Network Effects and Switching Costs as Entry Barriers: The Failure of the Epic Games Store’s Challenge to Steam’s Platform Dominance

The PC digital game distribution market is characterized by high concentration and strong incumbency advantages, where Steam has leveraged network effects and user switching costs to establish a durable dominant position. Taking the Epic Games Store’s challenge to Steam as its case, this paper examines the competitive strategies and failure mechanisms faced by a late-entering platform when confronting barriers created by network effects. Through an analysis of the industry background and Epic’s strategies of low commissions, exclusive releases, and free games, the study finds that although Epic achieved some success in reducing developer costs and accumulating an initial user base, the self-reinforcement of Steam’s network effects and users’ multidimensional switching costs created structural barriers. Epic also had a weak platform ecosystem and lacked many other functions and social support to attract users to stay and use it for a long time. Therefore, this paper proposes building differentiated social functions, designing progressive switching incentives, and improving the platform function ecosystem. Based on the above research, a new latecomer platform seeks to disrupt the dominance of established players by reducing switching costs and offering new value. This paper offers an empirical case study and practical implications for research on competitive strategies of digital platforms.