On Epic, revenue-shares, and manufactured outrage

Many many moons ago, back when I was fifteen or so studying economics at school, I wrote a project for my coursework about the economics of videogames. One diagram I included was a pie-chart I made of the various slices of a game’s RRP that went to each of the various elements involved in getting a game to sale including retailers, distributors, publishers, developers, and a couple of others which I don’t remember thirty years later. I do, however, remember being startled by how small the developer slice was. Of course at the time, most videogames would be funded by the publisher so a revenue share was not a given at all but even if you added the developer and publisher slices together you were still looking at less than half of the pie. The reality of all the things which needed to come together to get a game from a single master to being on a proper printed CD-ROM in a shiny box with a lovely manual in multiple languages, on a shelf in any random shop around the world was not something you really thought about at that age.

When Valve created their Steam store at a time when PC gaming was so screwed you were lucky if a game shop had more than half a shelf tucked away somewhere for PC games, coinciding with a time when the internet was becoming mainstream, digital distribution became viable and this changed everything. Without physical boxes to manufacture and transport, most of those pie chart slices evaporated immediately and while the store itself continued to take a slice about the same size that stores always have, since that was now the only slice being taken, for the first time the lion’s share of the pie went straight to the developer and publisher.

Digital distribution also opened up another option, and that was to forgo a publisher entirely. Traditionally, publishers were needed in order to arrange all those complicated steps needed to get the game in shops around the world and fund the costs of developing the game in the first place. With digital distribution streamlining the process of getting a game to sale, self-funded development became viable and another slice of the pie could be removed. The whole pie-chart optimised down to just that one remaining store slice and everything else going to the developer. This, combined with the limited number of games initially on Steam and therefore the huge visibility any one game would get, created the indie game boom.

Looked at like this, a pie chart which has had almost all of its slices removed save for the store itself, this revenue share looks anything but unreasonable. Would it be nice if we could somehow reduce that store slice even further? Sure, it would be nice. But in context here, we’re really arguing about having won a nice big prize that we don’t think is quite big enough.

Unfortunately, though, things did not remain so straight-forward. Over time, as the number of games on Steam increased any particular game’s visibility decreased. It became possible to get lost on the store and so the number of sales you could expect to get, lowered. As every game became a smaller and smaller fish in an increasingly large ocean, the need to market your game increased. Publishers stepped back in, other slices got re-introduced to the pie chart and we started to go full-circle. The more you slice up that pie, the more you start looking at that store 30% wedge and questioning its size. On average, nowadays, indie games sell so few copies that even a small re-distribution of those slices could make a difference.

And this is where I find the statements and objectives laid out by Epic to be muddled. Is it right that on any given platform that platform should be in complete control of everything? On a Windows PC you don’t have to use Windows Store for games since there’s Steam, GOG, Humble Store, Itch, and the ability to sell directly if you want. So while Steam dominates, other options are available but this is not so for other platforms and this is, in my opinion, a reasonable thing to demand.

But that’s not the end of Epic’s argument. Throughout this whole debacle to date, it has been framed as bad for customers or, at least, the alternative is good for customers. What’s good for customers is, really, one single trustworthy store that they buy all of their games and apps from. It’s simple, straight-forward, and consolidates all your purchases into a single convenient library. It’s argued, then, that if we instead opened the platform, created competition between stores, that the 30% wedge would be driven down through that competition – that the stores are therefore competing on price and customers win overall. Does anyone really believe that this would be the result? Have the multiple major stores on PC resulted in greatly different revenue shares? And do we see those slight differences in revenue shares passed on to the customers or, rather, pretty much consistent prices across all stores in general?

This is really the rub in terms of my distaste for the manner in which Epic are conducting themselves. The redistribution of revenue is a matter of primary importance to those smaller developers for whom the difference between 30% and 12% could be the difference between staying in business or not – affording to pay rent or not, being healthy or not. On the scale of large companies, it’s the difference between profit and more profit. But in framing the issue in terms of the benefit to the customer – in weaponising their outrage – it’s building in the principle that a smaller store revenue share leads ipso facto to a reduced cost to the customer. Small struggling developers, who could really need that extra revenue, would be pressured into handing that saving away because a giant company who still gets to slice 12% from every single transaction on the platform has decided these are the terms of the arrangement and has primed their customers as such. This doesn’t really look to me as a morally superior stance to their Orwellian-framed enemies.

If they don’t expect the extra revenue to be handed off to the customers (Horizon Zero Dawn, £39.99 on Epic Game Store, £39.99 on Steam) then why are they bringing customers into the fight? What difference does it make to them how the pie gets sliced? How is this about them, and not just about you wanting to make a lot of money out of selling videogames? You can have that fight, but that’s between you and the other platforms. It’s got nothing to do with us and acting like it has comes across to me as disingenuous.

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