Epic, Steam, and Digital Distribution by loreshapergames

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· @loreshapergames ·
$1.76
Epic, Steam, and Digital Distribution
Recently I've been thinking a lot about the launch of the new Epic Games storefront for digital game purchases.

The real selling point has been an 12-88 revenue split (with 88% of purchases going to developers), and that's actually rather significant.

From a sales perspective, you can expect about 3% of a purchase to be lost in transaction fees (unless you're using STEEM, but we're not going to worry about that yet), and then you need to consider the cost of running a marketplace.

As a result, the Epic Games revenue split is probably about 25% or so for covering transaction fees (I never read any legalese for them, however, so that might be a cost given to the developer), with the remainder covering the cost of running the service and being profit for Epic Games.

Under a 30-70 revenue scheme (which is pretty standard in the industry; DriveThruRPG, where we release our games, is more-or-less at this level and so is Steam), the split is pretty much going to be all profit, especially in the current day and age of extremely cheap hosting and bandwidth (in the early internet, a 30% take made more sense; it was harder to start up a digital shop and the hosting costs were greater).

# The Economics

Technically, you could run an e-shop for something like $100 a year. In practice, the time and effort that go into it probably push the price-tag to around $5000 or so, if you count all the associated potential issues, but that's an estimate based on the notion that you then need to self-service customer complaints and such; you could probably outsource this for a similar amount of money.

If you were selling 10,000 titles at $5 a pop (our estimate for the price, though not the sales figures, for Genship Exiles), you'd wind up with possibly a $10,000 net benefit from going your own way, but you need to be able to drive 10,000 sales on your own personal shop, which is not necessarily going to happen. I'm not expecting more than 100 sales on Genship Exiles, which means that I probably shouldn't be pumping as much money into it as I am, but I can dream.

# To be (or not to be) on a big storefront?

The justification for this right now is that the fee covers the benefits of being in a large marketplace, but there's some flaws in that logic as well. I'm going to give a brief overview of what the big benefits and weaknesses of being on such a marketplace are.

## Pros:

- Really easy hosting and management; the "fire and forget" method of owning a business. You still have to do your own marketing, but even on DriveThruRPG months after a release we see a trickle of traffic.
- Most marketplaces have a system for making sure people get updates and are informed when you release a new title.
- You get to have exposure from a broader audience that might otherwise not have seen your work.
- Partnerships and other opportunities that come from being on a big platform, the convenience of use for people who are already on that platform (versus tracking down download links or using other clients).
- Sometimes the fees cover automatic affiliate benefits, which mean that people get rewarded for reviewing your stuff if people click through.
- A well curated market with a good review process fosters sales.

## Cons:

- Fairly large fee above and beyond transaction fees.
- You still need to do your own marketing a lot of the time; word-of-mouth helps, but is not tremendous.
- You can be drowned out by a sea of competitors.
- May be fees or gateways to using the storefront.
- Poor curation and shoddy reviewing systems can make customers wary.

## Epic Games vs. Valve

Right now the Epic Games storefront is basically hitting Valve where it hurts. Game library fragmentation is an issue, but with a lot of major AAA titles not releasing on Steam, it's more and more likely that users have just learned to grin and bear it if they want to play the latest games.

Valve's also had a lot of issues involving the curation of its storefront and how developers have been treated (or, rather, not treated). While a lot of that's not really Valve's fault so much as something that always happens on publishing platforms, it is worth noting that having developers jump ship is going to be a pain, and 18% is a heck of an incentive.

The real challenge for Valve is convincing people to stay on the platform; if developers flee and offer benefits (like exclusivity or discounts) they're going to have issues, and Epic's offering free games on their new storefront as a sort of lure for users who are hesitant.

Valve does offer a lot of things that Epic's not offering, however, like social networking features and server hosting (though I'm not sure how much of this Valve does and Epic may have their own offerings I'm not aware of).

## Our Practice

For us at Loreshaper Games, there are a few other considerations. We do a lot of pay-what-you-want releases, and then whatever cut gets taken off of that would be taken, but setting this up would be extra time and effort on a bespoke e-shop solution.

Now, with that said, we could just have a download link somewhere, or make a freebie link and then a paid version available simultaneously, but those both have major disadvantages versus the sleek PWYW solution on DriveThruRPG.

However, in general, here's my position.

The fees we pay at a digital marketplace generally are worth, at least for our current volume, the cost of doing business.

DriveThruRPG offers an opportunity for print on demand, which I hope to take advantage of with Genship Exiles, and also provides a really reliable platform for distribution. While I'm not 100% certain how much traffic on DriveThruRPG comes from other sources versus DriveThruRPG itself (they have tools for this, but I never set them up), users browsing the site are likely a major source for our traffic.

