The Duel of Titans: Analyzing the Financial Strategies of Steam and Epic Games



by SEDEDIN DEDOVIC

The Duel of Titans: Analyzing the Financial Strategies of Steam and Epic Games
© Make Tech Easier / Youtube channel

The world of PC gaming has witnessed an unusual phenomenon where gamers often show strong loyalty to a single platform to buy, store and enjoy their favorite games. Many adamantly refuse to get their games anywhere else, some even waiting years for certain titles to hit platforms like Steam before buying.

Steam, once considered a poor choice, has evolved significantly over the years to achieve its current iconic status. However, it now faces a formidable challenge in the form of Epic Games. There are several key factors that set these two rivals apart.

Although Epic Games has grown rapidly in recent years, Steam still dominates with a huge number of users.

The origins of Steam's dominance

To understand the roots of Steam's dominance, it's important to acknowledge the company behind it – Valve.

Valve has been a strong presence in the gaming industry since its early days, producing hits such as Half-Life and the popular Counter-Strike mod. Steam has grown from this strong foundation, gradually building a reputation and trust among players.

Steam has gone through challenging periods and evolved over time, shaping into the powerhouse it is today. The longevity of its presence in the market has given Steam a significant advantage, and Valve has realized that success takes time and consistent effort.

For many years, persistence and patience were the keys to Steam as we know it today. In its early days, Steam was primitive in both appearance and functionality. Nevertheless, it gained immense popularity and acceptance. Over the years, Steam has transformed into the platform we know today, mostly because of the Counter Strike series, which has been among the most popular online multiplayer games for 2 decades, a success that hardly any game can boast of.

Some gamers, looking through rose-colored glasses and fueled by nostalgia, may recall the "old Steam" as superior. But that's just one beautiful part of the past that reminds us of the very beginnings of the online game, however, the reality is much different and many have accepted the current form of the platform.

Epic Games enters the arena

Attendees walk by the Epic Games booth© Justin Sullivan / Getty Images

In late 2018, Epic Games unveiled its digital video game storefront, capitalizing on the growing popularity of Fortnite.

Fortnite's exclusivity of the Epic launcher has made many players add the Epic launcher to their PCs. As the game grew in popularity, Epic explored effective monetization strategies, primarily through microtransactions in free-to-play titles like Fortnite and Rocket League.

This was exactly the right move that set Epic apart from the rest and brought it among the best. On paper, Steam primarily generates revenue from game sales, partnering with companies around the world. In contrast, Epic Games focuses on monetization through microtransactions in free-to-play titles.

Although he did not have much success in the beginning, the company has achieved record revenues in the last 3 years. Despite their different approaches, both strategies appeared to be mutually beneficial. However, Epic, not satisfied with its share of the market, sought to expand its user base and implemented two key business maneuvers.

Epic's tactics

First, Epic introduced coupons, offering 10% discounts on subsequent purchases for every game purchased on their platform. Steam responded by further shortening the duration of its discounts and introducing new ones related to deals with publishers or holiday celebrations.

Undaunted, Epic Games switched to another tactic – giving away certain older and indie titles to attract users. Although the occasional AAA title was included, the overall strategy proved to be effective. The free titles attracted a large number of new users and the management rubbed their hands with satisfaction.

Epic Games also adopted a more controversial strategy by allocating funds to support development studios. In exchange for financial support, these studios agreed to publish their games exclusively on the Epic Games platform.

The move caused a fear of missing out (FOMO) effect among gamers, leading them to choose Epic over Steam for certain titles. With this kind of business and marketing strategy, the growth of Epic Games is certain, but for now, Steam remains the dominant force in the market, mainly due to its wide user base and significant revenue.

Although Epic Games has seen significant growth, it still has a long way to go to pose a serious threat to its stronger competitor. Valve is not worried for now, because they still "hold" the market in a higher percentage and collect significant sums of money.

Admittedly, the fact that Epic now has some Chinese capital behind it, through the company Tencent, which owns a certain share in the shares of the Epic company, could become a problem at some point. Steam is still the platform for most gamers, and its status as the top choice is unlikely to change.

The battle between Steam and Epic Games is far from over, and both platforms will likely continue to innovate to secure their positions in the ever-evolving PC gaming landscape.