The termination of the Epic Games account on App Store sent shock waves in the gaming industry due to the potential implications of the move. Already, Epic Games is recording losses on the financial side following the account termination.
Projections by Buy Shares estimate that Epic Games will potentially lose an average of $26.7 million monthly in revenue after being booted from the App Store (by average revenue data from January 2020 to August 2020). The projections are based on the recent Epic Games revenue plunge due to the move by Apple. Our research indicates that between July and August this year, Fortnite’s cumulative revenue from both the App Store and Google Play declined by 63.23%.
Between January and August this year, Epic Games’ highest revenue was from the App Store at an estimated $191.42 million compared to $101.48 million from Google Play. Based on Sensor Tower data we have determined that the App Store accounts for 65.46% of all in-app purchases globally in H1, 2020. Our estimation, therefore, filtered the cumulative revenue for Fortnite on Google Play and Apple App Store by using our finding of 65.46% when comparing Google Play and App Store revenue.
The Buy Shares research also compared the valuation of Epic Games and the market capitalization of leading video game companies. As of August 2020, Activision Blizzard had the highest capitalization of $61.99 billion. The cap is at least three times more compared to Epic Games’ $17.3 billion.
Epic Games’ App Store policy violation
From the data, it is clear that Epic Games’ biggest revenue is from the App Store and the account termination will definitely have a catastrophic impact on the company’s future. Epic Games is behind the Unreal Engine, known to power internally developed video games like Fortnite and the Unreal, Gears of War, and Infinity Blade series.
Apple accused Epic Games of flouting the App Store rules through Fortnite. In the end, Apple removed Fortnite from the App Store. However, in a surprise move, Apple decided to terminate the Epic Games’ developer account altogether. In a quick reaction, Epic unsuccessfully tried to attain a temporary restraining order against Apple. The order would have enabled Epic Games to remain on the App Store until the courts had determined the matter.
Trouble began when Epic introduced a new way for players to buy in-game currency directly without paying Apple or Google their customary 30% cut of the revenue. This was a direct App Store and Google Play policy violation.
Fortnite is Epic Games’ most successful game and monetized when the player wants to acquire additions, known as ‘costumes’ and ‘skins’ which they have to purchase. Despite having the option to play free, most players pay for the additions that generate millions of revenue for Epic Games.
Impact of Epic Games account termination on Apple
In the saga, Apple is also set to make some losses considering that Epic Games is one of it’s biggest sources of revenue under the App Store. The 30% fee has become an integral part of Apple’s in a period when the iPhone sales have begun to slow. In general, the line of revenue has become a critical part of Apple’s business operations. Estimation indicates that Apple App Store accounts for 65.46% of all in-app purchases globally with $38.2 billion in revenue in H1, 2020.
In a statement, Apple claimed that the saga was self-created by Epic and can be solved only by the gaming company. Apple wants Epic to simply “submit an update of their app that reverts it to comply with the guidelines they agreed to and which apply to all developers,” Apple has maintained that it won’t act in favor of Epic because of business for the two companies.
The move by Apple came at a time Epic’s market valuation had hit highs of $17.3 billion. The valuation skyrocketed after the onboarding of new investors and funding deals. Recently, Sony made a $250 million strategic investment in Epic Games. It is not clear if the new investors and shareholders agreed to eliminate the 30% fee for Apple and Google Play.
Epic Games is among companies that spearheaded the boom in the gaming industry during the coronavirus pandemic quarantine. Consumers turned to interactive entertainment like games to pass time. The spike in Epic game valuation was also due to the impact of the coronavirus pandemic.
The implication of the saga goes beyond the monetary interest. Professionals who leverage on Macs and Unreal Engine to create content beyond iOS and macOS apps could be impacted. Additionally, Epic has warned that the move might be an end to the company with millions of players losing their ability to stay connected to Epic games.Read next
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The termination of the Epic Games account on App Store sent shock waves in the gaming industry due to the potential implications of the move....