Video game

After ‘Fortnite,’ Giving Game Developers a Bigger Share of the Revenue Pie – The Wall Street Journal


Every time a videogame is purchased from a digital store like Google Play, its creator typically has to give up nearly a third of the sale to the retailer. Tim Sweeney, leader of the cultural force “Fortnite,” thinks that’s unfair, and he’s pushing for change.

With digital stores, people buy games that they then download to an internet-connected device such as a phone, computer or console to begin playing. No discs or other physical media required.

In exchange for processing payments and providing various other services, today’s biggest digital game retailers—

Apple
Inc.,

Google,

Microsoft
Corp.

,

Sony
Corp.

and closely held Valve Corp.—all take 30% of developers’ sales, including in-game purchases of virtual weapons, coins and the like. That cut has been the industry standard for more than a decade, even as the cost of making games has swelled.

Mr. Sweeney’s company, “Fortnite” creator Epic Games Inc., opened up its own digital game store in December and it collects just 12% of sales. The entrepreneur says the revenue-sharing arrangement still leaves Epic with a decent profit margin.


‘In the era of Kickstarter and Patreon, everyone is as much a patron as a consumer, and we think this matters.’


—Epic Games CEO Tim Sweeney

“There’s enormous economic distortion with digital stores right now,” Mr. Sweeney said in an interview. “They’re marking up costs by four or five times and making more profit than most developers themselves make.”

Epic’s new shop currently features more than 100 games for personal computers. Mr. Sweeney said games for mobile devices that run on Google’s Android software will be added to it later this year or next. Selling games for Apple devices isn’t an option due to Apple’s tighter restrictions for third-party applications.

Moving into the world of digital retailing hasn’t been smooth sailing for Epic. The company was hit with a barrage of criticism on the social network Reddit after it struck deals to sell a handful of high-profile computer games on an exclusive basis at launch, including

Take-Two Interactive Software
Inc.’s

comedic shooter “Borderlands 3.” The agreements mean those games won’t be for sale on other major digital stores such as Valve’s Steam, at least not initially.

Epic “irritated the horde,” Needham & Co. analyst Laura Martin said. “This is a unique rule of fandom in the videogame space. Even in sports, fans don’t get together like this and put their checkbooks behind their loud opinions.”

Mr. Sweeney said he gets it: “A lot of people like to buy all their games in one store.”

But he argued that switching to buying games from Epic can benefit consumers, because its revenue-sharing policy leaves more money in developers’ pockets, which he thinks will lead to the creation of more games, higher-quality games or lower prices—if not all three.

“More of your hard-earned dollars go to your favorite developers themselves, rather than store profits,” Mr. Sweeney said. “In the era of Kickstarter and Patreon, everyone is as much a patron as a consumer, and we think this matters.”

As with the industry-changing success of “Fortnite,” Epic has already upended the status quo with its digital game store. Days before opening it up, Steam announced it was lowering its 30% revenue take for developers whose games meet a certain sales threshold. The industry’s other big retailers, though, haven’t made similar changes.

“This is the clash of the titans,” Mr. Sweeney said. “The ultimate result of this will be a much better industry for everybody.”

Write to Sarah E. Needleman at sarah.needleman@wsj.com



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