We'll see how things change if we get our release volume up and continue increasing social media followings. I suspect that at a certain point we may have a point where we want to switch over, especially if I ever finish a project (I have so many slow burning projects that if I die, ***I*** will probably end up in development hell myself).

## Other Companies

I don't have any working relationship with other companies, but I have looked around to see where they are sold and I have a little insight into some of their functions.

If you look at Wizards of the Coast and D&D Beyond, they clearly feel that it's not worth it for their fifth edition titles, but the fact that they've published most of their back catalogue on DriveThruRPG or its sister sites tells us that they're willing to have the convenience factor and print on demand services at the premium of losing a larger cut than they would on D&D Beyond sales.

SIXMOREVODKA does not operate any DriveThruRPG shops for Degenesis (though a third-party has created free Degenesis content and uploaded it on DriveThruRPG). Marko has stated openly that Degenesis is a labor of love and does not return a profit; the degree to which this is "doesn't make as much money as using resources elsewhere" or "actually is a financial loss" is unclear, but Degenesis has an absurdly high production value so I wouldn't be surprised if it's actually a financial loss.

Rowan, Rook, and Decard offers their books on DriveThruRPG, and on their own site at cheaper prices. I don't know how exactly their financials are doing, but they have had several successful Kickstarter campaigns and are producing content frequently. Their release schedule looks a lot better than ours.

A handful of other publishers used to operate both DriveThruRPG and their own sites, but most of them have since just consolidated on DriveThruRPG as far as I can tell. Prices tended to be the same on both platforms, and it was a major detriment to the value of those secondary storefronts versus DriveThruRPG if there's no pricing incentive to buy from there, since it leads to a fragmented games library.

# The Overview

The Epic Games storefront is going to shake up digital distribution for a while. In video games, it makes a lot of sense to switch over from Steam, because of the fact that the Steam marketplace has been suffering from a few unfixed problems and the difference in the developer's cut is so great.

However, there are also a lot of reasons why a premium marketplace makes sense, and I'm not going to take Loreshaper Games off of DriveThruRPG any time soon.
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@volderhein ·
I did notice the epic games store pop up A LOT during most world premieres at the game awards. so this was what was going on...
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@loreshapergames ·
Yeah. Right now it looks like Epic could really pull off a coup in the digital marketplace arena. 

Posted using [Partiko Android](https://steemit.com/@partiko-android)
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@volderhein ·
I mean, i really like Steam but as a consumer i'm all for that move which benefits developers the most, since THEY ARE the people who make games for other users like me. 

It's never good when only one company rules over an entire market, so it's always nice to see some innovation and new things here and there.
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@lextenebris ·
> - Really easy hosting and management; the "fire and forget" method of owning a business. You still have to do your own marketing, but even on DriveThruRPG months after a release we see a trickle of traffic.

A lot of people – and by people I mean "large businesses" – really forget this one, and there's a pretty elemental reason for it.

Running a store is very different than running a company that produces a thing. Being skilled, talented, and effective at running a business that creates widgets, whatever that widget is, does not immediately translate into being good at running a store. So by and large, if you want to sell your widget in your own store, you end up buying equipment and leasing software and people to do what is effectively another business. One that you probably don't have expertise in.

There are tons of small RPG publishers in the industry who tried to start up their own digital storefront and had a modicum of success – for about 5 minutes. I have logins on most of them. And then I end up buying most of my RPGs on DriveThruRPG because it's relatively well run, a consistent interface, and does the job every time.

Coupled with the fact that most people in niche artisan fields really don't have much of an idea of how to run a business in the first place, throwing running a storefront on top of that is a pretty heavy recipe for disaster.

Which, not surprisingly, translates over into the niche artisan process of making independent video games.

> - You still need to do your own marketing a lot of the time; word-of-mouth helps, but is not tremendous.
> - You can be drowned out by a sea of competitors.

These are the same problem, really. You are going to have to do your own marketing no matter what, and if anyone tells you different just because you happen to be on a specific storefront – they are lying to you and just want your money. You are responsible for getting your product in front of the people who want to buy it, and if you don't know who those people are, don't make the product. If you don't know where those people are, don't make the product. If you can't talk about the thing that you are interested in doing with enough excitement that people who like similar things feel it too, don't make the product. Or make the product but don't sell it; give it away.

If your product can be drowned out by a sea of competitors, don't make the product. If it doesn't stand out, if there's no good argument for "why should I buy this thing as opposed to that thing?" – don't make the product.

