Five reasons why Steam will destroy the PC games industry
In the feedback for How to Publish a Game, one element stood out.
I had suggested that it made sense for a developer making PC games to work hard to get on all the distribution platforms. Not just Steam, but GamersGate, Metaboli, Direct2Drive and so on.
Bollocks came the resounding response.
No-one wanted to be quoted. But Steam seems to account for by far the majority of the revenue of every single company who came back to me. People were suggesting that Steam outsold, by a factor of 10 or more, all of the other sites combined.
All kudos for Valve for building this service organically to be so dominant, but this is terrible news for the PC games industry.
We’ve sleepwalked into letting Valve be the dominant platform holder for core PC games. And they did it without having to provide the marketing muscle, financial support and hardware innovation that Microsoft and Sony needed to give us to get their consoles of their ground.
In short, Valve is becoming a dangerous monopoly.
Why does that matter?
Reason 1: Monopolies stifle distribution innovation
In a free market, innovation and improvements are encouraged by competition. The problem occurs when one company is so far-and-away ahead that no-one else can catch up. Think of Google. Think of Facebook. And now we should be thinking of Steam in the same way.
Reason 2: Monopolies stifle creative innovation
I keep hearing that is getting harder and harder to get onto Steam, and if you don’t, then your game won’t sell. The PC has always been an open platform on which it is easy to distribute games. If Steam becomes a de facto monopoly, Valve decides which games we see. A bit too competitive to Half-Life? No distribution. We don’t like Match-3 games? No distribution. We’re not sure that anyone will want a game based on farming? No distribution.
Reason 3: The little guys don’t get a look in
Helping the little guys is hard. When you’re big, and profitable, and important, it’s easy to prioritise the big publishers over the little guys. The little guys are already struggling on the console (although PSN provides one route to market), but the PC has been their lifeblood. A megalithic monopoly could rationally decide that it is no longer cost-effective to support the little guys.
Reason 4: Steam has all the pricing power
Retailers won’t work with indies: it’s not worth their while and, more importantly, indies don’t give them marketing support.
What if that becomes true of Steam? Valve is in a position to say “your game won’t sell without us. We want a bigger cut, or upfront marketing commitment, or some form of guarantee.”
Reason 5: Valve doesn’t need to promote the platform
For all their weaknesses, Microsoft, Sony and Nintendo spend a lot of money promoting and improving their platforms. Steam doesn’t improve the PC as a gaming device. I am a lot more comfortable about oligopolies when there is something in it for the consumer (like subsidised home consoles, for example).
Aren’t Valve the good guys?
To be clear, I’m not saying that Valve is doing any of these things right now. They are a great developer that has created, from scratch, a dominant digital distribution platform, mainly through making it so damned good that consumers don’t want to use anything else.
I am pointing out the risks of letting one company completely dominate a market.
Are there any silver linings?
Sure. As PC games disappear almost entirely from High Street stores, Steam is an incredibly valuable distribution platform. It may, in fact, be the only thing stopping the PC games market from abrupt extinction.
Elsewhere, social and online games (i.e. service games, not product games) are not dependent on Steam in the slightest. In fact, they pose a great threat to Steam, as gamers start playing free-to-play MMOs monetized with virtual goods, rather than spending £29.99 on a game in a virtual box from Steam.
So we’re in this weird place. Steam’s dominance is, in my view, bad for the industry. Yet the emergence of new service-based business models is a terminal threat to Steam.
How Valve chooses to react to that threat will show whether they are PC gaming’s saviour or its monopolistic exploiter.
Which do you think?
davidjwbailey on May 26, 2010 @ 9:54 am
insightful, and, for now, Valve are not being bad guys. they are marketing online, they do keep prices up, and they are paying people on time, in full and with 100% evidence of units delivered (and NO box-on-shelf publisher has EVER been 100% honest about units sold to developers before)
critically – who will pay advances (or invest in development) if the distributor is Steam? do Steam pay advances? can anyone provide cases? …. mmmm see the problem here?
however – OnLive (in which BT just took a stake) is a far bigger threat yet to fully emerge, so we need to get our developers aware of the issues asap
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Deadman on May 26, 2010 @ 3:06 pm
1. Reason 1: Monopolies stifle distribution innovation – It is a Digital Distribution. Really what is their to innovate? They add games all the time. Have sales etc. EVEN included Mac as a new platform.
2. Reason 2: Monopolies stifle creative innovation – yes and no. Commercials DO the same thing. I don't see commercials for “X” game, but do for “Y” game.
3. Reason 3: The little guys don’t get a look in – They sell indie games VIA steam. In fact it has it's own list. Killing Floor is an example of a non-huge one.
Reason 4: Steam has all the pricing power – It can I suppose. Although they already filter what they want to sell vs what is sold. Not every indie game is close to being good.
Reason 5: Valve doesn’t need to promote the platform – I have NO clue what you are going on about. They don't promote PC gaming? Steam IS PC ONLY. How is that NOT promoting it via steam. Remember they are not making **Hardware** or **Games** by Steam, thats through Valve.
