In context: It's no secret that the Epic Games Store has been operating at a loss since opening. Apple has leveraged this fact in court, suggesting that the EGS may never see profitability. It claims the store is nothing like the App Store and is unsustainable. Meanwhile, Epic continues to dump resources into its marketplace, confident that it will have a very profitable distribution platform in just a couple of years.
We're approaching the one-year mark since Epic began its antitrust legal battle with Apple over it forbidding it and other companies from operating independent stores on iOS. In the latest round of legal wrangling, Apple's defense lawyers went on the offensive attacking the Epic Games Store (EGS), saying that it is "unprofitable."
"Epic Games Store is unprofitable and not comparable to the App Store," Cupertino's legal team told the court. "and will not be profitable for at least multiple years, if ever."
As harsh as the statement sounds, it is not without merit. Epic Games Store reported $454 million in losses in the past two years and doesn't expect to profit until 2023. In 2019, it lost $181 million, then another $273 million the following year.
"Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with 'significant' growth, only $401 million in revenue for that year," Apple's lawyers contend. "Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021."
The defense team also postulates that given the store's "unrecouped costs," it does not believe that the EGS can see a cumulative gross profit until at least 2027, four years longer than Epic estimated. Epic argues that even with its lower 12-percent take on sales, it is enough to cover EGS operating costs, bringing its profitability around much sooner than Apple contends.
Furthermore, Epic seems to be flush with capital, largely thanks to Fortnite. It has not hesitated to dump money into timed-exclusivity deals to make the store more attractive to consumers. It spent $10.5 million alone to make Remedy's Control an EGS timed exclusive. It has also offered numerous freebies since opening, adding further to the store's losses. Epic is clearly not afraid of spending money on the gamble that it will eventually see hefty profits.