It's okay if the eventual answer is, "well, this isn't the sort of thing that you, in particular, will like." In fact, it's probably impossible to make anything that is so electrically awesome that everybody will like it. You might be able to make something so electrically bland that most everybody will at least give it a nod (Fortnite, I'm looking at you), but if you actually want to make some sort of a statement, resign yourself to having somewhat fewer people and that being okay.

Even if you were running your own shopfront, you will be doing your own marketing all the time and you can still be drowned out by a sea of competition. In fact, most of the time, you probably will be. The modern consumer doesn't even have to burn gas to go to another shop to buy something else.

> While a lot of that's not really Valve's fault so much as something that always happens on publishing platforms, it is worth noting that having developers jump ship is going to be a pain, and 18% is a heck of an incentive.

What I'm interested in is seeing whether Epic can make this income split work. Right now there deliberately undercutting Valve in order to get developer attention and it's working. But can they afford to keep the doors open with that split, given that indie gaming is notoriously up and down and the margin is never good for the store side of things. You'd think that 30% would be a nice, comfortable amount – but it's definitely not when you're talking about large numbers of servers being kept up for vast amounts of uptime, vast amounts of storage, all of which needs to be managed by a competent team, coupled with another team to manage the huge network bandwidth being consumed, and all the fun of dealing with however their servers are set up in a physical way… That's not cheap. And those are things which profit pretty heavily from economy of scale, so Valve is probably doing about all they can to push that margin.

Which makes us ask, given they don't have nearly as much leverage as Valve, how is Epic going to keep the doors open when taking a smaller cut? Can they? Is that even possible?

> The real challenge for Valve is convincing people to stay on the platform; if developers flee and offer benefits (like exclusivity or discounts) they're going to have issues, and Epic's offering free games on their new storefront as a sort of lure for users who are hesitant.

Valve really doesn't have a challenge in keeping people on the platform. They have a vast, vast advantage in network effect. They have all the infrastructure already in place to sell games, distribute games, and manage that process. A developer may be interested in taking a risk in jumping to Epic's platform because they know that if it sinks, Steam will always be there and they can go back and accept the larger cut, and Valve won't have a problem taking them back in because, "hey, free money."

Epic has a bit of an uphill climb because they aren't just competing with Valve, of course. They're also competing with GOG, itch.io, and at least one more small digital sales front that is evading my mind with their own client, not to mention Indie Game Store, Fanatical, and the handful of other sales fronts which focus on bundles and deep sales.

Epic has stepped into very, very aggressive waters. I'm not sure what they have other than one game for name recognition that's going to compete with the rather cutthroat options out there.

> We'll see how things change if we get our release volume up and continue increasing social media followings. I suspect that at a certain point we may have a point where we want to switch over, especially if I ever finish a project (I have so many slow burning projects that if I die, **I** will probably end up in development hell myself).

I'll put it to you like I always put it to people who ask me about whether it's a good idea to go to a bespoke storefront or not:

Did you start working on this stuff to own and manage a store, or did you start working on this stuff to work on this stuff? What makes you think you are qualified and competent to run a store? What makes you think that you are more qualified and more competent to run a store than people who do it all day and who have done so as long as you have been working on whatever it is that you do?

It's really that simple. Now, there's plenty of debate to be had about this store versus that store, this cut versus those bennies, and that is a fine and wonderful set of debates to have – but on the question of "do we need our own storefront?" the answer is really, really straightforward.

Maybe that's why most people don't like it.

> A handful of other publishers used to operate both DriveThruRPG and their own sites, but most of them have since just consolidated on DriveThruRPG as far as I can tell. Prices tended to be the same on both platforms, and it was a major detriment to the value of those secondary storefronts versus DriveThruRPG if there's no pricing incentive to buy from there, since it leads to a fragmented games library.

The smart move is to recognize that you're going to use an external storefront from the beginning and designed around that recognition. (It's going to improve the design of your site, too, so that works out nicely.)

Don't just have "storefront blurbs", a picture of the cover, and a price – take the opportunity to make an interesting page that communicates why something should be bought, why it's important, why it's interesting, and then link that to the storefront of whoever is moving your product. All too often, particularly small artisan crafts like RPGs, get caught up in pretending to be a store and forgetting that they need to sell the product. Write clear, concise, detailed bits on all of your products, share some internal art, talk about the development, show us why we want to buy it – and then link to somewhere where we can buy it. If you can do that, you're promoting your own product and leaving the part of the business you don't have to deal with to someone else.

Storefronts are awesome, but very few people went into the art of creation to become a shop keep.
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