Epic Games, maker of Fortnite, to launch its own online games store

Epic Games, maker of the monster hit Fortnite, has announced a new online store this week that could eventually put pressure on Apple, Google and Valve to relinquish some control over their own app stores.

Epic's new store will charge developers a commission of just 12 per cent, less than half of what the other stores charge. The audacious move could prompt app developers of all kinds to demand a similar deal, Benjamin Schachter, an analyst with Macquarie Capital, said in a note to clients this week.

Fortnite already dodged big royalty fees on Android, now Epic wants to let other dame developers do the same on all open platforms.

"This is a big deal and has potentially far-reaching implications well beyond just game developers," Schachter said.

Epic will start with a "hand-curated' set of games on PC and Mac, it said, opening up to other games and other open platforms including Android throughout 2019.

For years Valve's Steam has been the defacto marketplace for games on Windows and Linux PCs, with Apple's App Store and Google's Play Store the main avenues developers can use to get apps onto those companies' respective operating systems. Developers pay a 30 per cent commission to distribute through the stores, which the companies say is fair for the cost of providing a trusted and secure marketplace and distribution system.

Epic CEO Tim Sweeney disagrees. He has said the 30 per cent commission is a markup of 300 per cent to 400 per cent. Epic can cut commissions in half and still be profitable, Sweeney said in a blog post announcing the project.

Epic’s breakdown of fees on its new store versus Steam, for games developed with both Unreal Engine 4 and Unity.

Epic also makes Unreal Engine, a popular game creation tool used by many of the biggest developers. Unlike its rival Unity, Unreal Engine does not require up-front licensing fees, but Epic does take a royalty on revenue for Unreal games after a certain threshold. On its own store, Sweeney says Epic will wave those fees. Games made using Unity and other engines will be welcome on the store, he said.

In August, Epic said it wouldn't distribute Fortnite through Google's Play Store, instead asking players to visit its own site and download a special launcher that would open the game on Android devices. The method allows Epic to avoid the commission fee.

At the time, Sweeny said the 30 per cent store tax "is a high cost in a world where game developers' 70 per cent must cover all the cost of developing, operating, and supporting their games.

"On open platforms, 30 per cent is disproportionate to the cost of the services these stores perform, such as payment processing, download bandwidth, and customer service."

Of course not many games are big enough to launch outside of the Google, Apple or Valve stores and still sell, but if Epic provides an alternative store, and assure players it's secure, it could tempt developers over.

Shortly ahead of Epic's announcement, Valve announced changes that would result in the biggest-selling games getting to keep more of the money made from sales.

If Google is eventually forced to cut commissions to match Epic's, it could severely impact profit, Schachter said.

Epic's store is unlikely to be available on iPhones, where Apple does not allow rivals to its own marketplace, but asking developers to pay a higher commission than competing stores could put pressure on Apple nonetheless.

Bloomberg, with Tim Biggs

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