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Paradox Interactive: "The 70/30 revenue split is outrageous"

At Gamelab 2019, a developer panel discussed Epic's attempt to offer an alternative to the dominant revenue share model

The 70/30 revenue split offered to developers by most platform holders is "outrageous," according to Paradox Interactive's Fredrik Wester, who praised Epic Games' efforts to offer a more reasonable alternative with its own store.

Speaking as part of a panel at Gamelab last week, which was hosted by GamesIndustry.biz, Wester did not mince his words when talking about the deal that the industry's biggest distribution platforms offer to developers.

"I think the 70/30 revenue split is outrageous," he said. "I think the platform holders are taking too much money. Everyone in the press here, just quote me on that."

Wester is now executive chairman of the board at Paradox, after stepping down as CEO after a long tenure last year. In that time, the Swedish company built its business on PC genres like grand strategy and simulation, with Valve's Steam as perhaps its most important marketplace.

Steam takes 30% of revenue from the majority of games on its platform -- just like platforms operated by Microsoft, Sony, Apple and others. However, Wester suggested that the 70/30 split was based on a model established by Warner Bros. in the '70s, for the distribution of films on boxed VHS tapes.

"The platform holders are taking too much money. Everyone in the press here, just quote me on that"

Fredrik Wester

"That was physical. It cost a lot of money," he said. "This doesn't cost anything. So Epic has done a great job for the whole industry, because you get 88%. Fantastic move. Thank you very much."

While Wester was unequivocal in his assessment of the issue, Epic has received criticism from consumers for using exclusives as a means of building an audience; making it necessary for gamers to have a second PC storefront and launcher to access specific products.

Last week, Epic CEO Tim Sweeney entered a discussion on the issue on Twitter, citing the need for a challenge to the "70/30 status quo" enforced by stores like Steam, for the good of developers who could reinvest the money.

Epic achieving that objective of providing a competitive alternative to Steam is important for the industry, Wester said.

"I think it is, especially for new developers. They have lower margins, to get into the market. But I think it's also a matter of decency. I mean, how much does it actually cost to deliver a game?

"When the competition is low, the platform holder can get a big share of the pie; as competition increases, they need to lower their part of the pie, as well. That's how the market works, right?"

From left to right: Fred Wester, Dino Patti, Raul Rubio and Dan da Rocha

From left to right: Fred Wester, Dino Patti, Raul Rubio and Dan da Rocha

For his part, Sweeney has publicly stated that it will abandon its exclusives strategy if Valve changes Steam's revenue share to offer developers a more favourable deal. Right now, though, any developer faces a potential backlash if they opt to accept an exclusivity deal with the Epic Games Store.

This is a particularly tricky situation for smaller developers, which have small fan-bases that are likely to be Steam users. In addition, the kind of incentives -- both financial and in terms of exposure -- that Epic is offering could make the difference between finishing a game and running out of money, or between turning a profit and making a loss. The stakes are high.

"In some cases, that 30% taken is more than the profit for a small studio"

Dan da Rocha

"That [the 88/12 split] is a huge boon," said Dan da Rocha, another panellist, who is best known as the creator of the indie hit Qube. "It's a huge advantage. In some cases, that 30% taken is more than the profit for a small studio. That's just crazy, right? So that's a huge incentive for some of us.

"It's a tricky one. If you have a fanbase on Steam and you go to Epic, there could be a massive outcry there -- a fallout. But it depends on: Is the price right? Does it make sense financially? Is that just a vocal minority on Steam, talking about that and making those arguments?

"It's about weighing that up, I think. But the audience on Epic is getting larger now."

Tequila Works co-founder Raul Rubio offered another perspective, which captured a key change in the value that Steam offers to its partners now, compared to six or seven years ago -- despite its cut remaining exactly the same.

When Tequila Works launched Deadlight in 2012, Rubio said, "the amount of games that were released that year, in 2012, is the same number that are released in one month now on Steam.

"For us it was great, because we got the spotlight; people could see the game on Steam. Now, you basically need to rely on memes to grab attention."

