While a decision following the Epic Games v. Apple trial from May isn’t expected until later in 2021, antitrust experts predict Apple will have to adjust some policies of its App Store in order to foster a fairer ecosystem for third-party developers, who currently must comply with Apple’s 30% cut of in-app purchases. Epic tried to circumvent this system in 2020 and saw “Fortnite” booted as a result.
However, one immediate result of the trial was the leaking of Epic’s earnings documents, as reported by The Verge, which confirmed prior reports that the game has been earning billions of dollars for the privately held company since its explosion in popularity.
Revenue from Unreal Engine, a popular game engine used to program games since the ’90s, has ended up taking a significant backseat to “Fortnite,” which currently accounts for most of Epic’s revenue.
However, Epic has had the sense to not get too comfortable with the free-to-play game’s revenue stream, expanding into other areas as “Fortnite” playership has slowly declined.
While Epic proudly boasted 350 million registered “Fortnite” players across the globe in May 2020, back when much of the gaming world was stuck inside during the pandemic, actual monthly active users (MAUs) are far less.
This is normal for popular games, and the actual MAUs of "Fortnite" for 2020 were likely higher than what Epic forecasted, as CEO Tim Sweeney said in a court proceeding that Epic pulled in gross revenue above $5 billion in 2020. (Epic’s 2020 forecast was likely made before the full scope of COVID-19 was apparent.)
Still, Epic ended up launching a digital storefront to compete against Steam at the end of 2018 and also announced its multiplatform publishing arm in 2020, steering the company away from total reliance on in-game spending in "Fortnite."
Often referred to as microtransactions, in-game spending is the predominant payment scheme for free-to-play games and is expected to continue growing alongside mobile, which has become the dominant sector of the global games market.
It’s a no-brainer why Apple wants a sizable portion of in-game spending — something Epic is far less hawkish about on its own store, only taking 12% of revenue from outside developers.
But the California judge presiding over Epic’s case with Apple contested Epic’s motives, positing that Epic’s motivation for suing Apple was less about monopolies and more about Epic wanting to preserve “impulse purchases” rather than find an Apple-compliant way for players to acquire the “Fortnite” in-game currency outside of the mobile app.
The judge’s logic is that microtransactions are less effective as more steps are required of the player to make such purchases. So, if nothing is stopping Epic from informing players how to make game-related purchases outside of the App Store, provided the info isn’t relayed through the “Fortnite” mobile app, yet Epic chooses not to do so, then it’s utilizing its own predatory payment scheme against the player base of “Fortnite,” which counts many none-the-wiser children among its ranks.
Ultimately, Epic’s presence in the gaming industry will remain strong as it works on growing its storefront and publishing efforts while continuing to build the newest iteration of Unreal Engine. But no matter the outcome of its case against Apple, the scale of the company’s own finances won’t escape scrutiny anytime soon.
This is an extension of Variety Intelligence Platform’s 21-page special report on the video gaming market. For more on the sectors and trends steering video games toward a nearly $200 billion market cap, read the full report for subscribers.