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CEO Tim Sweeney breaks down Epic Games Store's 12% markup

Published: 13:53, 24 April 2019
Epic Games
The Epic Games Store logo
Epic Games Store

Epic Games' CEO Tim Sweeney has recently tweeted his explanation of why their store takes only 12 per cent, as opposed to the industry standard of 30 per cent, arguing that physical stores with physical stock only take 10-15 per cent.

"Why 12%? We chose this number to provide a super-competitive deal for partners while building an enduring and profitable store business for Epic. From that 12%, we net around 5% after direct costs and that could grow to 6-7% with greater economies of scale", he wrote.

Sweeney reminded that Activision, EA and Ubisoft ended up making their own stores, because they found it immensely more profitable than paying 30 per cent to another store.

"You have to understand, 30% is an enormous markup. When a grocery store sells an Amazon or iTunes or Steam card, their markup is maybe 10% to 15%. That’s for a physical retail store with shelves continually stocked by workers", he pointed out.

Additionally, credit card companies processing those transactions take 2.5 to 3.5 per cent, he said, which covers their fees for banking and customer service.

Now, it's incredibly important to note that this 30 per cent cut was once a godsend and that Steam's arrival was an industry-changing move, which threw a truckload of wrenches into publishers' plans at the time.

While we should all be undoubtedly thankful to Gabe and Co for this, those days are far, far behind us, and Sweeney thinks so too. 

"30% was a good deal in the early days of digital stores. But now digital stores are a $100,000,000,000/year business with truly vast economies of scale, and the savings aren't being passed on", Sweeney said.

Gearbox's CEO Randy Pitchford recently made a similar point , arguing that Valve's business model has involved very little reinvesting. Where there was some, it wasn't in games, but rather in other things, like SteamLink, VR tech or others. 

AltChar Logos of the Epic Games Store and Steam Epic Games Store v. Steam

In that sense, Epic's initiative along with their Store should be regarded as the second coming of Steam, but not everyone seems to think so. Well, we guess no change ever came without friction, so at least we know we're getting somewhere. 

You can find Sweeney's tweet here .

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