You can look forward to more coverage from Gamelab 2019 this week. In the meantime, you can read God of War director Cory Barlog's thoughts on how improved technology is creating new possibilities for using famous actors in video games, and EA senior designer Katie Scott on improving diversity in FIFA, and how that changed the way EA looks at all of its games.

GamesIndustry.biz is a media partner of Gamelab 2019. We attended the event with assistance from the organiser.

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Latest comments (10)

Morville O'Driscoll Blogger & Critic 4 months ago
Pity poor itch.io. A 90/10 split as standard, but consistently forgotten about or viewed as an indie store only. :(

Edited 1 times. Last edit by Morville O'Driscoll on 1st July 2019 11:39am

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Andrew Jakobs Lead Programmer 4 months ago
@Morville O'Driscoll: OR maybe because itch.io doesn't really make any promotion? I can barely remember the site, it's because you mentioned it that I remembered it from some time ago.

But the biggest problem with the stores is, the hardwired connected library. If there was a universal library which all stores could connect to, there wouldn't be this problem, and you could buy your games where you want. But exclusives is the only way you can get people to come to your platform these days, because Steam is just too big already, so planting your game in the Epic Game Store and Steam, you know most people will buy it through Steam and have it connected to their steamlibrary..
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Carlo Cicalese Freelance Journalist 4 months ago
@Morville O'Driscoll: That's what happens when you take only 10%: you don't have enough funds to sustain your store, have a decent client or server infrastructure and promote your platform.
Sweeney, as an amateur in the digital store market and having his finances boosted by external revenues like Fortnite's in-app purchases, Unreal Engine licensing fees to developers releasing their games outside of the EGS and the two chinese company backing him, can set his own price as low as he wants because he'll still be able to recoup with external revenues.
Valve, on the other hands, profits only from his digital store activities and every attempt at diversifying its activities has either underperformed or outright failed (Steam Link). Their 30% is a matter of survival while Sweeney's 12% is a bait to an exclusive distribution contract for a broken and featureless digital store with an audience boosted with games thrown away for free.

Edited 1 times. Last edit by Carlo Cicalese on 2nd July 2019 12:42am

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Morville O'Driscoll Blogger & Critic 4 months ago
@Andrew Jakobs: True enough that they don't promote. I mostly remember them because I follow a few indie devs on Twitter who constantly push the store. Partly that lack of promotion is on itch, yes, but it just needs a couple of larger publishers to deign to sell on itch in order for them to be seen as "worthy". Very chicken-and-egg, though. :/

@Carlo Cicalese: Oh, for sure I can see the reasoning in what you say. I find it a shame that Sweeney bulled his way into the PC digital distro market with exclusives, when with some astute investment into itch and long-term development of Epic's own store, he could've made a bigger impact when it comes to pushing the industry-standard split down.

More generally, because Mr Wester was talking about the whole industry, not specifically just PC, I don't see how pushing the split down in the PC market applies pressure to the console market. There's so many reasons why console manufacturers will fight tooth-and-nail to keep their 30% - from diffusing manufacturing costs to "We curate", to first-party tools and promotion, to the fact that they're walled gardens with a captive base - that unless you're a dev or pub whose sole focus is on PC, you have to sell on console,. Sony, MS, Nintendo, Apple, Google will always have the dominant hand here, because PC is seen as separate-and-distinct, and its rules not applicable to the console market.

Edited 1 times. Last edit by Morville O'Driscoll on 2nd July 2019 1:47am

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Antoine Baker Artist/Designer/QA Tester 4 months ago
@Carlo Cicalese:
Valve profits from their digital store activities because they CHOSE to. Remember that they are a game developer? They rested on their laurels through Steam. They have the source engine, digital storefront, steamworks and so on. Epic has been a competitor for less than a year give or take.