They aren't going to “go after” those F2P MMO's. They have no control. Actually most people in Runes of Magic WANT a boxed version of the game. Just giving diamonds to compensate for price, which can be all done through steam, their web site, or wall mart.
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anon on May 27, 2010 @ 9:03 am
Reason 1: Traditional publishers already do this
Reason 2: Traditional publishers already do this
Reason 3: Traditional publishers already do this
Reason 4: Traditional publishers already do this
Reason 5: Likewise, traditional publishers don't need to do this
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Weefz on May 27, 2010 @ 10:32 pm
Reason 2. I don't buy this. In my experience, it's not that Steam is preventing your game from selling through another medium. Indie PC games just don't sell that well. Steam lowers the barriers to market and helps developers reach a much larger audience than they would without. What distribution model is Steam edging out, exactly?
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Jon on May 29, 2010 @ 12:06 am
While all of these points are theoretically possible, they're actually almost the exact opposite of what Steam does in practice. Steam has tons of indies. Steam has plenty of games that compete in style and content to their own. Valve releases free tools to developers through steam to improve ease of creative innovation. Valve shows a strong and evident committment to improving the platform at no cost to the consumer. In my opinion the article lacks any practical relevance at all.
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JohnJacobJingleHeimerSchmidt on May 29, 2010 @ 4:27 am
This article is full of LOL WTF
1. steam has a lot of great features but it is also lacking in a lot of areas, like all the older games GOG has and also distributes a lot better than the older games on steam.
2. What are your sources stating its 'getting harder and harder' to get on steam?
Steam is NOT the only DD for PC games. Direct2drive,gamestop,amazon,GOG, stardock and others, I personally have games through D2D, GoG and gamestop. valve is NO WHERE CLOSE to being considered a monopoly. YOu keep using that word, I dont think it means what you think it means.
Also, I seriously doubt Valve is going to let themselves lose revenue because a game is 'competing with halflife', especially considering the game came out over a decade ago.
3. LOL WUT Have you even looked at all the indie games on steam? There are MANY games no one would know WTF about unless they were on steam…..LOL
4. So instead of buying indie game X for $15, sell it for $20……what if a dog had a square asshole…..
5. Steam doesnt improve computers as a gaming device, huh? So me not having to pop in a CD/DVD (if i can even find it) in order to install or play a game, see what my friends are playing and join in/invite them to games, automatic updates, all the steam sales……yeah none of that improve gaming on computers. at all. not one bit. Also, Steve Jobs would like to have a word with you…..
Free MMOs a threat to steam…….LOLOLOLOL.
Perhaps you should, I dont know, get a clue as to what the fuck you are ranting about.
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FromMonday on May 29, 2010 @ 4:32 am
The five points are needlessly inflammatory.
For one, as I understand things, it's pretty easy to publish a game on Xbox Live's new Indie platform. And let's face it, some of those games are really, really really crappy. Others are decent titles. Some are even great. But right now, there's a viable market for the hobbyist to earn back their investment, if not make a bit of money. Publishing on Xbox Live Arcade requires more of an initial investment, but small game studios can produce a title for a reasonable budget and can expect to get some exposure. And that's just one alternate platform to Steam which I can think of off the top of my head which isn't mentioned here.
Anyway, addressing the points…
Reason 1: Monopolies stifle distribution innovation
There will NEVER be a monopoly on PC Gaming. Whether it be competition from fellow online distrubition methods, cross-publishing to Xbox Live Marketplace, the WiiWare, or the Playstation Store, publishing the game online and generating revenue based on advertisements or even flat out selling copies via a good ol' fashioned brick and mortar store, there are TOO MANY options for a developer for Steam to even attempt to tackle it.
Oh, and funny story: I think Facebook, and Myspace pops up right alongside it. The number of employees each company employs backs up the comparison. Examples of monopolies should generally actually BE monopolies.
Reason 2: Monopolies stifle creative innovation
Again, it's hard to prove the monopoly in the first place, and games like World of Goo (or anything in the Humble Indie Bundle, really) show that there's certainly a lot of creative innovation.
Reason 3: The little guys don’t get a look in
Except that they always will. They might not all get exposure on Steam, sure, but there are dozens of viable options. Again, I'd point to companies like 2D Boy or other tiny studios as an example of how they always have and always will have options. Nothing in the Humble Indie Bundle required the bundle to actually be profitable, and yet the bundle raised over a million dollars.
And as the success of the various console downloads show, there's a lot of room there for the little guy to publish their quirky game and achieve some moderate success.
Reason 4: Steam has all the pricing power
Except that this relies entirely on Steam becoming a monopoly for PC distribution and also requires the developers not to put the effort in to reach the obscenely large install bases on Wii, Xbox 360 or PS3, which means the company would be too dumb to survive in the first place.
