Losing Steam: a look at the numbers on the Epic Game Store

There’s a certain complacency that sets in when you’ve been the King for as long as Valve. Of course, GOG offers DRM-free games and itch.io allows developers to define their own revenue sharing models. Neither of them, nor any of the smaller players in the market, seem to have made a dent in Steam’s dominance (or pride).

Last week may have revealed the first real contender to the throne in the Epic game store. Epic Games is building on the worldwide success of “Fortnite”, making money and disrupting the way the industry thinks about live games and other service offerings.

It’s fair to say that Epic (with the muscle of ‘Fortnite’) was the biggest motivator for Sony to finally allow cross-platform play with other console families (and now Epic is give these multiplatform tools free). There are few games that are big enough to succeed on Android and bypass the Google Play Store altogether. “Fortnite” did it without breaking a sweat.

Epic has also turned the screw on one of Unreal Engine’s main competitors, Unity, by shifting its revenue share from the traditional 70/30 split to 88/12 in favor of asset creators. Oh, and that made that adjustment retroactive for four years. This same 88/12 revenue split is a hallmark of Epic Games Store’s spectacular entry into the competitive digital distribution arena.

Discord, which started selling games in October, has the advantage of offering a universal launcher, bringing together most of your game library (Battle.net and Epic Games Store do not seem to work perfectly yet). Discord also has 130 million users. in May 2018, with 19 million daily connections. And earlier this month, Discord announced that it will offer a 90/10 revenue split in favor of creators.

Valve should scramble to figure out where this went wrong, especially since Epic’s announcement was perfectly timed to make Steam’s recent changes in favor of revenue sharing embarrassing by contrast. That’s not to say Valve is actually worried about the announced new Epic Game Store. In fact, it often takes real decline rather than the threat of it to displace entrenched market leaders.

While Valve was busy focusing on how many AAA titles it was losing to publisher-managed distribution (“Call of Duty: Black Ops 4”, “Fallout 76” and “Battlefield V”, between others), Epic was quietly wooing independent developers with exclusive offers. Team Meat’s “Super Meat Boy Forever”? Exclusive to Epic Games Store. Supergiant’s new “Hades” roguelite? Exclusive to Epic Games Store. The Souls-like “Ashen” from A44 and published by Annapurna Interactive? Surprise launched on the Epic Games Store during the Game Awards. “Satisfactory” from Coffee Stain Studios? Not only an Epic Games Store version, but the game’s Steam page has been wiped out.

So… why are independent developers excited about the Epic Games Store?

Earn your livelihood
To understand why Epic and Discord are making huge waves, you have to look at the trends. Valve launched Steam a little over 15 years ago. At the time, the concept was revolutionary: a unified storefront for games with automatic updating to make sure you were always playing the most recent version.

It didn’t take long for fans to clamor for all PC versions to come to Steam. And the developers and publishers were eager to play the game. It was worth the 30% cut Valve was taking to be ahead of thousands (then) and now 125 million registered users.

It was an easy selling proposition for Valve. You give us 30 percent, and we’ll put your game in front of the biggest PC gaming audience in the world. It was sufficient until a few years ago. In 2017, over 7,600 games were released on Steam. This represented 43 percent of the total number of titles available on the service. In 2017,

A quick overview of the trajectory creates an image of what started to go wrong:

  • 2005: 6 games
  • 2006: 71 games
  • 2007: 223 games
  • 2008: 183 games
  • 2009: 356 Games
  • 2010: 276 Games
  • 2011: 283 Games
  • 2012: 379 Games
  • 2013: 565 games
  • 2014: 1772 games
  • 2015: 2 964 games
  • 2016: 4,207 games
  • 2017: 7,672 games

While Steam has been King of the Hill for a decade, it wasn’t until 2014 that success became an issue for Valve. Growth is a double-edged sword. Of course, this means more revenue and power, but it also requires a level of investment in infrastructure and systems to continue serving stakeholders (both developers and consumers) with the same level of care. .

In 2014, Steam began to develop a discoverability issue. The games got lost in the shuffle. About 43% of all Steam games were released in 2014. In 2015, 59% of all games on the platform were released that year. Last year? That number has dropped, but to just 40 percent. The Steam library is growing at a tremendous rate and Valve has not provided stakeholders with the necessary discovery tools.

New versions quickly come off the first page. There is very little support Valve is able to offer in terms of visibility. Simply put: Steam versions still cost developers 30% of each copy sold, as it always has been, but the platform’s value has declined as more versions flood the storefront.