Valve can easily combat the exclusivity of EGS. They could develop the sequels to games fans actually want and have been asking for. But they won't. They choose not to because the PC gamer is going to defend them and prop up Valve. Steam is making them boatloads and they've been phoning it in for the last 8 years. People are emotionally invested. Having multiple installers is nothing new in the PC gaming space. Disks had their own installers. Even if EGS was a carbon copy of Steam, no one would still buy from it because they are monetarily and emotionally invested in Valve.
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Fahim Graphics Designer 4 months ago
@Antoine Baker: Not true. Epic has been around much longer than Steam. When Valve released Steam 15+ years ago on PC, Epic chose not to compete back then. In fact, Epic chose to completely abandon the PC platform as a whole around the same time Steam launched because Epic themselves had said that PC was not a profitable platform for them, blaming it on piracy and went straight to the console market to make games exclusively for the console market because in their own words they said that "That's where the money is at right now". Only Valve / Steam remained on the PC platform to fend it off from dying and helped it achieve the success that we're currently seeing today. The PC game industry as it stands is or par, if not greater than the console game industry (All three major consoles from Sony, Microsoft and Nintendo combined). And it was made possible largely because of Valve.

And now that the PC game industry is successful, Epic saw that, shamelessly cowered back into the PC game industry trying to butt in and claim they're doing good for the PC game industry when in reality, they as a whole didn't really do anything for the last 15 years or so, other than make and develop their Unreal engine. So forgive me if I call on everything that Tim Sweeney has said so far as complete hogwash. All his activities thus far has been not only counter-intuitive to the progress of the PC game industry as a whole, but is also blatantly anti-consumer and anti-competitive.
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Fahim Graphics Designer 4 months ago
And about Steam's cut, here's a few articles and videos that explains it in great details and how 20 to 30 percent cut is justified and earned
https://arstechnica.com/gaming/2019/04/why-valve-actually-gets-less-than-30-percent-of-steam-game-sales/
https://www.escapistmagazine.com/v2/2019/05/07/why-steam-cant-meet-epics-price-challenge/
https://www.youtube.com/watch?v=7rWBM0y2DY0
Here's some developers take on it
https://twitter.com/RobotBrush/status/1112204567394086913
https://www.reddit.com/r/Steam/comments/c04zpc/im_an_indie_game_dev_and_steam_blew_my_mind_and/
Here's consumer's take on it
https://www.reddit.com/r/pcgaming/comments/b9i4yd/to_everyone_complaining_about_steams_cut_please/
https://www.youtube.com/watch?v=5HVkRH6eEJQ

And here's my take on it. In short, Valve's 20 to 30 percent take is justified for the amount of features and services they provide. The whole debate about 20 to 30 percent cut from Steam vs 12 percent cut from Epic is a farce. Its a stunt pulled by Epic. Its not about the percentage cut. Its about Epic giving these greedy publishers a bag of cash to sign exclusivity deals on their platform and Epic lining their own pockets in the process. All the while trying to strong-arm customers to submit to this forced exclusivity and other anti-consumer practices while providing virtually nothing

If it was only about the cut then, these publishers would've moved to other platforms that has lower cut than Epic, who've been into digital distribution platform a lot longer than Epic. Platforms like Discord, which reduced their cut down to 10 percent after Epic store's announcement. Humble Widget through Humble Bundle, which asks for 5 percent of the cut. Itch.io, which asks for basically whatever percent of the cut you want to give them, which is lower than all the others combined. And yet a lot of developers and publishers choose Steam over any of them Why ? Because none of the other platform provides the massive visibility / discoverability of games that Steam provides and the subsequent big sales potential. Not to mentions Steam is the only platform that provides THE most features and services towards both developers and customers compared to any other storefronts in the world, PC or console.
https://blog.discordapp.com/why-not-90-10-3761ebef4eab
https://www.humblebundle.com/developer/widget

