Epic Games and Bandcamp: An acquisition that proves a point?
When it comes to incremental revenues, the music industry is obsessed with two things: NFTs and gaming.
There are few things more certain in life right now than the fact that both will have appeared in multiple panels in every forward-looking PowerPoint presentation in every record label meeting room around the world for the last 12 months.
Ignoring NFTs for one blessed moment, as far as gaming is concerned, the interest currently centres around audience expansion opportunities, specifically ‘live’ performance opportunities in games such as Roblox and Fortnite.
It’s no exaggeration to say that events such as Marshmello, Travis Scott and Ariana Grande in Fortnite, plus Lil Nas X and Twenty One Pilots in Roblox, will be looked back on as landmark shows in music’s evolving ecosystem. Perhaps not The Beatles on Ed Sullivan or The Pistols at The Roxy, but extremely significant for sure.
In that context, one of the biggest stories in the music industry in the last month has been Epic’s acquisition of Bandcamp. And it was big not just in terms of its newsworthiness, but also in terms of its ramifications. Once the initial deal had been digested, pundits very quickly started discussing what it might mean, and exactly why Epic had made its move.
One of the most interesting (and least obvious) takes has come from a trade journalist whose background suggests he might well have more insight than most.
Tim Ingham is a former editor of MCV and CVG, and, as the founder and editor of Music Business Worldwide, is now one of the most respected music industry journalists around. In the latest MBW Talking Trends podcast he argues that it is Bandcamp’s profitability that attracted Epic – but, counter-intuitively, not for financial reasons.
He follows the trail back to Epic’s ill-tempered legal battle with Apple, in which it tried (and failed) to force the company to reduce its 30% app-store commission rate.
As part of its argument, Epic referred to its own Epic Games Store, through which it charges third parties just 12% commission. Sure, countered Apple, but it makes heavy losses, so…
As The Washington Post concluded at the time: “By highlighting how the Epic Games Store is not profitable, Apple is trying to show that a 12% commission like Epic charges is not sustainable for running an app store and that a 30% commission such as Apple charges makes business sense.”
Bandcamp, meanwhile, ?charges its customers (indie artists) just 10-15% commission rates as a retailer – and on Bandcamp Fridays, it charges nothing at all. Even with these rates, it has been profitable for the past 10 years.
Ingham speculates: “Epic now owns an online retailer that charges its customers just?10-15%?commission, and sometimes nothing. But that retailer has paid out around a billion dollars to artists, and crucially, it says that it has long been profitable.
“Epic can now point to Bandcamp as what it might claim to be proof of Apple or Google’s excessive commission fees. In return, Apple or Google won’t be able to attack Bandcamp for running on a broken model or being unprofitable… because it’s not.
“This all leads me to believe that the key factor in Epic Games buying Bandcamp had nothing to do with the metaverse or music’s place within it, as trendy a topic as that may be.
“I believe this was simply a strategic buy for Epic because it gives the company a powerful asset in its fight to force Big Tech to reduce commission rates on their app stores.”
You can listen to the full podcast here.