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[Bernoulli]

I saw on the other thread the hate on epic games for no reason, Apple and Google are taking 30% and have the most profits in the industry without doing a single thing in gaming

"We believe those [consoles] to be competitive markets and we believe that the fee, their cost structure, is entirely different than a mobile app store," Gelber said in a recording from September 2022.

Gelber was then pressed on how the cost structure for Nintendo, Sony and Microsoft is different from that of Google and Apple.

"Well, they subsidize hardware, so they sell their hardware, as far as I can tell from widely published reports, at a loss, and so the fee needs to cover that," he said.

Epic explains why it hasn't sued Nintendo, Sony and Microsoft over 30% fee | Epic vs Google

Sign up for the GI Daily here to get the biggest news straight to your inbox Epic Games has offered an explanation as t…

www.gamesindustry.biz

 

[Guilty_AI]

"We really don't want to risk that market while our hands are full with google and apple. Not yet"

 

[Godot25]

And they are right.
Sony and Microsoft are subsidzing cost of hardware in exchange for 30% cut on software. Apple is selling iPhones with huge profit and they are still charging 30%.

Although I have feeling that EU in their infinite wisdom will go after console manufacturers in same way they are currently going after Apple with Digital Markets Act.

 

[Alexios]

Nintendo doesn't sell hardware at a loss. I think Wii U was the one exception where they still said a single game purchase with the system was enough to bring in profit. So, clearly, 30% forever from day one probably brings in a biiiiiit more profit than needed for that hardware subsidizing, lol.

Valve may not have hardware costs (well, nowadays they do with Index, Deck and so on) but clearly put the R&D in software, hence the best platform/store (launcher, lol) with the widest range of capabilities for consumers and developers/publishers by a gigantic margin. That's why all the publishers who thought they could do better/as good eventually returned to Steam (before Microsoft bought them too, lol). Timmy boy himself has said before that's the reason they won't do certain features on EGS (though he's backpedaled on a ton of that too), because in his opinion it's not worth the cost, but at the same time spews the complete opposite bullshit like this, as if developing and maintaining a platform doesn't have costs of its own if hardware development isn't involved. Whatever works situationally at any given question/time rather than a real stance toward real issues.

Just as he was against Steam sales for devaluing products and now EGS is the free game/coupon/sale spot with Fortnite pretty much the only profitable endeavor on it (enough to cover fake "guaranteed" sales for other games to pretend they also made a profit but they're toning that down now).

He knows he's full of shit and just says whatever random crap certain clueless, ignorant, idolizing fanboys can latch on to defend him a la Elon Musk. Funny shit. At the end of the day EGS is a black hole for Fortnite money so the way they do business is one to avoid, not copy, for any other company.

Waiting for the next Epic lay offs or gutted platforms like Bandcamp to prove how for the people they are.

 

[StealthGoblin]

'Also Sony are one of our investors and we partner in many areas. '

 

[Bernoulli]

And they are right.
Sony and Microsoft are subsidzing cost of hardware in exchange for 30% cut on software. Apple is selling iPhones with huge profit and they are still charging 30%.

Although I have feeling that EU in their infinite wisdom will go after console manufacturers in same way they are currently going after Apple with Digital Markets Act.

I don't think EU will go against consoles, they are a small market compared to billions of phones

Jez and Tom warren just love to push that narrative because they want playstation to be forced to open up and have Xbox use them.
You can see they don't even talk about Nintendo, all their focus is anything that can slowdown or hurt playstation

 

[deriks]

- we charge 30% on apps on iOS and Play Store
- so why you don't do this over consoles?
- because then we will become worse than EA

 

[Bernoulli]

Nintendo doesn't sell hardware at a loss. I think Wii U was the one exception where they still said a single game purchase with the system was enough to bring in profit. So clearly 30% forever from day one probably brings in a bit more profit than needed for the hw subsidizing, lol.

Valve may not have hardware costs to cover (well, nowadays they do with Index, Deck and so on) but clearly put the R&D in software, hence the best store with the widest range of capabilities for consumers and developers/publishers by a gigantic margin.

Timmy boy itself has said before that's the reason they won't offer all such features on EGS, because in their opinion it's not worth the cost, but at the same time spew the opposite bull like this.

He knows he's full of shit and just says whatever random crap certain clueless, ignorant, idolizing fanboys can latch on to defend him a la Elon Musk.

