An incredible amount of digital ink continues to be spilled over Fortnite, the 100-player free-for-all that slowly but surely became a cultural force in 2018. The game functions as a sort of social network of its own, luring players to return with a constantly rotating array of features and upgrades. It has earned its maker, Epic Games, billions of dollars. And it is increasingly apparent that Fortnite is not only a major economic force on its own, but a Trojan horse for a broader shift in the PC-gaming market.
In early December of last year, Epic announced the launch of the Epic Games store, a digital storefront for PC games. It’s a relatively simple concept, except that the company faces a strong incumbent: for more than a decade, digital game sales have been dominated by one service, Steam. Run by Valve Software, the developer of games like Half-Life and Portal, Steam has for a long time been the only digital store that mattered. Steam was an app store before app stores existed. Anyone remotely interested in computer games probably owns a collection of dozens or hundreds of games on the service (usually acquired through occasional sales offering steep discounts).
There are many benefits to Steam. For users, games are installed with the click of a button. For developers, the company makes digital publishing relatively easy, handling things like credit card payments and no-fuss implementation of features like cloud saves, transferring game progress between devices. It also has an enormous customer base.
Every major PC release comes out on Steam. Or at least, they used to. As Steam has grown in market dominance, users, developers, and publishers have started to bristle at Steam’s growing list of hassles. At the top of the list is the 30 percent cut that Steam takes from every transaction (Apple and Google take identical cuts on their app stores). There is also Steam’s review system, which is often subject to a form of manipulation known as “review-bombing”, and the store’s return policy — any game purchase played for less than two hours can be automatically refunded.
Over the years, major (“triple-A”) publishers have begun to conclude that with tentpole releases, they can likely get away with releasing their games outside of Steam. The idea is that the need to play a game immediately at launch will supersede a player’s devotion to Steam. Pretty much every triple-A publisher has its own “launcher,” a piece of unifying software tying together a user’s catalog of purchases. Recent releases in Electronic Arts’s Battlefield series have been exclusive to EA’s Origin launcher. The most recent Call of Duty title is available to PC players exclusively on Activision’s Battle.net, which is also the only place to buy Blizzard games like Starcraft and Diablo digitally. In a strategy shift, the newest Bethesda title, Fallout 76, is also only available through a proprietary launcher. While available independently, Ubisoft’s launcher software, Uplay, is even baked in to some of the titles it sells on Steam.
From the consumer’s standpoint, the increasing number of first-party launchers is a hassle. Each launcher is managed by a company competing against the others: an EA game is unlikely to ever appear for sale via Activision’s launcher, and vice versa. Part of Steam’s appeal is that all of your purchases from different publishers can be made in one place, and sometimes centralization is convenient! Imagine, as an analogy, if you had to install new software every time you wanted to put a book from a different publisher onto your Kindle. Steam is a lot like Amazon — it obviously has a worrying amount of sway over the market, but the convenience factor is clear and difficult to give up. Users have sunk a lot of money into Steam, and a nagging sunk-cost fallacy sometimes keeps them from buying games digitally elsewhere.
The launch of the Epic Games store, however, has been greeted with a lot of optimism from the game industry and its customers. A primary reason for this is that Epic is taking a 12-percent cut of sales, instead of a 30-percent cut. It’s also not going to shoehorn in social features like forums that can be overrun with toxicity and then tank a game’s sales. There are plenty of other reasons though, and a lot of it has to do with Epic’s other businesses: the Unreal Engine and Fortnite.
Before Fortnite, Epic’s primary business was its software development kit, the Unreal Engine, which it licenses to other game studios. In the games industry, this sort of licensed codebase is known as “middleware.” Epic also operates a marketplace for creators who want to sell assets, like 3-D models, for use in the engine. That marketplace was subject to a 70–30 revenue split until this past July, when Epic announced that because of the huge infusion of cash from Fortnite, it would shift to an 88–12 revenue split — and apply that retroactively to sales from the last four years. Some developers got big checks in return for no additional work.
The Fortnite war chest has also let Epic pursue some big targets. This week, Ubisoft announced that it would sell its upcoming The Division 2 on Epic’s storefront in addition to its own first-party store, Uplay. It will not be available on Steam, though it was available for preorder there until recently. Clearly, some late-stage agreement was struck. The Division 2 is only the first in a number of titles Ubisoft has promised to Epic. The press release announcing this move isn’t particularly subtle: “Epic continues to disrupt the videogame industry, and their third party digital distribution model is the latest example, and something Ubisoft wants to support,” it reads, quoting Ubisoft vice president of partnerships Chris Early. The aspect of the industry that Ubisoft wants to disrupt is Steam’s stranglehold on PC game sales (or at the very least, their 30-percent cut). Epic is the first major marketplace to pose a threat to Steam, and because most triple-A publishers use the Unreal Engine in some part of their portfolio, Epic has a lot of friendly business partners to leverage.
Valve is obviously trying to make amends. Shortly before Epic unveiled its store, Valve announced a better revenue split for games that sell a certain number of copies. But Epic is clearly in it for the long haul. Presumably, some money changed hands between Epic and Ubisoft, as is common when distribution channels lock down exclusives. Epic is also giving away a free game every couple of weeks (one can assume Epic is subsidizing these giveaways for the titles’ developers). In a shrewd tactical move, Epic also hired Sergey Galyonkin, the creator of Steam Spy, an analytics tool that tracks fluctuations in Valve’s marketplace.
Tucked into the Division announcement is also news of an expansion of Fortnite’s Support-A-Creator mode. That mode allows people who stream Fortnite on Twitch, for instance, to earn a share of the revenue from people who buy Fortnite items. If a player buys a new costume for your character, their preferred streamer gets a cut. It’s commodified, quantified, monetized fandom. Galyonkin announced on Twitter that every game sold on the Epic Store will feature similar functionality.
Amazon implemented a similar system for games purchased through a Twitch streamer’s channel. A couple of years ago, it seemed like Twitch, a social network that also functions as a commercial for any video game, was going to leverage its position to take on Steam (especially since it had acquired — what else — a desktop launcher) but Twitch-as-store hasn’t really gained ground. Even still, the idea of launching a store for the enormous audience you already have appears to have made sense to Epic.
Epic is slowly but surely making a big push to get people used to the idea of jumping ship from Steam (the company pulled a similar move by releasing Fortnite’s Android app outside of the Google Play store, a move almost unheard-of for top-tier mobile apps). More importantly, Epic has a chance to capture an entire generation that isn’t even invested in Steam. Fortnite, just like other major PC games, has its own proprietary launcher. That launcher was, until recently, a bland piece of software that Epic updated overnight into a sleek digital storefront. Without opting in, every single Fortnite player on PC became an Epic store customer, and every future Fortnite player on PC has to install Epic’s games store. Fortnite and the store are now inseparable.
The adolescent portion of Fortnite’s player base is now coming into (or is only a few years away from) substantial purchasing power. With Fortnite and free game giveaways and quasi-exclusives, Epic is already conditioning players to see its storefront as a viable place to start their PC game collections. It’s a long play, but one that seems poised to pay off as long as Steam continues to falter.