To compete with Steam, Epic Games has been pouring Fortnite money into the Epic Games Store for the past two years, signing over 100 exclusive deals, and giving away free games every week.We knew Epic was spending a lot of money to bring customers into the store But we didn't have much concrete information until now, thanks to a big court battle between Epic and Apple, and this week we learned that Epic spent about $444 million in 2020 alone on exclusive contracts for the Epic Game Store. Phew.

More precisely, the company spent $444 million on a "minimum guarantee" for games that are released on the Epic Games Store and will not be distributed on Steam for a year. The "minimum guarantee" is just another way of saying an advance: that is, Epic guarantees the publisher a certain amount of money, regardless of whether or not the game actually sells. For example, Epic provided $10.45 million for "Control."

Epic stated in its year-end report that players spent $700 million on the Epic store in 2020, but third-party game sales accounted for only $265 million of that amount. Advances of $444 million to third-party developers would have yet to be recouped. Some of those contracts must be for exclusive titles to be released in the future, but according to Apple's study, Epic will eat "at least $330 million in unrecovered costs from the minimum guarantee alone" if the 2019 contracts are also taken into account.

As for how much Epic Games Store will lose in total by the end of 2021, taking into account exclusive content and all other expenses, projections say less than $600 million. That's a bit of pocket change.

These estimates come from a (rather spicy) summary of the arguments Apple will file with the court next month in defense of its App Store and iOS policies against Epic's antitrust claims (PDF uploaded here). As part of the defense, Apple's legal team wants to show that the Epic Games Store is not comparable to the iOS App Store, and includes everything Epic has said about how the Epic Games Store is less profitable.

Citing sworn testimony from Steve Allison, VP and GM of the Epic Games Store, and Joe Kreiner, Epic's VP of Business Development, Apple said that Epic lost $181 million on the Epic Games Store in 2019 last year and projected a loss of $273 million last year and another $139 million this year, he said. Taken together, the Epic Games Store will need to recoup an estimated $600 million before it is profitable as a whole; Apple noted that it does not expect that to happen until 2027.

Epic, in a new filing (PDF here), shows a silver lining in its business plan, estimating that the Epic Games Store will begin making an annual profit in 2023; what Apple calls a "loss," Epic would probably call an "investment." All of this spending is part of the plan, and the 12% revenue cut will ultimately be enough to sustain the store, Epic has been saying since launching the store in late 2018.

"EGS is not yet profitable at its current size and stage of development because it is accelerating marketing and user acquisition costs to gain market share," Epic's application states, quoting CEO Tim Sweeney.

All of this shinning match between Epic and Apple is over how transactions are handled on the iPhone and iPad; Apple is forcing developers to obtain authorization to sell iOS applications on the App Store, as well as for in-app purchases Epic argues that because Apple and Google have all the power when it comes to smartphones, developers are forced to pay their fees if they want to create successful mobile apps, which is unfair. Epic wants to receive payments from Fortnite iOS players through its own payment processor, bypassing Apple's fees (Apple's unauthorized actions that started this fight are well known), and Apple wants to continue receiving 30 percent of Fortnite's iOS revenue.

But Epic has even bigger plans than getting around Apple's fees on Fortnite: it wants to set up an Epic Games Store on the iPhone, selling mobile games through its own payment system and competing with the App Store itself, It wants a U.S. court to rule that it would be anti-competitive for Apple to prevent it from doing so.

Epic claims that iOS developers are unable to innovate and offer secure features because of Apple's overbearing policies, and Apple brings up the low profitability of the Epic Games Store to attack the idea that Epic is actually doing that in the first place Attacking the idea that it is, Apple's lawyers wrote (mirroring most of Reddit) that "the Epic Games Store, two years after its launch, still admits to itself that it lacks 'critical' features."

In a mostly redacted section, Apple points to "a significant security breach involving EGS," presumably referring to the 2019 Fortnite breach. It also cites an internal email sent by Sweeney, saying that Epic's customer support team is inferior to Apple's, and asks "what happened to the community team" that was supposed to provide customer service to online complainants? 'I haven't seen anything. 'We've been inundated with endless complaints about problems that Epic won't answer, and there's literally zero.'

Another topic that might come up in court is that Epic does not force developers to use its own payment processing for in-game purchases in its store. For example, Ubisoft's games in the Epic Games store use its own in-game transaction system. Apple does not want the court to think that the App Store and Epic Games Store are in the same boat, stating that in-app purchases are part of the iOS platform, not just a store feature, and that the original iPhone did not even allow third-party apps.

Throughout the document, Apple more or less says: Epic, your store is the bonfire you throw money into, and all the gamers are pissed off at you, because in order to get $700 million in revenue from Fortnite on iOS, our App Store You needed it, you ungrateful nerds.

After all, comparisons between the Epic Games Store and the App Store will not be a big part of the trial Epic's problem with Apple is not just that it operates a store with mandatory fees; Epic's gripe is that Apple has a "no-accounting" system that is not only inefficient, but also inefficient. making its store and its in-app billing system inescapable on a huge portion of the world's smartphones; in Epic's view, that is what the antitrust issue is all about.

Part of Apple's counterargument is that Microsoft and Sony are doing the same thing with Xbox and PlayStation; Epic argues that gaming consoles "do not have the same general computing capabilities as smartphones," are not portable and cannot connect to cellular networks, it is not the same, he said. Since "smartphones are an important platform for developers, many of whom are iPhones, developers are forced to play by Apple's rules," Epic says, adding that Apple "allows consumers to switch from iOS devices to Android devices, and they are switching. and are actually switching," and that many people play Fortnite on multiple platforms, so it is actually competitive.

The two companies raise many more arguments and counterarguments in these recent filings, which together run to about 500 pages. For example, Apple states, as it has before, that Epic attempted to negotiate a side deal with the company, suggesting that Epic's open platform evangelism is in fact self-serving. Epic, on the other hand, has accused Apple of burying competitors' apps in App Store searches.

Contrary to my expectations, Apple's is the more aggressive and more interesting of the two documents. Here are some snippets from Apple's interpretation of the evidence:

Epic and Apple will be in court on May 3; due to Covid-19 restrictions, journalists will not be allowed into the courtroom, but live audio will be played. Prior to trial, a conference will be held on April 21 to clarify the elements of each party's claim.

This article was updated on April 10, 2021 to add submissions and case details.