It is at loss or very close, unlike phones like IPhone 15 pro that cost 400 to produce and sold at 1400 euro for the base 128gb version

 

[Godot25]

I don't think EU will go against consoles, they are a small market compared to billions of phones

Jez and Tom warren just love to push that narrative because they want playstation to be forced to open up and have Xbox use them.
You can see they don't even talk about Nintendo, all their focus is anything that can slowdown or hurt playstation

Few years ago nobody have thought that EU would go after Apple and yet here we are.

And I doubt editors of The Verge and WC have such a powerful opinions to dictate a trend . But I see that they live rent free in may heads around here.

 

[Thirty7ven]

"Well, they subsidize hardware, so they sell their hardware, as far as I can tell from widely published reports, at a loss, and so the fee needs to cover that," he said.

*Nintendo has left the chat*

 

[winjer]

That is just a load of bullshit. The reality is that Epic doesn't want to piss off console makers, as this is still their biggest market.
It's true that console hardware is subsidized, but that usually only happens at the start. Eventually, with newer revisions, they manage to get to a zero loss. Or even a profit.
And this argument doesn't even hold water in the PC space. Because there, hardware is made by other companies, like NVidia, AMD and Intel. And these are the ones making profit out of hardware sales.
The same for Android, since most phones are made by third party companies, not by Alphabet.

This statement from Epic just serve to show they are very hypocritical. And their arguments are not based on logic.
The reality is that Epic was very late to the digital market store. And because of that, they are now trying to bend everyone else, to their will.

 

[crackajack]

The moment you can't demand those 30% releasing any console makes barely sense anymore and you are better off just going third party. Forcing Sony and Nintendo to allow MS and Epic or whoever to sell their products on their platforms without, maybe exorbitant, fees, will make those platforms pointless.
Any such action might immediately kill consoles and we will only have PCs and handheld PCs then.

 

[willothedog]

It is at loss or very close, unlike phones like IPhone 15 pro that cost 400 to produce and sold at 1400 euro for the base 128gb version

are you sure that is not just the parts cost as production costs are completely different

 

[Robb]

They better sue Nintendo then, they’ve been raking in cash on the Switch since day one.

 

[Pejo]

This statement from Epic just serve to show they are very hypocritical. And their arguments are not based on logic.
The reality is that Epic was very late to the digital market store. And because of that, they are now trying to bend everyone else, to their will.

I'll always remember Sweeney saying that he'd take the deal if Apple offered ONLY Epic a way to skip the 30% instead of everybody else. Then he acts like he's out there fighting the good fight for gamers and developers everywhere. Snake in the grass.

 

[Bernoulli]

Few years ago nobody have thought that EU would go after Apple and yet here we are.

And I doubt editors of The Verge and WC have such a powerful opinions to dictate a trend . But I see that they live rent free in may heads around here.

it only started because of the new antitrust law that got introduced not long ago and phones are used in billions for everything unlike consoles that are just for playing games, the complaints about the 30% were there for a few years like spotify in 2019 or earlier than that https://www.theguardian.com/technol...mmission-unfair-european-commission-complaint

 

[Ozriel]

Nintendo doesn't sell hardware at a loss. I think Wii U was the one exception where they still said a single game purchase with the system was enough to bring in profit. So, clearly, 30% forever from day one probably brings in a biiiiiit more profit than needed for that hardware subsidizing, lol.

Valve may not have hardware costs (well, nowadays they do with Index, Deck and so on) but clearly put the R&D in software, hence the best platform/store (launcher, lol) with the widest range of capabilities for consumers and developers/publishers by a gigantic margin. Timmy boy himself has said before that's the reason they won't do certain features on EGS (though he's backpedaled on a ton of that too), because in his opinion it's not worth the cost, but at the same time spews the complete opposite bullshit like this. Whatever works at any given question/time rather than a real stance.

Just as he was against Steam sales for devaluing products and now EGS is the free game/coupon/sale spot with Fortnite pretty much the only profitable endeavor on it (enough to cover fake "guaranteed" sales for other games to pretend they also made a profit but they're toning that down now).

He knows he's full of shit and just says whatever random crap certain clueless, ignorant, idolizing fanboys can latch on to defend him a la Elon Musk. Funny shit. At the end of the day EGS is a black hole for Fortnite money so the way they do business is one to avoid, not copy, for any other company.

Nintendo may not sell at a loss, but they certainly aren’t selling with the type of margins you see in every other consumer electronics company.

Without a console being a walled garden, it certainly wouldn’t make sense for console makers not to bake in a substantial margin.

