by Toby Heap, Head of Commercial Development at Flexion
The news that Epic Games will host webshops for game developers could be significant as Google and Apple ease their strangleholds and markets open up.
Looked at one way, it is just the natural progression of a company building a games-service business. But Epic is a disruptor and, in that light, many will see it as the latest tactic in a war with the app-store giants. Its webshops will offer a much more cost effective alternative for taking payments to Apple and Google’s 30% transaction fees.
The move follows Epic’s launch of its mobile Game Store (Android worldwide, and iOS in the EU) to third-party developers at the beginning of the year, with favourable terms. Together, these developments signal a new-found freedom for game makers to innovate within the mobile market, albeit at the cost of having to deal with the inevitable fragmentation.
The root of the issue is the 70/30 revenue split that the big two app stores have clung to despite widespread criticism from a diverse group of mobile developers. Development and user acquisition costs have steadily increased as discoverability in the stores has diminished through overcrowding. The charge against Apple and Google (in court and elsewhere) has been that they’ve used market dominance to maintain a stranglehold on their own revenue.
But the bigger picture is that reduced developer profits have resulted in underinvestment in the games themselves and that has translated into a period of stagnation for the whole industry (including Apple and Google).
In August 2020, Epic tried to publish its blockbuster Fortnite with a mechanism for out-of-store purchases on Apple and Google. This violated T&Cs and the game was blocked in both stores.
Epic sued.
In doing so, the company became a champion knight for all game developers. But the court cases were more like trench warfare than an honourable jousting match. Fierce resistance from the tech giants saw Epic make gains in tiny steps and at enormous cost. It’s nearly five years later and the battles continue.
In August 2024, Epic CEO Tim Sweeney revealed that the court battles had cost Epic hundreds of millions of dollars. Some analysts put the figure much higher. On top of that, Sweeney said the company had lost about $1 billion because Fortnite had not been in the app stores. It’s worth noting that it also represents a loss of hundreds of millions for Apple and Google. Despite costs, Epic continues to believe the fight is “worth it”.
The small gains – particularly in the US where developers now have the right to direct users to payment systems outside the app store – have changed the mobile gaming landscape for good. When you take payments on your own webshop, you pay a smaller cut – Epic will offer developers 100% of revenue for the first $1 million in sales in its webshop deal and will take only 12% thereafter. This is the same deal it offers on its mobile Game Store. Other options offer similar financial gains. Although webshops currently only offer developers a way to improve monetisation of existing players, it is a starting point for a future where there is more scope to build long-term relationships with users in a way you just can’t in the app stores.
As a result of Epic’s war of attrition, most of the top 50 developers are already investing in webshops – they see the benefits clearly. But, Epic itself estimates that, if you look at the top 200 developers, only 18% have webshops today. If Epic’s new service contributes to a general shift in consumer behaviour that will certainly broaden the fight against Google and Apple.
Epic’s webshop service is a symbol of new options becoming available to developers. But this new-found freedom comes at the cost of increased fragmentation. An increasingly complex market for developers to navigate means more non-core business activities need to be managed. Many will look for help to new specialist services and providers. Google and Apple are likely to remain part of the equation but there are many other options worth considering, as a way of maximising margins while reducing opportunity cost. A shift away from the Apple/Google duopoly has already started in earnest and the wisest of developers are taking a multichannel approach to the future.
New commercial freedoms will drive innovation and that should take us back into a period of growth.