For the record, other major platforms like GOG, Microsoft, Sony, Nintendo, Amazon, Google, Apple and a lot of others also take the industry standard 30 percent of the cut while providing significantly less features and services to both customers and developers in return. I wanna emphasize on Sony and Microsoft (Playstation and Xbox) who are the biggest gaming platforms next to PC, Who've been taking that 30 percent cut from developers and publishers for decades now while doing business with them. They don't provide nowhere as near as many features and services as Steam does. Who takes hefty licensing fee from developers / publishers spanning in millions of dollars to sell their games on Playstation and Xbox. Who used to charge devs / pubs money everything they wanted to patch / update their games on those consoles. Who locks certain essential features and services behind monthly subsciption fee against customers. And yet, developers / publishers happily put all their games on those consoles and make huge profits. Now with Epic, while they do take 12 percent cut, they also provide virtually nothing in terms of features and services for customers. Steam on the other hand provides numerous features and services for customers for their 20 to 30 percent cut.

To give you a rough idea of the amount of features and services Steam provides, take a look at the following chart. It lists all the major features of Steam compared to other platforms on PC. These are just some of the features and services that are public knowledge and / or have been revealed by Valve themselves. There's a whole host of other infrastructures that Valve operates and maintains on a daily basis. All of these combined costs a lot of upkeep on a day-to-day basis. At the same time, Valve regularly innovates, improves and expands on all of these features, services and infrastructures to give customers and developers a better gaming and business experience.
https://imgur.com/P6cIq1u
https://steamcommunity.com/groups/steamworks#announcements/detail/1697194621363928453
Valve lets all developers / publishers to generate free Steam keys on their platform and sell them anywhere else where the devs / pubs keep all the profit. What's interesting about that third party Steam key, is that on average more than 30 percent of any games purchased on Steam are bought from third party key sites. The rest 70 percent of purchases are straight from Steam itself. Meaning Valve doesn't get any revenue from the 30 percent of a games purchased from Steam. And yet, Valve itself enables and supports the free generation of third party keys for developers / publishers to sell them elsewhere, keep all the profit AND Valve themselves will bear the cost of those games being operated and maintained on Steam. The result is that developers / publishers gain more revenue and we customers get to buy games cheaper from third party sites selling Steam keys.
When you look at all these features and services that Valve / Steam provides and are continuing to provide at an even greater capacity every single year, it is clear that out of all the other platforms, only Steam gives back the most to both consumers and developers. Unlike other platforms, Steam earns their cut AND they're adding and improving new features and services every single year for no extra charge. Not only that. Valve has also reduced their 30 percent cut to 20 percent for those who meets certain sales milestone.
https://steamcommunity.com/groups/steamworks#announcements/detail/1697191267930157838

In conclusion, what Epic is doing is using the 12 percent to undercut others using money generated from Fortnite, then trying to get developers / publishers on board with cash incentive and subsequent forced third party exclusives, and then trying to strong-arm customers with said forced exclusive deals and other anti-consumer practices while providing us virtually nothing since they cannot compete with Steam on fair grounds or match Steam's level of features and services with that 12 percent cut. Its all about greedy developers / publishers getting paid by Epic for exclusive deals while shoving down all sorts of anti-consumer / anti-competitive policies on us customers. Epic does not care about customers as they've openly proved and stated it time and again. They only care about lining their own pockets.
Valve / Steam always has customers interest at heart followed by developers / publishers. Epic on the other hand, has only their own interests at heart, following by developers / publishers. We, the customers, will choose the platform to do business with that has our interests in mind. Because at the end of the day, we customers don't need their games to survive, its the developers / publishers who needs us, our business, to make their day-to-day living.
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Fahim Graphics Designer 4 months ago
Lastly, its about publisher getting a bigger share of profit while developers sees virtually no benefit from it. Most of the profit a publisher generates does not go to the developers but straight to the higher-up CEOs, CFOs, board members and the likes. If anything goes wrong, its the developers who suffers either paycuts or getting fired from those companies, while the higher-ups enjoys their every increasing profit margin.