The EU knows it would harm consumers even more if they go after consoles, so nobody’s touching that. And I’m not seeing anything conflicting in what Epic’s saying in that regard.

That is just a load of bullshit. The reality is that Epic doesn't want to piss off console makers, as this is still their biggest market.
It's true that console hardware is subsidized, but that usually only happens at the start. Eventually, with newer revisions, they manage to get to a zero loss. Or even a profit.
And this argument doesn't even hold water in the PC space. Because there, hardware is made by other companies, like NVidia, AMD and Intel. And these are the ones making profit out of hardware sales.
The same for Android, since most phones are made by third party companies, not by Alphabet.

This statement from Epic just serve to show they are very hypocritical. And their arguments are not based on logic.
The reality is that Epic was very late to the digital market store. And because of that, they are now trying to bend everyone else, to their will.

Consoles eventually become profit generating, but that’s consistently being countered by them dropping prices as the generation goes on.

Your argument doesn’t hold water at all. Samsung, Apple, Google et al aren’t making a business that’s built on $20 profit margins on hardware that costs $400+. Valve has near dominance in the PC gaming space, so they can afford to sell base Steamdecks with very small margins. Check out the very high markup on the Valve index if you want to see how their hardware is priced when the market is still immature.

 

[Ozriel]

- we charge 30% on apps on iOS and Play Store
- so why you don't do this over consoles?
- because then we will become worse than EA

Unless there are special deals negotiated (like Activision with Sony) it’s 30% on console too.

 

[RoboFu]

So the answer is for them to make their own phone with their own store…market it to become popular. Then use their fee to subsidize the hardware cost.

Problem solved!

 

[Bernoulli]

I'll always remember Sweeney saying that he'd take the deal if Apple offered ONLY Epic a way to skip the 30% instead of everybody else. Then he acts like he's out there fighting the good fight for gamers and developers everywhere. Snake in the grass.

he said that because other Devs are getting this kind of deals but Not Epic when they are bringing the most revenue.

 

[Flutta]

That is just a load of bullshit. The reality is that Epic doesn't want to piss off console makers, as this is still their biggest market.
It's true that console hardware is subsidized, but that usually only happens at the start. Eventually, with newer revisions, they manage to get to a zero loss. Or even a profit.

Lol. Your hate for EPIC is clouding your judgement. The PC market almost as big as the console market for EPIC, That’s the first. Second Both PS5 and Series sell at loss and we are 3 years into the gen. Also keep in mind that the economy is currently a mess, selling high end console with profit is getting harder and harder almost at zero chance.

 

[winjer]

Lol. Your hate for EPIC is clouding your judgement. The PC market almost as big as the console market for EPIC, That’s the first. Second Both PS5 and Series sell at loss and we are 3 years into the gen. Also keep in mind that the economy is currently a mess, selling high end console with profit is getting harder and harder almost at zero chance.

Your love for Epic is clouting your reasoning. The PS5 non-digital was already profitable in 2021. And with the newer revisions, it's probably profitable for the digital version now as well.
Steam doesn't make PC hardware. Yes, there is the Steam Deck, but that is a tiny fraction of the PC hardware market. So Valve has to make a profit of the software side, just like Epic. The same happens with Alphabet.

 

[Ozriel]

Lol. Your hate for EPIC is clouding your judgement. The PC market almost as big as the console market for EPIC, That’s the first. Second Both PS5 and Series sell at loss and we are 3 years into the gen. Also keep in mind that the economy is currently a mess, selling high end console with profit is getting harder and harder almost at zero chance.

Very well said.

Every other hardware manufacturer builds in significant profit margins when they sell their devices.

Consoles would certainly hit $700+ prices if the walled gardens are relaxed. No regulator is going to change the status quo mid-generation, so at best you’d be waiting for a much more expensive PS6 and next gen Xbox.

 

[Pejo]

he said that because other Devs are getting this kind of deals but Not Epic when they are bringing the most revenue.

And that's fine, but it doesn't go both ways. You can't sit on the stand and say "oh fuck yea I'd take that deal" and then when you don't get it, say you're fighting for a free and open market on mobile and Apple/Google are the devil. I mean they are, but it's still hypocritical which was what I was agreeing about with my post.

 

[crazepharmacist]

Maybe Apple spends more money than Sony, Microsoft, and Nintendo developing and consistently refining, updating IOS, MAC OS, IPAD OS, Watch OS, TvOS, Vision OS and needs the 30% to recoup those costs? Did they ever think of that?

