll run at a loss until some projected unspecified future when they have magically gathered a sufficient amount of paying customers to sustain the loss.

Valve, needless to say, isn’t running at a loss.

Valve could probably optimize, squeeze their margins some, and chop a piece of deadwood out of their profits to ensure the developers got a bigger cut…but how much is by no means assured. Servers cost money, bandwidth cost money, curation costs money.

Yeah, Steam could run better and try to get developers a better shake. A competitor providing a similar service against which Steam could compete would be good. I just don’t believe Epic will be it.

kallethen says:

Re: Re:

I would say that Steam is much more than just a website selling games. It has many community features that other storefronts don’t have. Discussion forums, game guides, cloud storage of game saves files, workshop for fan mods/content on games that allow it, messaging platform, Photon for running Windows games in Linux…

…plus a working shopping cart!

This comment has been deemed insightful by the community.
Candescence (profile) says:

"In other words, Epic positioned its exclusivity program as merely a method to get the other storefronts to take less money away from game developers, which softened the blow with the public and surely made it a great many fans in the gaming industry."

I hope that’s sarcasm, Tim, because that didn’t really happen. The Epic store is still largely despised by the PC gaming community, and not just because of exclusives. Steam is not only significantly more accessible for developers and publishers of all shapes and sizes (the availability of content on the EGS is miniscule compared to what Steam offers, even if a lot of games on Steam are crap, but it still has exponentially more games that are at least okay), it also provides a significantly better interface and a truckload of features for both the consumer and developers that the 30% revenue take pays for maintaining, and Valve keeps adding new features that enhance the experience for consumers and improve visibility for developers. The EGS doesn’t even have basic features that should be taken for granted on any basic digital storefront – I’m pretty sure it still doesn’t have a shopping cart feature. The EGS is an absolutely terrible client and storefront, Epic has really been trying to muscle its way into being competitive by splashing the absolute truckloads of money it made from Fortnite.

Also, speaking of those exclusives, Steam can potentially wait out Epic. A recent court filing reveals that Epic has been losing hundreds of millions of dollars from the EGS, and doesn’t expect to be sustainably profitable before 2023 at the earliest, maybe 2027 at the latest. Paying for exclusives and free games has been a huge gamble that won’t pay off for years, if ever, and documents uncovered by the court battle imply that the EGS has been underperforming for Epic and the games on the store have not been meeting minimum sales guarantees. Sure, an upfront loss to start a new venture is a viable strategy, but it clearly isn’t working here if games aren’t selling.

Also, I have to note, again, the lower revenue split won’t help the vast majority of developers/publishers, considering the EGS has a miniscule amount of games compared to the likes of Steam or even Itch.io. A better revenue split isn’t going to help if you can’t publish your game where the lower split is. People may complain about Steam’s open doors policy, but nobody wants to go back to the days when Valve was ridiculously picky about what games ended up on its storefront.

Don’t get me wrong, a lower revenue split would be nice for developers, but Epic is the wrong party to champion that cause, and they’re the wrong type of competitor to try and tackle Steam. They’ve been trying to brute-force their way into the market with a ridiculously inferior storefront and client using high-profile exclusives, something that’s been tried before (especially with EA, and look how that turned out, they came running back to Steam after a while). In my opinion, Epic is really only providing a low revenue split as a selling point they can use because they can absorb the resulting loss in revenue from game sales. And considering the data indicates it’s not driving people to buy games nearly as much as they want, Steam has little incentive to change course.

Anonymous Coward says:

Re: Re:

Case in point: I didn’t like Epic because of it’s lack of features and bringing over the reason I left consoles in the first place: Exclusivity.

THEN they made that hate personal by making a series I’ve waited years to come to PC Epic exclusive that being the Kingdom Hearts series.

I’m not saying I’m sailing the high seas but the sea be a tempting mistress.

Anonymous Coward says:

I love how the PC Master Race is bending over forward to justify Valve, a private company which is complete opaque to us in regards to its expenses and revenues, taking its pound of flesh from developers while continuing to attack public companies who have to reveal their finances for daring to challenge the hegemony. It reminds me of how people wanted everything on Netflix and complained about new streaming services, and look at us now. More choice, better shows. Competition is good.

