In my previous post, I talked about games as services and other game business model topics. Here I will go a layer below to the platforms that offer these games, specifically in the context of Epic’s brand new game store that is seen as yet another challenger to Valve’s Steam. I remain skeptical on Epic’s ability to meaningfully challenge Steam for reasons I will go through below.
What I mean by platforms is the combination of a storefront and services that exist on certain hardware ecosystems. As mentioned in the previous post, the point of a platform is to be able to have a toll on any transaction made there and to act as a gatekeeper. In the case of Microsoft’s Xbox, Sony, Nintendo and Apple, these are vertical monopolies where it’s their hardware and anyone wanting to sell their software on these platforms have no choice but to work with these first parties1. On PC and Android hardware platforms, there is more competition among various app stores. Traditionally Windows has been a free-for-all but both Valve’s Newell and Epic’s Sweeney have been worried of the possibility of Microsoft forcing developers into using Microsoft’s own app store on Windows 10.
Launchers and platforms
A lot was written about Steam’s conquering of China when people discovered that all Steam’s user base growth and a massive slice of total users were from China. The missing insight was that this was really about Dota 2 and not Steam in general. Even in western countries, Dota 2 is the only game Dota 2 players play on Steam. It is just a launcher to a game the play, not unlike say one has for League of Legends or for Fortnite. Similarly it is very dangerous to make any assumptions of Fortnite audience’s willingness to turn in to Epic Games Store customers. If it was that easy, Blizzard wouldn’t crosspromote its Battle.Net games like crazy.
Fighting the previous war
This whole “who is the next Steam?” question totally begs the question2 that the future looks like what we have now. What if the future is streaming? This year should bring us more widely available streaming services from Microsoft and Google, and Sony has just announced they are expanding the countries where they offer Playstation Now. If streaming manages to break where VR couldn’t, it will make previous platforms and their stores and business models less important. Suddenly Google would matter and the various game stores on PC would not.
Even if streaming doesn’t happen, there are the subscription services. Currently these seem to operate on two models: First, some like Humble and Twitch are more traditional in the sense that they give every monthl new games3 but there are also the likes of EA Access and Xbox Game Pass that give access to a (changing) library of games, Netflix-style4.
Visibility, curation and the Indiepocalypse
In efficient markets, which the platforms hardly are outside of PC where monopolies are the norm, the revenue cut would equal in the other hand to the costs faced by the operator of the platform and on the other hand the value the game maker gets from the platform. A lower cut, in effect, could also signal lower support from the platform.
Of course, conversely, in monopoly situation the cut might be higher than the value to the publisher. More and more indie developers seem to be disappointed to the support they get from Steam compared to the revenue cut. Seeing the recent news about adjusted revenue cuts to bigger publishers by Steam, it is not just the indies who are not happy with the arrangement.
However, I’m always reminded how Blackberry proudly claimed back in the day that their app store was more profitable than Apple’s and Google’s for a developer because they took a smaller revenue share. I’m quite sure there did not exist a single developer whose absolute earnings on Blackberry were higher than on Apple or Google. So, when Discord announced that forget the others, they’ll just take 10% you really start to wonder what do they offer in return compared to the others.
A lot has been written also about the indie developers who gladly jumped ship to Epic’s yet unproven platform. And for sure, the first mover advantage is clear: the visibility in the small pond can easily beat whatever the machine gods at Steam’s big lake might give on a lucky day. However, the indies probably don’t have as much negotiation power as, say, Ubisoft when they come with a major release with exclusivity. The storefront can be as curated as it wants, but there is no world where a random indie is on equal footing with Ubisoft’s The Division 2.
Indiepocalypse in the end is a question of visibility - something that was for years a challenge on mobile platforms were few premium indie games were and continue to be viable. However, Epic Games Store can offer visibility only for so long until its storefront is saturated with many games. Epic can offer no solution to the cause of indiepocalypse and with their Unreal engine are one who “cause” and enable the massive amount of games available5. As long as one third of Steam’s entire catalogue are from current year, the Indiepocalypse will only get worse.
If Epic Games Store, why not…
Right now, Epic Games Store is very much a storefront, not unlike Humble Store. Granted, it has a friend list but that is far from the platform features available on Steam, Xbox, Playstation, Origin or even Uplay. My skepticism to Epic Games Store rises from comparison to other Steam competitors already on the market:
If massive user base was the silver bullet, why not Discord - or Twitch - both of which have massive and multi-game audiences and their own game stores (and subscription services)?
If it is indies, why not Itch.io? If Steam can’t afford to lose the big publishers, how long can Epic focus on just indies? Can or even will it attract or even want bigger publishers on its platform? If it wants to challenge Steam, it has to. Ubisoft’s move might make indies think twice if they are exchanging the old boss to a new but same as the old boss with a smaller potential audience.
How is Epic Games Store different from EA’s Origin, really? Origin has games from indies and other big publishers available on its store. It was likewise an attempt to circumvent Steam and to show that EA doesn’t need Steam. The big publishers are not as concerned about selling other publishers’s games on their platform as they are about having leverage. Notably, if you went to EA Origin website at the time I write this, you would find Ubisoft’s AC: Odyssey there on front page. Notably, the first The Division was sold also on EA’s platform. Also, EA recently announced that they now have third party games in their subscription service.
If the difference is down to brand good-will, then that is unlikely to be enough to challenge Steam itself. Steam is loved and hated by its userbase, which probably the best that anyone can expect in the gaming community. Epic is undeniably on a roll with earning all the goodwill it can get when its competitors fumble.
As a sidenote, GOG was the first to understand the value of the long tail of digital games (back when the store was called Good Old Games). They offered a unique selling point to the customer who could now get legal access to older games that wouldn’t run otherwise in modern environments (and not just because of outdated DRM methods). It took publishers few years to understand the true value of their back catalogues and take it back to their own hands. Compared to the rise of GOG, right now Epic Games Store lacks a unique selling point, unless the developer and customer subscribe to Sweeney’s world view of a world without walled gardens.
Epic Games Store is essentially in my opinion a big middle finger to Steam (just like its free backend services are to Steamworks) by Tim Sweeney who dislikes walled gardens as much as Valve’s Newell hates Microsoft’s attempts to use its platform leverage on Windows 10 for Xbox. We can hope that this leads to competition that would lead to better services for developers. Steam has clearly stagnated and seems to only react when a formidable opponent arrives6 - as long as Steam is in a clear market leader position, it does not seem to innovate much7.
This leaves many opportunities for creative destruction. However, in its current state, it is really difficult to see Epic challenging Steam in a meaningful way. It will be interesting if they prove me wrong.