Embracer Group Spends Twice as Much on Commissions as on Game Development
Embracer Group, which includes Deep Silver and Gearbox Software, revealed in its 2021 financial report that it spends twice as much money on store commissions for its games as it does on creating games themselves.
Embracer Group, which comprises of companies such as Deep Silver, Gearbox Software, Saber Interactive and 4A Games, has released its financial report for 2021. The document shows that the Swedes spend twice as much money on commissions for industry giants such as Sony, Microsoft, Nintendo and Valve than on actual game development. Embracer's representatives admit that the situation is very unfavorable for them, and promise to challenge stores that charge a 30% commission.
It is worth noting that the aforementioned group owns a total of 225 different game brands and its studios are currently working on 160 projects. The scale of such a venture raises the question of its own distribution platform, one which - at least for now - Embracer does not possess. As a result, the Swedes are forced to transfer part of their revenue to third-party companies in exchange for being able to sell games in their stores.
In total, the Embracer group was expected to spend SEK 2 billion on its games in the previous financial year (that's about 241 million dollars). On commissions, on the other hand, at least $458 million. This means three things. Firstly, the Swedes' games are selling well (see: the success of Valheim). Secondly, the costs associated with selling the games (not counting marketing) are almost twice as high as the costs of developing them. Thirdly, PC releases of Embracer brands are more likely to debut on Epic Games Store than on Steam.
We saw a manifestation of the latter in the case of Metro Exodus, which was released on PC first in Epic Games Store, and only after a year on Valve's platform. In view of the above figures this move by Embracer is not surprising. And although Metro also came out simultaneously in Microsoft Store, the Redmond giant has already announced that from 1 August this year it will reduce the commision in its store on PC to 12%.
The situation is slightly different on consoles - Sony, Microsoft and Nintendo do not seem to be willing to change the current commissions. In fact, Microsoft has outright statet that it does not make any money on Xbox, so it needs the 30/70 split to be able to work on future consoles. And until at least one of those companies breaks out of the deal, we shouldn't expect any changes.
Lars Wingefors, CEO of Embracer Group, has announced that he and his company are not going to accept this state of affairs and will fight back.
"We will continue to challenge these paradigms and pursue opportunities to reduce costs and increase the relative investment into content creation" (via TweakTown).
This may mean that Dead Island 2 or Saints Row 5, for example, will be exclusive titles and will not appear on Steam on launch day.