 

[Yoboman]

Maybe Apple spends more money than Sony, Microsoft, and Nintendo developing and consistently refining, updating IOS, MAC OS, IPAD OS, Watch OS, TvOS, Vision OS and needs the 30% to recoup those costs? Did they ever think of that?

They sell hardware at a substantial markup already

 

[mdkirby]

And they are right.
Sony and Microsoft are subsidzing cost of hardware in exchange for 30% cut on software. Apple is selling iPhones with huge profit and they are still charging 30%.

Although I have feeling that EU in their infinite wisdom will go after console manufacturers in same way they are currently going after Apple with Digital Markets Act.

I mean, they might. But we’d have to suddenly accept that consoles are gonna cost quite a bit more, and get used to $90 games

 

[Zathalus]

Wait a tick, I thought Sony and Nintendo didn't sell hardware at a loss? Both of them have reported making profit on the consoles sold? So this argument holds no water.

 

[Ozriel]

Maybe Apple spends more money than Sony, Microsoft, and Nintendo developing and consistently refining, updating IOS, MAC OS, IPAD OS, Watch OS, TvOS, Vision OS and needs the 30% to recoup those costs? Did they ever think of that?

Apple has some of the highest hardware markups in the industry

 

[StereoVsn]

are you sure that is not just the parts cost as production costs are completely different

Yep, plus the BoM for 15 Pro Max is still higher than $400. Once you add logistics costs, shipping, Apple Store cost (b&m and online), R&D and so on, cost goes up a lot.

I mean Apple still enjoys very high margins, but let’s not get ridiculous. Hell, Samsung flagships cost similarly. And even Chinese flagships like Oppo, Huaweo and Xiaomi aren’t far behind if at all.

 

[Bernoulli]

Maybe Apple spends more money than Sony, Microsoft, and Nintendo developing and consistently refining, updating IOS, MAC OS, IPAD OS, Watch OS, TvOS, Vision OS and needs the 30% to recoup those costs? Did they ever think of that?

They don't, IOS gets almost no features each year and is a buggy mess, they don't deserve to get the 30% just by having a store
That's why MAC OS has sideloading and one gets apps on the Mac store

 

[Tiago Rodrigues]

*Nintendo has left the chat*

And Sony as far as i know isn't selling hardware at a loss for a while...in fact since 2021 if i remember correctly.

 

[SmokedMeat]

Now for the real reason: Without Sony, Xbox, and Nintendo, there would be no Fortnite Microtransaction sales.

Epic can’t afford to go after them.

 

[StereoVsn]

Your love for Epic is clouting your reasoning. The PS5 non-digital was already profitable in 2021. And with the newer revisions, it's probably profitable for the digital version now as well.
Steam doesn't make PC hardware. Yes, there is the Steam Deck, but that is a tiny fraction of the PC hardware market. So Valve has to make a profit of the software side, just like Epic. The same happens with Alphabet.

Well, Valve has to make a profit and also spend money on improving their offering. Epic Store isn’t built for making profits at their current rates and definitely isn’t built for improving anything.

If not Fortnite cash, it would have gone belly up long ago.

 

[TheThreadsThatBindUs]

He right and we should all be critical of companies who extract significant value out from the gaming market without re-investing anything back.

MS, Sony and Nintendo subsidize hardware, software platforms, services and also re-invest directly in financing both first and third party gaming projects.

Apple and Google suck money out of the gaming market and give nothing back.

 

[Thick Thighs Save Lives]

Wait a tick, I thought Sony and Nintendo didn't sell hardware at a loss? Both of them have reported making profit on the consoles sold? So this argument holds no water.

Still selling at a loss as of last quarter (Nintendo HW is profitable though). This is from the latest SONY IR Q&A a few weeks backs - https://www.sony.com/en/SonyInfo/IR/library/presen/er/pdf/23q2_qa.pdf

Question 1: Could you elaborate on why your hardware losses widened?

A: In the same quarter of the previous fiscal year, we recognized one-off foreign exchange gains denominated in yen, so it is on the basis of that comparison that the loss in Q2 FY2023 was wider. More precisely, we faced an extraordinary situation in that the yen depreciated rapidly during the same quarter of the previous fiscal year just as we were facing long lead times between component procurement and completed production.

XSX and XSS sells at a loss as well so Tim's argument def holds water since that's where Fortnite gets its largest $$$ share (Xbox + PS >> rest of the platforms where Fortnite is available).

