
In a call to the press primarily about Epic's continual grievances about Apple needing to be forced to allow Epic's independent game store on iOS as well as Fortnite, Epic CEO, Tim Sweeney briefly addressed what has and has not been successful in driving users to create EGS accounts and his answer is unsurprising. Sweeney admitted that their strategy of trying to sign timed exclusivity deals was less effective than giving away games for free. Last year, the Epic Game Store processed the redemption of 580 million free games. On the other hand, many of you are also aware of PC game titles both big and small that no longer are purchasable on Steam or GOG and are only available on Epic, the most notable example being Alan Wake II, a game that Remedy has later admitted has not generated a profit. With the CEO admitting that these timed exclusivity deals are not moving the needle as much as they would like, I wonder if we will see less of that in the future.
Now, it has been a running storyline that Epic still does not make money by running EGS and the digital marketplace is in fact a huge loss leader for the company. Late last year, Forbes verified that in the five years that the Epic Games Store has been operating, it has always operated at a loss. Prior to that, The Verge did a report in Spring of 2023 about how exactly Epic goes about selecting and paying for all of the games it provides for free. In that report by Verge, Epic admits to spending millions of dollars to keep the program rolling.
Sweeney did provide context on why the cost of Epic's free games program isn't a cause for concern. In the disclosure he had with the press recently, he stated:
"Giving away free games seems counterintuitive as a strategy, but companies spend money to acquire users into games," said Sweeney. "For about a quarter of the price that it costs to acquire users through Facebook ads or Google Search Ads, we can pay a game developer a lot of money for the right to distribute their game to our users, and we can bring in new users to the Epic Games Store at a very economical rate.
"And you might think that this would hurt the sales prospects of games on the Epic Game Store, but developers who give away free games actually see an upsurge in the sale of their paid games on the store, just because their free game raises awareness. And it's so much that often developers, when they're about to launch a new game, come with us wanting to work closely on a timed release of a free game, just to drive user awareness of their next game. That's been an awesome thing. And it's been by far the most cost effective aspect of the Epic Games Store."
It is important to note that Tim Sweeney has been full of shit before. My absolute favorite example dates back to 2008 when Sweeney was hyping up the release of Gears of War 2 and posited that Intel's discrete graphics systems would mark the death of the GPU. So, of course the man is saying everything is fine. He might understand games and the tech industry, but he's been in the corpo circles long enough that you have to take everything he says with a grain of salt. That said, while Epic definitely is not hurting financially thanks to the growing use of Unreal Engine 5, you do have to wonder what the long-term goal is for EGS.
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