Epic Games splashed a huge $145 million to secure Borderlands 3 as a six month timed exclusive for the Epic Games Store in 2019, but still managed to turn a profit on the deal, it has been revealed through leaked documents from the Epic Games vs. Apple court case.
The “fully loaded” deal, as Epic describe it included a combination of a one-off fee of $20 million, a marketing commitment for $15 million and a minimum guarantee for $80 million in game sales revenue. That might seem like a huge amount of money to drop, it worked out for Epic, as they recouped the $80 million investment in two weeks (it actually made $100 million). Epic made $9.2 million thanks to their 12% cut on game sales in those first two weeks (some were made through retail and resellers), so the one-off fee and marketing commitment took a while longer for Epic to fully clear, but came with the value of securing more users for the EGS.
Also notable: Epic paid Take-Two $146 million in advances for PC Borderlands 3 exclusivity ($115 million for the game + marketing + one-off fee) and recouped the minimum guarantee part ($80mil) in just the first 2 weeks. pic.twitter.com/3YThZuy5pJ
— Simon Carless (@simoncarless) May 4, 2021
Epic’s tilt at Steam’s hegemony over PC gaming has seen them aggressively securing games with timed exclusivity periods to the Epic Games Store. Borderlands 3 was one of the most high-profile examples, alongside Control, Oddworld Soulstorm and others.
In addition to paying one-off fees, Epic has also been greasing the wheels by making minimum guarantees as an advance, taking a lot of risk and uncertainty out of game’s release for a developer or publisher. Court douments previously published in Epic’s legal battle with Appel revealed that Epic committed to $444 million in minimum guarantees in 2020.
We’ve also discovered a lot about how much Epic are paying in order to add free games to the Epic Games Store, with Epic breaking down the up-front cost, the number of downloads, and the most important stat for the company, users acquired.
Want to know how much $ the devs of those 'free' Epic Games Store games got, & how many copies were grabbed? Here's the first 9 months to September 2019. 👀 pic.twitter.com/5hkLb1VEjj
— Simon Carless (@simoncarless) May 3, 2021
While Epic are making a lot of the money invested in minimum guarantees back, the Epic Games Store is not yet profitable. Epic are burning cash through the store’s first few years in the name of user acquisition – it’s the same policy pursued by tech start ups like Uber to gain market share. In Sweeney’s words, it is “hundreds of millions of dollars short of being profitable” right now as they set up the store, and that ““We have a general expectation of becoming profitable within 3 or 4 years.”
“Is the Epic Games Store currently profitable?” asks lawyer.
No, says Sweeney. It’s “hundreds of millions of dollars short of being profitable” because of the upfront costs of setting it up.
“We have a general expectation of becoming profitable within 3 or 4 years."
— Adi Robertson (@thedextriarchy) May 3, 2021
Lucky for Epic, they’ve got the money from Fortnite and successive rounds of funding and investment to make that happen.