Epic Games’ Epic Battle on Storefront Space

The Wall Street Journal reported that Epic Games will challenge mobile app store business model dominated by Google and Apple. But what factor differentiates Epic Games from incumbents whose network effects are working in this case? The answer is disruptive pricing on the supply side of storefront (12% rake on revenue that apps generate). This is not surprising as Epic Games has already adopted the strategy at its Epic Games Store since December 2018 when it launched the online storefront. Basically gaming online storefront and app store share the similar business model of digital distribution.

WSJ also reported that Epic will start selling games (if you can distribute app game, of course you can distribute other apps) for Android devices where the ecosystem is more open (Epic distributes Fortnite at its launcher bypassing Google Play).

So what will Google react to that disruptive pricing? Mostly likely Google will wait and see until it senses that Epic’s storefront has the potential to become de facto app store on Android devices.

Analyst suggests that if Google decides to reduce the rake on Google Play, the move might force Apple to adjust rake on App Store. There might be a chain reaction but this is different from the competition on PC/Mac gaming storefront. Basically the customer bases between iOS and Android are different. The difference will determine whether Apple will follow the move, when to follow, and the magnitude in rake reduction if it follows.

Below is the chart illustrating how Epic Games’ disruptive pricing might impact game digital distribution (and more). Disruptive pricing will have less impact on closed ecosystem in the short term. That said, in the long run, closed ecosystem might be indirect influenced by another open ecosystem (Google Play’s move might have impact on App Store) and a functionality that makes the ecosystem less closed (Epic Games is rolling out cross-platform services in 2019). Enabling cross-platform will commoditize access devices for games potentially playable across platforms. Consoles with special form factors or strong exclusives will face less pressure from cross-platform. This might be the reason why Sony is reluctant to cross platform.

Disrupt_Pricing_DigiDistrWhile some industry analysts predict Steam will maintain its game storefront dominance, at least in 2019, my posts on game storefront competition analysis has showed that Epic Games and Discord’s potential to gain market share and disrupt the digital distribution space if they systematically execute strategies in their playbooks. Don’t be surprised if the competition landscape changes much faster than you think.

~ My Related Posts ~ 

Gaming-related Platform Ecosystem Competition and the Financing behind

Entering a market where existing platforms have network effect working

Networks can still be beaten

2 thoughts on “Epic Games’ Epic Battle on Storefront Space

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s