In the context: It’s no secret that the Epic Games Store has been operating at a loss since its opening. Apple used this fact in court, suggesting that EGS may never be profitable. He claims that the store is not like the App Store and is unstable. Meanwhile, Epic continues to dump resources into its marketplace confident that it will have a very lucrative distribution platform in just a couple of years.
We are approaching the one-year mark since Epic started its antitrust lawsuit with Apple over the fact that it barred it and other companies from running independent stores on iOS. In the latest round of lawsuits, Apple’s attorneys went on the offensive, attacking the Epic Games Store (EGS), claiming it was “unprofitable.”
“The Epic Games Store is unprofitable and incomparable to the App Store,” Cupertino’s legal team told the court. “And won’t be profitable for at least a few years, if not at all.”
As harsh as this statement may sound, it is not devoid of merit. The Epic Games Store has reported losses of $ 454 million over the past two years and does not expect to make a profit until 2023. It lost $ 181 million in 2019 and another $ 273 million the next year.
“Epic has set aside $ 444 million in minimum guarantees for 2020 alone, while it predicts, even with ‘significant’ growth, only $ 401 million in revenue for this year,” Apple lawyers said. “Epic recognizes the trend will continue in the near future, with Epic planning to lose approximately $ 139 million in 2021.”
The defense team also postulates that given the store’s sunk costs, it does not believe EGS will be able to generate cumulative gross margins until at least 2027, four years longer than Epic had anticipated. Epic claims that even with a lower 12 percent sales growth, that’s enough to cover EGS’s operating expenses, leading to higher profitability much sooner than Apple claims.
Plus, Epic seems to be full of capital, thanks in large part to Fortnite. He doesn’t hesitate to invest in time-exclusive deals to make the store more attractive to consumers. Just to make Remedy’s Control an exclusive EGS product, $ 10.5 million was spent. Since its inception, it has also offered many free gifts, further increasing the store’s losses. Epic is clearly not afraid to spend money on gambling, which will ultimately generate huge profits.