This comment has been deemed insightful by the community.
BG (profile) says:

Re: Re:

"Competition is good". Yes, that is correct. However, Epic is not attempting to compete. Epic’s strategy is to buy their way into the PC games market, ideally to buy their way into first place. Epic are doing almost everything they can to avoid having to actually compete with Steam.

This comment has been deemed insightful by the community.
Scary Devil Monastery (profile) says:

Re: Re: Re:

"Epic are doing almost everything they can to avoid having to actually compete with Steam."

This, right there.

Honestly, you could argue that a 30% skim of the top is a lot – but that depends on the product and volume of sale as compared to the cost of operation.
Epic is, instead, running their business at a loss in an attempt to undercut Valve rather than provide a competitive business environment.

I think Valve have their arms folded simply because they know damn well when the game is rigged the only way to win is not to play.

This comment has been deemed insightful by the community.
Anonymous Coward says:

How much is epic passing you, Timmy?

Fyi, the Microsoft store is mostly first party. So that whole switching to 12% is snake oil. So other devs’ profit is 0 of 12% because most of the pc user base uses steam.

Epic isn’t making money on their Spyware(let’s be honest, and describe it as such). They’re losing money with exclusives, and driving people back to piracy. You know the thing that steam(and other decent pc storefronts: ea, gog, discord, itch.io, etc) largely killed off. Even their growth numbers are propped up with give aways that epic doesn’t even let people keep.

Epic is barely even a store with the lack of security, a shopping cart, reviews, etc). They are so anti consumer, it isn’t even funny.

Yes, people like competition. What people don’t like it anti competitive bs.

This comment has been deemed insightful by the community.
Anonymous Coward says:

Re: How much is epic passing you, Timmy?

Discord is kinda the odd name out here… It’s primary focus is communications. To my understanding they don’t even have a main storefront anymore. They have a system for setting up a store in verified servers, but that’s unlikely to reach a normal user.

Discord’s Devs already know most people play games elsewhere, otherwise they wouldn’t have their overlay feature.

It can be argued that Discord isn’t really a storefront, they just have servers that happen to sell games.

Anonymous Coward says:

I dunno how many times we have to point out how your take is wrong regarding the EGS and Steam each time an article pops up about it.

Microsoft owns like no part of the market with its storefront. These cuts sound nice… For developers. But that doesn’t automatically mean customers will buy there. Most don’t know or dont care about the revenue split so they aren’t leaving steam.

Anonymous Coward says:

That’s why, whatever you think of the Epic Store, the added competition certainly is nice.

Wait wait… are you saying corperations might be able to do both generally bad things and generally good things at same time, and that Techdirt isn’t just showing blind fealty to whoevers side they are on? Madness.

( /s. See-also: previous sarcasm health warnings. Would be nice if objective evidence actually trigger rational thinking in self-reflection in trolls… but I’m pretty sure they are immune to that)

Anonymous Coward says:

Steam is like the youtube of gaming platforms, its hard to compete with it, it has millions of users ,its well designed ,easy to use
theres a limit to how many app stores people want to use,
epic is giving away games just to get people to use their store
how is epic helping piracy when it gives many games away for free ?
you go where the customers are,
most devs end up putting their games on steam after using other services .

Anonymous Coward says:

Where's the consumer benefit?

Ok,EPIC is taking a smaller cut, and now M$ is too. That’s great. I’m wondering where the benefit for consumers is though?

I would assume that if games were cheaper to sell on EPIC then some developers would be thinking "I want to make $10 on every copy of this game I sell, so let’s sell it for $14.99 on Steam, and $11.99 on EPIC." Then market forces would inevitably drive more sales to either EPIC – if the price point was the issue, or Steam – if the additional features of their platform were worth it to consumers. But since all the non-exclusive games I’ve looked at are still being sold for the same price on both platforms I’m obviously going to buy it on the platform with more features.

PaulT (profile) says:

Re: Where's the consumer benefit?

"But since all the non-exclusive games I’ve looked at are still being sold for the same price on both platforms I’m obviously going to buy it on the platform with more features."

Well, the point is that the decision is yours. If people keep buying from competing platforms, then the message is maintained that Epic need to get their platform to an actually useful state in order to compete. If consumers decide that they’re willing to sacrifice features for a lower price point, the developers still get a decent cut, which in turn encourages them to develop more content. The only downside would be if Steam decided that joining the price cuts meant that they wouldn’t bother developing the useful features they’re known for, but that’s unlikely in the short term.

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