Epic Games has revealed that its digital storefront is still facing challenges in becoming profitable five years after its launch.
During the first day of the Epic vs. Google court case, Steve Allison, the head of Epic Games Store, testified that the digital PC store is not yet profitable despite being introduced in December 2018. He did affirm that the company’s primary objective is still centered on growth.
It was also brought to light that emails uncovered during the Epic vs. Apple trial in 2021 implied that the company aimed to capture half of all PC gaming revenue. Epic CEO Tim Sweeney even tweeted at the time that losing over $300 million on the store was a “fantastic success in reaching gamers with great games and a fantastic investment into growing the business!”
Furthermore, during this trial, the company made a statement indicating that the Epic Games Store would start generating profits by 2023, a projection that has not materialized. Epic Games has been spending millions to provide free games every week, aiming for a fairer profit-sharing model between developers and publishers. This ongoing campaign shows no signs of slowing down, despite the fact that the company does not pay for each copy given away.
The legal battle between Epic and Google comes after Epic filed a lawsuit against Google in 2020 fueled by a dispute over in-app purchase fees. Epic claimed that the Google Play Store represented an unlawful monopoly.
It’s evident that Epic’s strategy of investing heavily to achieve profitability has impacted its workforce as it recently laid off approximately 830 employees, which accounts for 16% of its workforce. Sweeney mentioned that “layoffs are the only way” after acknowledging the financially unsustainable situation.
“For a while now, we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators,” Sweeney wrote in a statement. “I had long been optimistic that we could power through this transition without layoffs, but, in retrospect, I see that this was unrealistic.”
“While Fortnite is starting to grow again, the growth is driven primarily by creator content with significant revenue sharing, and this is a lower margin business than we had when Fortnite Battle Royale took off and began funding our expansion. Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
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