It’s players, not developers, that the Epic Store needs to convince

Developers are excited by the revenue share offered by the Epic Store, but success will hinge on whether Epic can tear players away from the convenience of Steam.

Last week, we broke the news that Epic had soft-launched a digital storefront with their latest client update. It wasn’t included in any patch notes, nor was there any fanfare. There weren’t really even any games to speak of, so we wondered if it had been a mistake. Perhaps it had launched early.

Then, the following day, came the official announcement, followed by a bunch of quotes from Tim Sweeney and a short segment at The Game Awards. The salient facts are:

• Epic is offering an 88:12 revenue split (this is an improvement on the 70:30 revenue split offered by Steam)
• Epic is also offering to waive Unreal Engine’s 5% royalties for games sold on the Epic Store (which effectively makes an Unreal Engine game cost 35% to sell on Steam)

There are other details in there – yes, you can release Unity games on the Epic Store; yes, there are exclusivity deals on offer, but they’re not universal; the Epic Store will have sales, but inclusion in them isn’t mandatory; the Epic Store won’t have forums, but will feature “curation” – but the key takeaways are that Epic will give you 18% more of your gross takings than Steam, and they’ll waive your Unreal Engine royalties (making you a further 5% better off).

Just prior to the announcement of the Epic Store (it’s almost as if they got wind of it) Valve announced that they would be increasing the revenue share for developers/publishers that earn over $10m dollars. It’s a ratchet system. If you earn between $10m and $50m, you’ll take advantage of a 25% revenue share – a 5% improvement on Steam’s usual 30% cut – and if you top the $50m mark, you’ll only be paying Steam 20% of your takings.

That sounds like Valve is being generous, but in reality, it’s an appeal to larger publishers not to abandon ship. EA, Ubisoft, Activision Blizzard, and most recently, Bethesda all have their own storefronts or launchers. Every dollar they sell directly to their consumers is 30 cents out of Valve’s pocket; something they would have taken for granted a couple of years ago.

Let’s call it what it is, then: a tax break for the rich, to try and stop them going “offshore”. In this scenario, Valve is the Republican party (or the Tories, if you’re in the UK) offering rate relief to the exclusive, wealthy few, while the people on the street – in this context, that’s both consumers but even more so, indie developers – see no benefit.

Valve’s argument has always been one that their services are worth 30% of a developer’s revenue. Some of that is practical and logistical – like infrastructure, hosting, bandwidth, and the like – but the majority of that value has been placed in discovery.

Steam is the biggest video game marketplace on the planet, so just to be on there at all was once worth the price of entry. The old adage that 70% of something is better than 100% of nothing is frequently trotted out.

Things have changed, however. In 2005, when Steam launched, there were just 32 games on the platform by the end of the year. Now, at the time of writing, there are nearly 27,000 games on Steam.

Just as a sheer numbers game, the chances of success have been significantly diminished since Jonathan Blow released Braid on Steam in 2009; Playdead released Limbo in 2011; Mike Bithell released the rectangle game in 2012; Rami Ismail’s Vlambeer released Ridiculous Fishing in 2013. Those are all great games, admittedly, but are we so sure we would be looking back at the same degree of success had they launched alongside thousands of others, not hundreds?

And that’s before you get onto the functionality and efficacy of Steam’s algorithms, that power its much-vaunted discovery.

Valve as a development shop and a platform holder is well within its rights to make changes to Steam’s algorithms. To its interface. To its discovery queues. It’s generally seen as tinkering under the hood to try and get the best performance. But these algorithms are black boxes, closed off from the outside world so that people can’t learn how to game them, and every change has unforeseen consequences.

Take Google as a for instance. When Google makes changes to its algorithms – which it does iteratively, all year round, but there’s often a big update, roughly every quarter – it never does so maliciously, but we might see our performance from Google change. We might start ranking better for some search terms, and worse for others. We might completely drop off the map for something. That’s entirely Google’s doing, but it’s not necessarily their fault; they are tinkering with an arm’s length impunity and the intention that these changes are “for the best”, regardless of any impact they have on the businesses (and ultimately, earnings) of others.

Look at YouTube, another Google company. Someone literally entered the YouTube offices and opened fire on employees in April 2018, because they believed their channel – and therefore, their livelihood – had been negatively impacted by changes to the video platform. Nobody at YouTube was trying to deliberately demonetise her channel, and we’re not for a second saying they were justified in their actions, but it’s difficult for companies to operate these arm’s length functions without there being unexpected, often negative consequences.

Now indie developers are starting to notice that their performance on Steam has dropped – in many cases, quite significantly – as a result of algorithm changes by Valve’s development team.

