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Epic thinks EGS could make up 35-50% of the PC gaming market by 2024

Buying a seat at the table — Epic v. Apple gives us our deepest look yet into the economics of Epic’s storefront. Kyle Orland – May 4, 2021 8:10 pm UTC In 2019, the EGS saw a series of daily user spikes surrounding the release of new free games. Free games also succeeded in bringing…

Purchasing a chair at the table —

Epic v. Apple gives us our deepest look yet to the economics of Epic’s storefront.


  • In 2019, the EGS watched a run of daily user spikes surrounding the launch of new free games.

  • Free games also triumphed in bringing new users into the EGS ecosystem.

  • Important exclusives were by far the largest driver of true spending EGS games.

  • “Buyout” spending individual free titles could vary considerably.

  • The vast majority of users attracted to EGS by free matches did not pay a dime to Epic from the EGS’s first 10 months.

Last month, a filing in the Epic v. Apple court case revealed the public how much cash Epic was throwing about to secure private”guarantees” and offer free games in a bid to establish a market foothold for your Epic Games Store (EGS). Today, a new filing in the case gives a comprehensive breakdown of how that money was spent on the first 11 weeks of the Epic Games Store’s presence (through October 2019).

While this edition of Epic’s Review of Performance and Strategy is somewhat dated today, it still gives the clearest public indication yet of how Epic sees huge upfront spending free and exclusive games as key to bringing new users to the EGS. Epic hopes its investment can help to finally make the EGS a self-sustaining, rewarding storefront with a significant discussion of the PC gaming industry.

How to make money with free matches

In the initial 10 months of the EGS’s presence (during September 2019), Epic spent approximately $11.6 million to disperse just over 104 million free copies of 42 distinct names, the filing shows. The”buyout price” paid from Epic to the publisher for each individual title varied, but the center half of titles (25th to 75th percentile) price $80,000 to $350,000 each. Two of the free games from the bunch have been worth at least $1 million to Epic–Mutant Year Zero ($1M) and Subnautica ($1.4M)–while offering free copies of those three accumulated Batman: Arkham games price Epic $1.5M complete.

Epic steps how many individual downloads every free game brought, but the organization’s real measure of success to get a free-game giveaway appears to be how a lot new Epic accounts came to the service for this game. Epic linked 5 million new accounts for the free-game application through September 2019, which means it invested about $2. 37 a new account. Games such as those from the Batman: Arkham series and Subnautica were big attractors for new EGS consumers, but names such as Slime Rancher, Overcooked, Hyper Light Drifter, and World of Goo brought in surprisingly substantial numbers of new EGS users as well.

In the EGS’s initial 10 weeks, the huge majority of users coming to the store for free games were whole freeloaders who did not invest a dime around the store. But about 291,000 of these (5. 34 percentage ) became paying clients, and people who did spent an average of $36. 30 each about the Epic Games Store in that moment. Add it up, and you receive about $10.6 million in EGS revenue that is pretty straight attributable to”free” games.

$11.6 million.

Amount Epic spent acquiring free game giveaways at the EGS’s initial 10 months.

Viewed from the short term, the whole free-game idea seems like a dreadful deal for Epic. Through September 2019, the company basically paid $11.6 million for free games and only got $10.6 million in revenue from new users drawn by those games. The transaction looks even worse when you consider that Epic retains only 12 percentage of the spending, or roughly $1.3 million.

But a single 10-month slice doesn’t catch the whole story here. Epic reasonably supposes that a number of those 291,000 new paying clients will continue spending money and that some percentage of 5 million entirely cheap (thus far) users will eventually invest money on the EGS now that they have accounts.

Epic notes in its planning document a storefront such as Steam earns roughly $3 in average earnings per active user monthly . Even though many of the EGS’s new paying consumers don’t stay active, the individuals who do could eventually make up for the cost of the free games which attracted them in the first location.

Only on EGS

Free games aren’t the only way Epic is attempting to attract new customers to its store, needless to say. The company is also paying countless dollars in”minimum guarantees” to attract exclusive matches to its shop.

