jsnell
3845
But why would we be interested in reports? We’re never going to see them. What should matter is understanding whether this can be scaled to a viable business. And for that, the breakdown of costs as fixed vs. variable is exactly what matters.
Why does GOG make a loss when Valve prints money? They’re in exactly the same business, and Gog’s cost structure should be better, since Poland is much cheaper than Seattle. It’s because Steam has 100x the revenue of Gog. For Gog, fixed costs like software development are oppressive. For Valve, they matter a lot less since they get amortized over much more revenue.
Could EGS be profitable at sales of $10M/year? Of course not. Could they be profitable at $1G/year? To answer that, we’d mainly need to understand the variable costs. The fixed costs would already be a tiny fraction of the revenue.
So again: you think Sweeney is lying about the variable costs. What do you think the actual number is, and how does it break down?
I am not sure why anyone thinks he is lying. What reason would he possibly have?
Either it’s viable, or it isn’t.
If it isn’t viable, then launching a business based on it would make no sense, since you can’t walk it back later. If they couldn’t sustain it, the instant they reneged on the % every single developer would jump ship.
There’s no reason to lie. There is no upside to doing so, and only a catastrophic downside.
Tim is not a stupid person. He’s certainly a hell of a lot smarter than me.
Add to that that they are currently operating the largest Game-As-A-Service in history and I think they probably know their costs pretty well.
How much bandwidth and hosting do you think Netflix uses? How many GB are individual users gulping down daily from Netflix servers? It’s a whole lot.
I don’t think it’s probably useful to compare the fixed and variable costs that most people are familiar with to Valve and Epic’s at the scale they operate. And the idea that Valve is operating on some razor-thin margin to make Steam work at 30%… no.
Aceris
3847
You aren’t very familiar with modern cloud services business models I take it :) (joke)
12% does seem very low, especially with the UE license included. We’re talking about an 80% gross margin undercut beneath the established price. I think it probably is a potentially good business for them, but only if they achieve Steamlike market dominance (no easy feat), and even then it’s still going to make them substantially less money than Fortnite does. Essentially this looks to me like a bit of an ego project for Epic. Time will tell though.
It might make a lot of sense if Tim and Tencent want to take Epic public and cash out substantial portion of their stakes. I can see it being used to justify a much increased valuation.
(EDIT: you mention netflix as an example - Netflix’s development costs alone would more then cover the 5% gap between “variable costs” and revenue in this scenario. R+D for any kind of serious cloud service doing anything beyond the norm is incredibly expensive. It just doesn’t seem like it because the big players in the space are so huge)
I’m operating under the assumption that the massive scaling that Epic has had to do to accommodate Fortnite’s success has already covered their R&D costs for service, which seems like a reasonable assumption to make.
But at the simplest level, Steam’s estimated revenue for 2017 was 4.3 billion dollars.
Does it really seem reasonable that 30% of that, 1.3 billion dollars, is required to operate their storefront and hosting at a profit? I mean, we can dicker over exactly how much the service costs, but it’s not 1.3 billion dollars to operate.
So let’s take 12% of that figure, which is still half a billion dollars - still enough to operate Steam at that scale? Does that really seem unreasonable?
Is EGS as big as Steam? No, so their costs would be less anyway - a lot of the cost is scale after things are in place, right?
Aceris
3849
I’ll grant you that the infra work on Fortnite will help (although that’s not so “massive” in the grand scheme of things, but then neither is Steam). What about all the features on their roadmap you were talking about? What about discovery, a very hard problem that is a big driver of store revenue and requires some of the most expensive skillsets in the business?
EDIT: From your numbers, Steam’s figure yields $980m for fixed costs and profit (which I imahine is principally R+D and corporate-level support). EGS yields $215m. As I said, that can run at a profit and be a nice little earner, but at that margin it’s certainly going to be much less attractive for EGS to invest in extra functionality the way steam has.
All those are things to work on, but they have a throttled game release schedule, so discovery is more of a deferred problem at present. But they don’t seem like costs that soar into the hundreds of millions to me. They’re engineering costs.
Let’s say for some INSANE reason they had three hundred engineers working on those problems each with a quarter-million dollar salary. That’s still 75 million(!) annually.
I’m not here really to dicker over the individual particulars, I just am not sure why people find it difficult to believe that 12% is attainable, sustainable, and profitable.
I am available for one of these engineering positions. ;)
https://www.rocketleague.com/news/psyonix-is-joining-the-epic-family-/
Epic buys the Rocket League developer. Eventually the game will be only sold on EGS.
Of course, people are already racing to be huge hypocrites. Because I remember reading several times in other places how EGS exclusives were totally different than EA or Ubisoft selling their games on their stores because they were THEIR games, first party titles. Well, now Rocket League is a first party title from Epic, but now they seem to have forgotten that previous argument and the move is still ‘disgusting’.
Obviously, try to also not remember how Valve in their entire history has bought more companies/IPs than made games by themselves: Portal, Team Fortress, Counter Strike, Dota, Left 4 Dead…
Reemul
3854
I supposse if you troll the whole web you can find some one with an opinion on anything. As of yet no one on here has had that opinion have they or are you preempting that already
Unsure of how that works for people already playing it on steam and whether any add ons, new dlc or seasons will work on Steam or be EGS specific in the future, people will be annoyed until thye know how it’s going.
jsnell
3855
Did they actually say that somewhere? Certainly not in the announcement.
Yes, it’s been confirmed that they are pulling it from Steam at the end of the year.
I guess congrats to Psyonix for signing up to do Epic crunch from now on.
Yes, I remember the furor when EA and Ubisoft pulled their back catalogs from Steam to sell them exclusively on Origin and UPlay.
Except wait, that never happened and I can still buy Dead Space 1 and 2 (among others) off Steam if I want.
I figure it will be going free to play anyway. I’ve been surprised it hasn’t done that already.
KevinC
3860
I like when people make a post with a strawman already in tow. It’s a highly efficient way of bypassing the usual circular discussions!
As I understand it there is a wealth of content and mods in the Steam Workshop for Rocket League. I wonder how this will impact that?
KevinC
3862
It does have Workshop support, yeah. I was able to quickly determine this because Steam store pages aren’t the wasteland of information that EGS pages tend to be. ;)
EDIT: Misread what you said a bit. To put good-natured snark aside for a minute, I imagine people will need to use Nexus Mods or something like that, unless Epic has a Workshop replacement ready to go.
Of course their first-party games will be exclusive to their store. Epic is trying to compete with Steam, unlike EA and Ubisoft who merely want to avoid paying Steam’s fees.
You only need to do that when you need to acquire more users to keep running. They still get 100k+ peak concurrent users, roughly the same number they’ve had since they became popular. Those people are already buying their loot boxes. There’s little for them to gain right now.
