The world’s biggest app stores are facing increasing push-back by developers over the high costs they charge for connecting their games with users — and new gaming platforms are looking to swoop in.
Tallinn, Estonia-based Ultra will take 15% from sales it generates through its digital store, in a bid to challenge companies such as Google, Apple and Steam, the industry-leading platform owned by Valve, which takes a 30% cut.
The launch, planned for PCs as soon as November, comes amid rising push-back from game makers and publishers against platforms that distribute games. Epic Games, which created the hit game Fortnite, recently decided it didn’t need Google’s app store — which takes a 30% cut of sales, including in-app payments. Epic chose to distribute the game itself and keep 100% of the money it generates, though it still offers the game through Apple’s App Store, which also takes a similar cut.
“There’s no reason why such a big fee should be taken,” Nicolas Gilot, co-CEO of Ultra, said in an interview. “The business model is totally viable without that.”
Global revenue for mobile, PC and console games is increasingly lucrative, expected to reach a combined US$137.9-billion this year according to data compiled by market research firm Newzoo, increasing to $180.1-billion by 2021.
Once dominated by brick-and-mortar stores, the industry is now led by online platforms that allow gamers to download from thousands of titles. Steam — launched 15 years ago — generates about $4.3-billion in revenue, not including in-app payments or additional content, according to data compiled by independent monitoring tool Steam Spy.
Game studios have long been competing with Steam. In 2011, Electronic Arts introduced its Origin platform and made it a required install in order to play many of its biggest new PC releases. Microsoft lets customers access some of its first-party titles early if they purchase from the Microsoft Store, including its next Forza Horizon release.
Ultra
Ultra is among a clutch of start-ups hoping to win market share by cutting costs and using new technology.
Founded in 2017 and staffed by former gaming executives, Ultra plans to use blockchain technology to process payments and offer tokens to gamers who use its platform. Ultra’s board includes Ritche Corpus of US graphics-card maker AMD, and Allen Foo, a veteran of both Microsoft and videogame development software company Unity Technologies.
Ultra plans to initially offer between 150 and 200 games. The company is in the process of raising funds and has already collected about $10-million from private investors, according to a person familiar with the matter who did not want to be named discussing confidential matters.
Spain-based Robot Cache is following a similar business model, using blockchain to track the sale of second-hand games, offering both game studios and consumers a cut of the sales while taking a 5% transaction fee.
Some question the ability of new entrants to reach a wide enough fan base. Green Man Gaming, the British online retailer, sells digital keys to games that customers can redeem on a number of platforms, including Steam and Origin. The game is then added to a user’s account. Green Man takes about a 30% cut on each sale, while Steam makes money on in-game purchases. But the London-based company’s CEO, Paul Sulyok, said the benefits of selling through a large international retailer are worth the cost.
“We sell games in 195 different countries, 16 currencies, and support north of 80 different payments systems,” Sulyok said, “and the cost of getting people’s awareness of a product is significantly higher when you don’t have a standard store.”
Google and Apple argue similarly, and say their stores offer developers access to users in more than 150 countries, technical support, and in some cases detailed user insights.
Part of Ultra’s business model still mirrors its larger rivals, and may suffer from push-back of its own. Studios often roll out downloadable content to existing titles to keep consumers hooked. Google and Apple, as well as Ultra, take a cut of any of these add-ons purchased on their platforms.
Frank Sagnier, CEO of videogame developer Codemasters, said this ability for retailers to keep taking a slice of every transaction made within a game is a larger concern than the specific cut taken on an up-front sale.
“If you sell a game during its launch period, there’s a cost to doing that, so maybe 30% is justified,” he said. “But once you bought my game start downloading content going forward, that’s my customer. I think that’s where the big distributors may find there could be some pressure.” — Reported by Natalia Drozdiak and Nate Lanxon, (c) 2018 Bloomberg LP
