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The Epic Games Store is hemorrhaging cash to deliver exclusives and free games

Epic's bid to disrupt the digital distribution status quo with the Epic Games Store is costing the company hundreds of million of dollars each year.

Epic's bid to disrupt the digital distribution status quo with the Epic Games Store (EGS) is costing the company hundreds of million of dollars each year. 

Court documents submitted by Apple ahead of its high-profile showdown with Epic indicate the Fortnite creator lost around $181 million on the EGS in 2019, and was projected to lose another $273 million on the storefront in 2020.

The filing also notes that Epic has committed $444 million in minimum guarantees for 2020 alone, and is anticipating a further loss of $139 million in 2021. Epic had previously revealed that PC customers spent over $700 million on the EGS in 2020, of which third party games represented 37 percent at $267 million.

While it's no surprise to see Epic throwing cash at a fledgling storefront in order to compete with established powers like Steam, it's still interesting to see just how much the company is spending in order to bag exclusivity deals and dish out monthly free games. 

Indeed, Epic itself has acknowledged that the incentives and investments it has made to developers and publishers will result in "unrecouped costs," but in its own legal filing claims the marketplace will become profitable by 2023. Apple had suggested the store wouldn't be profitable until 2027 at the earliest. 

"The Epic Games Store is not yet profitable at its current scale and stage of development because it has front-loaded its marketing and user acquisition costs to gain market share," said Epic. "EGS's 12 percent transaction fee is sufficient to cover the variable costs of running EGS, including payment processing, customer service, and bandwidth."

The latest exchange comes before the two companies head to trial on May 3 over Apple's decision to remove Fortnite from its platforms after Epic broke App Store guidelines. 

Epic claims Apple has turned the App Store into an "unfair and anti-competitive" monopoly by refusing to let other companies implement third-party payment options. Apple, however, has argued it has plenty of competition from other storefronts that operate in a similar fashion, and in its most recent filing claimed the "Epic Games Store is unprofitable and not comparable to the App Store."

You can view and download the proposed findings submitted by both Apple and Epic over on Scribd.

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