Estonian startup undercuts billion-dollar ‘gaming stores’

Bloomberg

The world’s biggest app stores are facing increasing pushback by developers over the high costs they charge for connecting their games with users — and new gaming platforms are looking to swoop in.
Tallinn-based Ultra will take 15 percent from sales it generates through its digital store, in a bid to challenge companies such as Alphabet Inc.’s Google, Apple Inc., and Steam, the industry-leading platform owned by Valve Inc., which takes a 30 percent 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 Inc., which created the hit game Fortnite, recently decided it didn’t need Google’s app store — which takes a 30 percent cut of sales, including in-app payments. Epic chose to distribute the game itself and keep 100 percent 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-Chief Executive Officer 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 $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 almost exactly 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 Inc. introduced its Origin platform and made it a required install in order to play many of its biggest new PC releases. Microsoft Corp. lets customers access some of its first-party titles early if they purchase from the Microsoft Store, including its next Forza Horizon release.
Ultra is among a clutch of startups 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 Advanced Micro Devices Inc., and Allen Foo, a veteran of both Microsoft and video-game 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.