This has not gone unnoticed.

In one annual survey conducted by Lars Doucet, co-founder of Level Up Labs, the developers had the chance to comment on the perceived value of being on the Steam storefront. Only 11% of 167 people surveyed believed Steam earned their 30% discount last year. This is down from 39% the year before.

Epic hits when the iron is hottest.

Capitalize on the woes of a competitor

According to Mike rose, founder of independent publisher No More Robots, the average Steam version sells for around 2,000 units (total) and earns $ 12,500 in the first month and $ 30,000 in the first year. This is due to a combination of the massive noise of dozens of releases every day and discovery issues that Valve should have seen coming after the iOS App Store fell victim to it years before. Valve has done itself a disservice, by encouraging “asset return” games that exist only to flood the collectible card market and earn revenue after hungry collectors exit.

But let’s break down what this same version on the Epic Games Store could win. All other terms being equal, the net earnings of $ 12,500 for a developer on Steam would be $ 15,714 in the first month and $ 37,714 in the first year.

Rose’s data is an estimate based on a variety of benchmarks, but not actual sales reports. This cannot be verified, nor for that matter the numbers generated from SteamSpy. In 2017, SteamSpy suggested that the median ownership of games released that year was 1,500 (500 less than Rose’s claim). If we assume Rose’s estimate is approximate and SteamSpy was “pretty good”, We can make some comparisons of magnitude.

If the data itself isn’t quite accurate, but is consistently lagged by the same margin, we can still connect the dots and determine how sales growth has changed. In 2015, SteamSpy reported the median number of units sold for new games on Steam was 32,000 copies.

Epic also promised an organized showcase. While we don’t have full details on what exactly this means, we can assume that the Epic Games Store won’t open the doors and allow all games on the platform. There is no incentive for asset rollovers, as there is no secondary market for collectible cards. Even though Epic only managed to replicate Steam’s supposed performance in 2015, it’s a huge improvement over what Valve is offering developers today.

To put that in financial terms, assuming an average sale price of $ 20 over the life of a game and 32,000 units sold, a developer will earn $ 563,200 for their game. If that game was released on Steam in 2015, the developer would only earn $ 448,000. That’s enough to keep an independent developer going and making another game. The difference between Steam’s 70 percent and Epic Games Store’s 88 percent is another full-time member of the team (or two. ), more subcontractors or more spending on marketing and public relations.

The 90 percent of Discord would give developers an additional $ 12,800. However, Discord has said it will allow self-publishing in 2019. The impact of this on discoverability is not yet clear.

Epic and Discord can compete on price alone. The 88 percent and 90 percent (respectively) they’ll pass on to developers far exceed Steam’s 70 percent. But it’s not just a fight on this front. Having a clean slate and being able to learn from Apple and Valve’s discovery mistakes is where Epic and Discord can really shine.

That is, if they can advocate their case with consumers who are tired of adding an extra installer to their rotation, with EA’s Origin, Ubisoft’s Uplay, GOG, Battle.net and the Bethesda Launcher. Epic and Discord need to offer value to make up for the reduction at the convenience.

The easiest way to woo end users is to show them that having another storefront is good for them. Epic is already promising a free game that users can keep every two weeks. It’s a good start.

Getting developers to pass on some of the difference between Steam’s 30 percent cut and the new storefronts 12 percent and 10 percent, respectively, might be enough to woo the vocal group who appear to dispute having an icon of more in the taskbar. Many end users won’t know (or just won’t care) that one storefront helps developers more than another. Messaging should be user-centric.

There are still a number of unknowns in the Epic Games Store, and while there aren’t some tough conversations within Valve’s Steam team, there should be. With the ‘Fortnite’ war chest, relationships established with developers through widespread use of Unreal Engine, and leadership thriving through disruption, the Epic Games Store has the potential to be more than an equally well-funded. . Discord’s massive installation and user base make it a real competitor with its new pricing structure. These two are creating real competition in space for the first time in years. If Valve responds with improved policies and competitive financial terms for developers, whatever storefront comes out on top, developers and consumers alike will benefit.

But don’t expect Valve to move fast. The threat of market share erosion is not enough to exhaust a well-established leader. It will take significant and sustained competition to move the needle forward.

“In-Game Economy” is a monthly column exploring business events and demystifying the workings of the video game industry by Michael Futter, freelance journalist and author of “The GameDev Business Handbook”.