Some of the exclusive EGS deals seem to be paying off very well. A chart of daily EGS earnings in the store’s first 10 months reveals significant spikes around the exclusive launches of Metro Exodus, The Division 2, also World War Z early in the year. Then comes Borderlands 3‘s exclusive launching in September, resulting in a massive revenue spike well above any the store had seen and driving about $82 million in total EGS revenue in September. For instance, that single month conquer the $78 million EGS brought in throughout the entire preceding nine months.

  • Epic recouped its $80 million upfront revenue guarantee for Borderlands 3 within a couple of weeks.

  • Epic sees the EGS’s growth as highly reliant on whether it continues to invest in exclusive earnings guarantees.

  • Attracting new users is not inexpensive, but it might pay off in spades if EGS becomes big enough.

Borderlands 3 also shows how these kinds of exclusive bargains don’t in fact have to be costly for Epic in the long term. That’s because minimum revenue guarantees are just there as a backstop if the game does not bring in that much cash in earnings by itself. If the game sells well, Epic uses that EGS revenue to recoup the guaranteed money it paid upfront and ends up ahead of the game.

In Borderlands 3‘s instance, the $80 million in sales Epic guaranteed upfront was already recouped over the first fourteen days of sales, making Epic whole again fairly quickly (although Epic paid an additional $35 million in marketing and other non-recoupable prices ). In reality, Epic earned $9.2 million from its average 12 percent earnings cut in the first two weeks of Borderlands 3 sales and brought in roughly 800,000 new consumers to the EGS store to boot. Not a bad bargain, all told.

$80 million. )

Amount of revenue earnings Epic ensured to procure EGS exclusivity for Borderlands 3.

Of course, not every exclusive game could be Borderlands 3.  In 2019, for example, Epic paid roughly $542 million in minimum guarantees to draw exclusive titles that it projected would earn just $336 million in recoupable income over their lifetimes. The $206 million difference in these two amounts is Epic’s real expense for attracting those exclusives (along with the new users who come with them) for the year.

Eventually, since the foundation of EGS consumers for those exclusive matches grows, Epic anticipates it will gradually begin recouping 100 percentage of its new minimum guarantees, fully regaining the upfront costs it uses to entice exclusives. But how quickly that happens depends on a few matters.

Aggressive expansion or”winding down”?

The most fascinating part of Epic’s 2019 EGS prediction concerns both distinct futures it sees to the storefront. In one of those scenarios, the company continues an”aggressive pursuit” of exclusives, making guarantees of $469 million annually for 34 exclusive titles in both 2023 and 2024. In another scenario, Epic begins trickling down its private guaranteed payments, paying only $80 million to two exclusives in those years.

Epic’s projections under all one of those scenarios show exactly how important it sees exclusives to driving the EGS’s growth. Under the aggressive model, with heaps of exclusive matches each year, Epic believes it might attain about 125 million total users and 50 million monthly active users by 2024. That number could go down to 90 million users and 33 million active users if”Steam competes,” presumably by decreasing its revenue cut to be nearer to Epic’s 12 percent.

Under the”wind-down” model, however, Epic ceases paying exclusives relatively fast, and the Epic Game Store plateaus at around 58 million total users in 2024. Active users really begin decreasing after 2020 in this scenario, deflating to 16 million monthly from 2024.

Under the aggressive scenario, Epic thinks the EGS could be responsible for everywhere from 35 to 50 percent of the PC gaming market by 2024, based on Steam’s reaction. That would be a huge success, considering estimates currently place Steam at roughly 75 percent of that market.

But if Epic stops paying for exclusives and winds down, the provider sees EGS market share peaking at approximately ) percent before falling to about 8% by 2024. That isn’t nothing, but it would be a disappointing piece following Epic laid out hundreds of millions of dollars due to its foothold.

Epic’s thinking on the future of this Epic Games Store may have changed in the 18 weeks because this projection was initially created, naturally. To be sure, the amounts the firm released publicly in 2020 suggest that the EGS might be growing considerably faster than has been projected the year before (even though it’s difficult to compare internal projections like this to public-facing data directly).

In any case, going ahead, we are going to be keeping tabs on how many new timed exclusives show up about the Epic Games Store as a potential sign of whether Epic is staying”aggressive” or may be starting to”wind down” the EGS.

Listing image by Aurich Lawson / Getty Images

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