It’s been almost five years since the Epic Games Store was launched, and to this day, it seems that this platform has not yet hit profitablity. This fact came ot light recently, during the Epic Games vs Google court case, where the head of Epic Games went on record to say that the Epic Games Store had failed to generate a profit in its five years existence, which began back in December 2018. However, he further went on to say that the company is still focussed on the future and aggressive growth. Their ambition is to capture atleast half of all PC Gaming revenue. A bit too far fetched, but not impossible, if they can play their cards right.
Epic Games invested close to $300 million on their digital store and while it was termed a success by CEO Tim Sweeney, it looks like corporate is starting to sweat as the forecasted indicated 2023 to be the year where their ‘Store’ turned profitable, and with just a few days left for the year to end, it is not looking too good for their ‘successful investment.As part of their effort to support developers and publishers with an equitable profit split, Epic Games spends millions each week giving away free games. A campaign that shows no signs of slowing down anytime soon. Even though they do not pay for each copy given away.
The legal battle between Epic and Google arose in 2020 when Epic filed a lawsuit against Google over their dispute regarding, in-app purchase fees. Epic argued that the Google Play Store was operating as a monopoly. Furthermore, Epic’s strategy involved spending an amount of money to gain an advantage.
This loss of profitability has hit the employees of Epic Games, with 830 individuals facing the sack, which is close to 16% of the entire workforce. Tim Sweeney has justified these layoffs, saying that laying off workers was the only way for Epic Games to survive as an entity. In an internal email, Sweeney had informed the staff that for a while now, Epic Games had been spending more money than they were actually earning through business and other investments combined. He also said that the growth of Fortnite was imperative for the company’s profits moving forward.
Initially, he had been optimistic that they could navigate this transition without resorting to layoffs; however, in hindsight, he acknowledges that such optimism was unrealistic. Although Fortnite is experiencing growth again it is primarily driven by creator-generated content with revenue sharing involved. This particular aspect of their business yields lower profit margins compared to when Fortnite Battle Royale took off and funded their expansion efforts. While achieving success with their creator ecosystem is commendable it necessitates structural changes, to their overall economic model.
The initial intention was for the company to brave this phase without the need to layoff employees, but now, Sweeney concedes that this was a case of over optimism, and that the layoffs, though painful, have given the company a new lease to life. Fortnite seems to be finding its feet again with some fresh collaborations, and the company hopes that this will spearhead the comeback for Epic Games.