New blog post (with charts and data): Steam’s discovery algorithm killed my sales. Please RT! Thx.https://t.co/lTnNB6qbjA pic.twitter.com/AZS7bzI0dd

— Jake Birkett – Veteran Indie (@GreyAlien) December 3, 2018

The chart for Gunmetal Arcadia is even starker. It got less traffic during sales post-October than during non-sale periods pre-October. pic.twitter.com/tfNqc3T4jg

— J. Kyle Pittman (@PirateHearts) December 2, 2018

Hey @GreyAlien @SimoRoth @mrhelmut I felt left out so I made a graph too. Other Product Visits declined by 70% since September 5. October 5 seems to be when the slide began. Correlation doesn't imply causation, but Oct revenue down 50% compared to Sept, and Nov will be worse. pic.twitter.com/HgBlmBMAhQ

— mainichimadapaka 🇵🇭 in 🇪🇸 (@RyanSumo) December 4, 2018

These are just a few examples we’ve seen on social media. And while these sorts of fluctuations are just par for the course for Google search and YouTube, based on the volume of posts and the sheer amount of surprise expressed by a number of indie developers, it looks like this is the first time Valve has tinkered with its algorithms to this degree.

It’s unsurprising, then, that a recent survey has shown that far fewer developers feel they are getting their money’s worth out of Valve’s 30% in 2018 than they were in 2016-2017, or have done at any time during their relationship with Steam as a platform. The same study also shows that the majority of developers prioritise their revenue share and “not being screwed by the algorithm” at the top of their list of issues and concerns, among other things.

Operation Tell Valve All The Things, 3.0https://t.co/dkoUz6iggR#gamedev

Please, be excellent to one another. This was hard for me to put together for a wide variety of reasons, not all of them immediately apparent. pic.twitter.com/jrUryIiuwj

— Lars Doucet (@larsiusprime) December 10, 2018

So between overcrowding and changes to discovery, Steam is performing less well as a platform – at least, for smaller developers; Valve is looking after the $10m club rather handsomely – and developers are starting to become unhappy with the service and value they’re receiving.

That makes the Epic Store seem like a no-brainer. Why wouldn’t a developer or publisher rather release their game onto Epic’s digital storefront, and take a greater share of the profit than they do on Steam?

The thing is, Epic isn’t the only one to offer this sort of incentive to lure developers away from Steam. Itch.io not only offers developers a better revenue share than Steam – its default split is 90:10 – but also allows developers to set their own split. If you’re having a particularly rough month financially, you could opt to cut Itch’s share right down to the quick. The model, from Itch’s perspective, is that developers value the service and will cut them back in, or pay it forward later when they can afford to do so.

https://twitter.com/terrycavanagh/status/1069995026502086656

Itch isn’t without its supporters, both among developers and players, but it’s always been a numbers game. Itch simply doesn’t have the volume of players that Steam does. So while developers might be getting a better share, it’s a better share of fewer customers and smaller gross takings.

Anecdotally, we’ve spoken to a number of developers who make money from both Itch and Steam, sometimes in fairly equal quantities. This might be fewer Itch sales than Steam, but with a higher revenue share, and often takes into account a higher volume of sales on Steam that take place during massive sale events (with a massively reduced purchase price).

Lots of developers co-exist between Itch and Steam – and other platforms – in this way. In an ideal world, a scrappy little co-operative like Itch would be enough and nobody would need to swell Valve’s coffers, but the reality is that most developers need both revenue streams.

There’s no reason why the Epic Store can’t also fit into this ecosystem, but if they want to achieve a bigger slice of the action, it’s the players they’ll need to get on board. Steam, as most monopolies do, has grown out of convenience more than anything else. If Itch is a traditional market, with a greengrocer and a butcher and a fishmonger, Steam is a giant Walmart. Everyone knows that it’s better to shop locally and to support small businesses, lest they disappear altogether, but being able to buy everything in one place is just so damn convenient.

You might argue that it’s an education issue, that more players would buy games from Itch if they knew that developers got a bigger share. Surely people can cope with clicking on a different website or using a different launcher, if it means creators they love will get more money to continue making wonderful games, right?

You’d think that would be the case, but if you follow any indie developers on Twitter, you’ll know that they talk about Itch a lot. If they’re linking to their game on Steam, you can guarantee that in the next breath, they’ll also give a link to buy the game from Itch. It would be crazy for them not to.

Gamers could literally put more money into developers’ pockets by using Itch instead of Steam, then, but for whatever reason, they’re choosing not to. To take a look at the Twitter feed of Tommy Refenes – one of the developers of the massively popular Super Meat Boy, who recently announced that their upcoming game, Super Meat Boy Forever, will be an Epic Store exclusive for 12 months – tells a story.

That’s just the tip of the iceberg. There are a lot of unpleasant things being said about Epic Games, and Tommy, and Super Meat Boy Forever, and it’s hard to understand exactly why. The lack of empathy is, frankly baffling, as is the degree of tribal loyalty video game fans show towards corporations for some reason. Don’t be surprised if the Epic Store ushers in a new level of console war-like “them and us” bickering to the PC gaming landscape.

Ordinarily, a challenger to Steam wouldn’t be such a big deal. Other stores have come and gone, but Epic’s challenge is different: their store already comes with 5m players. Admittedly that’s 5m PC players of Fortnite Battle Royale, and other than cosmetics and in-game currency, not a single one of them has bought the game, but it’s still a far bigger headstart than anyone else has managed.

So while the Epic Store might be offering developers a better deal, the relatively limited uptake of Itch – in relation to Steam – suggests that tactic alone won’t be enough. Epic will need to get the punters on board, and based on what we’ve seen in the past? That’s a far more challenging proposition.