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“It’s about economic efficiency when you have these stores sucking out a huge fraction of the profits from games. In many cases, it’s more than a majority of the profit already,” Sweeney told The Verge during an interview at the Game Developers Conference in San Francisco last month. So the difference between 12 and 30 is not just a little bit of money. “The truth is that most developers make a lot less than a 30 percent profit margin on a game. That, in turn, could affect how games are financed, built, and sold in a future where titles are increasingly developed for multiple platforms simultaneously. The showdown could reshape how one of the fastest-growing and most lucrative sectors of gaming sells its software.
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Photo by Nick Statt / The VergeĮpic’s opening shot was shifting the once-standard revenue split for games, taking a 12 percent cut instead of 30, with an even more generous offer to waive the Unreal Engine’s 5 percent royalty fee if your game is built using the software and also distributed through Epic’s store. Suddenly, you have a player in the market sitting on a pile of money who says, ‘Let’s go after that.’”įortnite has become a global phenomenon, earning Epic enough money to let it pay for exclusive titles for its store. “Epic now, with its success from Fortnite, suddenly comes into all this money. In order to send your rocket into space, you need to overcome gravity. “Valve had 15 years to develop and build Steam. Epic CEO Tim Sweeney has decided that he’d like everything to change, most importantly the size of the revenue cut platform owners like Valve have imposed on game developers. Yet now, thanks to the meteoric rise of Fortnite as one of the most popular games on the planet, Epic has quickly earned the financial and industrial clout it took Valve more than a decade to build. You couldn’t go against them and it was in benefit to hardline that conversation because Valve has so many players on Steam.” In January of this year, Valve said Steam had 90 million monthly active users.
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“For a long time, as a PC game developer, Steam was the only place to go. “In many ways, Valve has had the kingdom to itself for well over a decade,” says Joost van Dreunen, a game industry analyst specializing in digital distribution and co-founder of Nielsen-owned analytics firm SuperData Research. Software engineer Richard Geldreich, who worked at Valve for more than five years starting in 2009, has publicly referred to Steam as a “virtual printing press” exacting a “30 percent tax on the rest of the industry.” In 2017, Steam is estimated to have made more than $4 billion for Valve through game sales alone, not counting any downloadable add-ons or in-game transactions, which are both significant sources of revenue. Yet none have made a visible dent in Valve’s store. “Valve has had the kingdom to itself for well over a decade.” Smaller marketplaces like Itch.io and the Humble Store have managed to gain ardent followings among indie game fans, while chat app Discord has leveraged its social infrastructure to open a competing game store of its own. The only companies that have historically dared to defy Steam’s arrangement are the largest publishers in the industry, companies like Activision Blizzard and Electronic Arts that largely distribute only their own studios’ games outside Valve’s store. And a lion’s share of all digital sales goes through Valve. PC gaming, while not as large as the mobile marketplace that now dominates the $137 billion game industry, has grown immensely in the past decade and now approaches the size of the home console segment at nearly $33 billion in annual revenue, according to market intelligence company NewZoo.
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Without its own Android to challenge it, the store has for years been a de facto monopoly, earning Valve a 30 percent cut of all sales. But the company’s main moneymaker has been Steam, an iOS App Store-like marketplace for PC games. Steam parent company Valve has enjoyed enormous success as a game developer, thanks to titles like Half-Life, Counter-Strike: Global Offensive, and Dota 2. The ensuing competition has morphed into a console war-like debate for a modern generation of players who grew up under the unhindered dominance of Steam, a platform now facing its first real form of competition since it arrived on the scene nearly 15 years ago. Steam, the longtime leading digital distributor for the PC platform, is facing a significant challenge from an equally large and powerful player: Fortnite creator Epic Games, which launched its own PC games store last year. There’s a war brewing in the video game industry, and it’s getting uglier by the day.
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