 

[DaGwaphics]

The tricky part is that Epic doesn't have the power to make this distinction. And the distinction they've put forward isn't legally sound. Success for them here will ultimately kill the console business model entirely down the road. Epic might not be part of that fight, but someone else would take that position.

 

[crazepharmacist]

Apple has some of the highest hardware markups in the industry

Maybe because they make all of their own chips and most of their hardware in house and need the 30% and higher hardware markups to recoup those costs? Did Epic ever think of that?

 

[twilo99]

"We really don't want to risk that market while our hands are full with google and apple. Not yet"

Right, because fundamentally there really isn’t a difference between all of them..

 

[twilo99]

Maybe because they make all of their own chips and most of their hardware in house and need the 30% and higher hardware markups to recoup those costs? Did Epic ever think of that?

No, they just make very well engineered products that everyone wants so they can charge a premium.

At this point, considering their install base, they shouldn’t be allowed to have a walled garden that they can milk 30% from other people.

 

[Topher]

Maybe because they make all of their own chips and most of their hardware in house and need the 30% and higher hardware markups to recoup those costs? Did Epic ever think of that?

Apple's prices were always high even when they bought chips and other hardware from other companies.

 

[TheThreadsThatBindUs]

Maybe because they make all of their own chips and most of their hardware in house and need the 30% and higher hardware markups to recoup those costs? Did Epic ever think of that?

It's cheaper for Apple to design their own chips with internal teams than to pay a third party like AMD to do it (like Sony and MS do). As any third-party chip designer will add their own profit margin to the chip design cost they charge a customer.

So no, Apple's mark-ups have little to do with them designing their own chips and everything to do with utter fucking greed by being considered a luxury brand.

 

[crazepharmacist]

No, they just make very well engineered products that everyone wants so they can charge a premium.

At this point, considering their install base, they shouldn’t be allowed to have a walled garden that they can milk 30% from other people.

They shouldn't be allowed to? They built their hardware and software ecosystem from scratch. They can charge whatever they want. This isn't communist China. If Epic doesn't want to sell their games on their store, they don't have to. The lawsuit is completely frivolous.

 

[hlm666]

Sony and Microsoft are subsidzing cost of hardware in exchange for 30% cut on software.

Why didn't they put the 30% up to 35% instead of increasing hardware and software prices then and making the consumer front the increased cost?

 

[crazepharmacist]

It's cheaper for Apple to design their own chips with internal teams than to pay a third party like AMD to do it (like Sony and MS do). As any third-party chip designer will add their own profit margin to the chip design cost they charge a customer.

So no, Apple's mark-ups have little to do with them designing their own chips and everything to do with utter fucking greed by being considered a luxury brand.

There's a massive amount of money that went into their R&D to develop those inhouse chips. They should be allowed to recoup there costs and profit. If they knew they wouldn't be able to charge 30% because of government regulation or frivolous lawsuits from Epic, they wouldn't have decided to make their own chips.

Chips that are by the way, faster than anything on Android or third party mobile chips from snapdragon or other companies.

This is how capitalism and free market works. Don't like it? Don't buy Apple products or try to sell your apps on their store.

 

[AJUMP23]

You can only bite one hand at a time, not every hand that is feeding you.

 

[Stitch]

 

[Three]

Apple has some of the highest hardware markups in the industry

And google doesn't even sell most of the Android phones out there and barely makes any hardware profit. The truth is that Epic can try and change mobile policy by acting like a dick because they make 90% of their revenue outside of that platform on PC and console so they don't mind if they remove their games from those stores.

 

[Guilty_AI]

Right, because fundamentally there really isn’t a difference between all of them..

The difference is one of said console owners has a stake in epic.

 

[Dane]

'Also Sony are one of our investors and we partner in many areas. '

"And Microsoft is helping with our engine" "And Nintendo just bought licenses"

He right and we should all be critical of companies who extract significant value out from the gaming market without re-investing anything back.

MS, Sony and Nintendo subsidize hardware, software platforms, services and also re-invest directly in financing both first and third party gaming projects.

Apple and Google suck money out of the gaming market and give nothing back.

They are not obliged to invest in any stuff outside of their business, Google only has the Pixel smartphone line as they sold Motorola years ago to Lenovo, their profit comes from the Play Store, the Android OS is royalty free.

The reason why Timmie and company sucks so hard with third party stores is because they're doing out of pure greed than actually making a benefit to consumers like GOG does.