Standard credit card charges alone are 2+%. Does anyone realistically think they can hire programmer
Fixed cost.
Incorrect. Labor is a variable cost. Unless labor is contractual and cannot be terminated, it is a variable cost. Epic did not have people playing paper football waiting to start the store.
Moreover, credit card processing fees are the epitome of variable charges. You seem to not understand the nature of fixed versus variable costs.
and their associated equipment,
Fixed cost.
Incorrect. Computers and other equipment for labor is also a variable cost. Epic did not have a huge inventory of PCs and other devices just doing nothing that were pressed into service.
staff for customer care,
They say the cost of customer service is 1%-1.5%. That seems plausible. Back of the envelope:
- Average game on their store costs $30. (Seems to be the case now, but we don’t yet know what Epic’s policy on running huge Steam-style sales will be.)
That’d mean they’re project $0.30-$0.45 in customer service fees on average. What about the cost:
- One sale in 100 will cause a customer support case. (Seems plausible to; me I’ve never contacted Steam support despite buying hundreds of games).’
- The average time spent on a support case is five minutes. (I think this is conservative. They’ve got enough volume that they surely have a a script for 99% of the cases)
- This is not a highly skilled job. Let’s say $15/hour for pay, $25/hour fully loaded cost. (I’m not that familiar with American labor costs for this kind of work. Does that seem
reasonable?)
That’d be $25 customer service costs per hour / 12 cases per hour * 0.01 cases per game =~ average of $0.02 in customer service per game bought. That’s about 20x too loẉ. So you could multiply my original estimate of the customer service contact rate by 5x and the amount of work per case by 4x, and still not reach the top end of Epic’s estimate.
So that seems reasonable enough.
You spent way too much time on this and still missed an epic amount of cost. Management, research, testing, etc…if customer care were so cheap to staff companies would have far more robust care services because the cost of providing it would be so low. That is not the case.
refunds,
That’s an interesting one. The common wisdom on indie developer boards is that return rates on Steam should remain under 10%; you’d expect it to be a little lower for Epic since they’re hand-curating the store and thus have a higher average game quality, leading to fewer return on average.
The cost of handling a refund is effectively zero, but leaves them out of pocket for costs like payment processing and bandwidth. But still, it’d mean refunds can only increase whatever estimate we have for the other costs by another 10%, not any more than that.
shakes head
engage sales
Not sure what you mean by this?
Who do you think is contacting developers for the exclusives? Sales and marketing.
and host this
Storage and compute are going to be too cheap to meter for a business like this. They’re claiming 1% on bandwidth, based on their experience with Fortnite. It would not add up at CDN list prices, but on the other hand they’ve easily got enough volume to not pay list prices.
for 5%?
Yeah, I’ll buy it.
After your post, I doubt you have ever seen a balance sheet or income statement. Bandwidth is not trivial. Cloud services are not that trivial. Storage is not trivial. Servers are not trivial. Personnel costs are not trivial. Security costs are not trivial. If the cost of entry was that cheap and every cost so trivial as you claim, any number of companies would have entered the market and absolutely dominated it in a matter of short while or Steam would be 10x its current size and Gabe would Scrooge McDuck into a pile of gold every day.
You buy 5%? Great. I have oceanfront property to sell you. In Nebraska.