The following links are just some of the examples of how publishers fire hundreds of developers despite earning record profit

Here's Epic's own developers being abused and overworked

https://www.polygon.com/2019/4/23/18507750/fortnite-work-crunch-epic-games
https://www.youtube.com/watch?v=D7lecpA2zPU
https://www.youtube.com/watch?v=RT14-lyqofA
https://www.geekwire.com/2019/guild-wars-2-developer-arenanet-confirms-layoffs-canceled-projects/
https://www.youtube.com/watch?v=cQKjVgDNVJw
https://www.youtube.com/watch?v=93xOfrcNQ_A
https://www.youtube.com/watch?v=qofu4j0HZIQ
https://www.youtube.com/watch?v=GN1uV57hE_w
https://www.youtube.com/watch?v=tmK43DV_wVY
https://www.youtube.com/watch?v=l9Y_PJ9lByw
https://www.youtube.com/watch?v=-bn3Ydzj-tY
https://www.youtube.com/watch?v=n6rwbKzrcd8
https://www.youtube.com/watch?v=Jz4qegmGoLo
https://www.youtube.com/watch?v=9jM_FL5VxO8
https://www.youtube.com/watch?v=rbEtxD9nU6o
https://www.youtube.com/watch?v=FdVLJ6mLT-U
https://www.youtube.com/watch?v=Tke1c83ceXI
https://www.youtube.com/watch?v=Wh0mKpzXf5A
https://www.youtube.com/watch?v=SrKDgDlbsS8The
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Bonnie Patterson Narrative Designer, Writer 4 months ago
One big problem with the 70/30 split is for companies who republish localised versions of foreign online games, as the split then becomes 30/40/30. That impacts cash shop prices - a game originally designed and balanced for an anticipated 50 yuan monthly from 60% of its customers can end up having to target sums of 100 in its republished form - and because fewer players can afford that, it unbalances the game - all the snacky powers people happily buy when they're a couple of quid become out of reach except for whales.
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Antoine Baker Artist/Designer/QA Tester 4 months ago
@Fahim:
As a viable storefront I believe they been around less than a year. Could be wrong tho. Epic seeing the PC money is nothing new in the world of business. That's how business works. Companies follow where the money is. EA took their content off Steam as they felt they could get 100% of the PC rev from their IP's instead of 60%-70% and give a small sum to Valve. AA/A is still going to be big on console because that's where companies make the bulk of their money for game releases. Indies and smaller devs depend on the PC market so they can break into the console space or continue being game devs. PC is cleanup rev for most AA/A companies. PC has gotten a boom due to Youtubers and indie devs. Everyone is trying to stream the next game and it's become earned promotion for most companies.

"In conclusion, what Epic is doing is using the 12 percent to undercut others using money generated from Fortnite, then trying to get developers / publishers on board with cash incentive and subsequent forced third party exclusives, and then trying to strong-arm customers with said forced exclusive deals and other anti-consumer practices while providing us virtually nothing since they cannot compete with Steam on fair grounds or match Steam's level of features and services with that 12 percent cut."

It wouldn't have mattered anyways because everyone still would have purchased the games on steam, even if EGS was a carbon copy of Steam (features and QoE updates). Then the gamers would have been outraged calling EGS a "copycat" or "unoriginal". So EGS wouldn't have won in that regard as people would have cried foul about copying Valve. The gamer has TOO many games, friends, achievements, time and money invested in Steam. EA has almost the same features and they don't have as much market-share as Valve. GOG, same deal, no one migrates over to it. uPlay has some features, but no one wants it (and rightfully so). You have to adapt to your surroundings, and Epic knew what to do and how to strategize surviving Valve. The other companies trying to compete "fairly" aren't even making a dent in said market-share. Remember they have a 15 year head start. So that's actually false as there are other competitors trying to do the same thing and don't nearly have the same amount of impact as Valve.

You can actually improve quality of life features without taking a huge cut. If you are smart about it. But they are a platform and they can name their own price. As a publisher you would have already bought publishing rights to the game. The devs already made their money from the publisher paying everyone. The game selling would be the publisher recouping the money back from investing in the devs. So if they spent 15 million on the game and you only made 7 million, that makes publishers worry and they are less likely to give that team another shot as they have cost them money.
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