Reason 5: Valve doesn’t need to promote the platform
This strikes me as particularly dumb. Valve does plenty to promote the platform and the platform does improve your gaming experience, depending on what you're looking for. Having a game on Steam has some advantages over regular download and play online sales or buying a game in a store. Valve works to make the platform beneficial to the user and provides services which have value for a certain section of the consumer base.
*sigh*
The thing with Steam right now is that it's working precisely because Valve is not taking advantage of the fact they've got something close to a monopoly. They let the little guys peddle their games, they don't take advantage of their monopoly to make life hard for the customer, and they have a wide selection of titles which make the distribution service one worth having an account for.
Choking off the supply of games would kill the service, put bluntly. It's a shiney, happy soap bubble and the minute Valve tries to prod it, it'll burst. Either they'll keep it like it is and it'll slowly flourish, or it'll pop and become something for Valve games only.
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Danny on May 29, 2010 @ 4:47 pm
“Steam doesn’t improve the PC as a gaming device.”
Invalidates entire article. If you don't know how Steam improves PC gaming then you really really aren't qualified to write anything about PC gaming. Everything from friends lists, to the community aspect, to auto patching, to the ability to re-download games and not worry about discs is a HUGE improvement to the PC as a gaming device.
Not knowing any of that makes this article just completely ridiculous and comparable to FOX News talking about Mass Effect as an orgasmic sex simulator.
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asaratha on June 1, 2010 @ 9:33 pm
Nicholas Lovell. You're a fucking idiot that needs too read up/Check out what the hell he's' talking about.
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Katrina on June 2, 2010 @ 2:00 am
And the sun could explode tommorow, you are talking about things that COULD happen, and trying to say they will do it.
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Nicholas Lovell on June 2, 2010 @ 1:19 pm
I think my concern was very much about what Steam could become, rather than what it is. Google used to be the hero of the tech world, but is now fast becoming the demon – I wanted to warn that the same might happen to Valve.
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Nicholas Lovell on June 2, 2010 @ 1:24 pm
I'm not going to reveal my sources, because I promised I wouldn't. But when a number of developers, big and small, say that Steam outsells *everyone else put together, by a factor of 10″, that's a defacto monopoly. I applaud Valve for having been so good at delivering what consumers want and building a high quality distribution platform that everyone else is floundering in the dust, but just because there are a number of competitors, doesn't mean Steam isn't a de facto monopoly.
And separately, and this is where I suspect we differ, I do think free MMOs are a threat to Steam. More than that, I think that they are a threat to traditional boxed PC games, because the economics are so much better. They require less risk, less upfront investment and are much more profitable, so many of the better developers will start looking at them. Which will limit the number of old-style PC games made.
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Nicholas Lovell on June 2, 2010 @ 1:27 pm
Maybe I should rephrase that: “Steam doesn't invest in improving the hardware of PCs or spending marketing money to convince new consumers of the value of the platform.”
My point is that Sony and Microsoft spend huge amount of money creating their oligopolies, and can perhaps claim that they need the economic rent that comes from that to be able to deliver value to their consumers. Valve doesn't: it lets Intel and Nvidia and Dell carry that role, while Steam makes money from selling the software.
So I acknowledge that Steam has added a lot of innovation to PC gaming – but they are not making the same financial contribution that, for example, Microsoft and Sony are for their consoles, or Apple is for the iPhone/iPad
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Nicholas Lovell on June 2, 2010 @ 1:28 pm
Thank you for that cogent and well argued response.
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Nicholas Lovell on June 2, 2010 @ 1:31 pm
Katrina,
You are right, and I accept that the article was inflammatory. But I've lived in the UK for the last 13 years watching a government bring in terror laws (“which we'll only use, like, to get really bad guys”) and then applying them to people pretending to live in a different street to get their kids into better schools, to Icelandic banks, and to photographers making a living taking pictures of public spaces.
Similarly, I've seen Google amass a terrifying amount of data with hardly any complaint until the last 18 months or so.
I think it's important that we are aware that Valve is turning into a monopoly, and what the possible consequences could be. We can then decide if it is serious enough to act.
It would have been less inflammatory to entitle this piece “Five reasons why Steam might be the death of PC gaming”. I confess that changing “might” to “will” may have been influenced by a desire to stiumlate controversy.
And, for the record, I currently think Valve are doing great things for the PC gaming community. I just never trust anyone who is getting that much power, no matter how benevolent they seem.
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Jan Werder on June 2, 2010 @ 1:59 pm
These are the dumbest argument I've ever heard.Steam is supporting Indies like World of Goo and even has its own categorie for Indies.Steam does not build any PC's but their direct partners like Alienware do.Steam is the best gaming platform on the Internet, ever thought of why this could be so?
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Ajax19 on June 2, 2010 @ 9:39 pm
Nicholas,
Interesting article.
I am a competition lawyer who deals with these kinds of questions on a daily basis. Having a large percentage of sales (a high market share) is simply one of a number of questions one must ask to determine whether a company has a monopoly or monopoly power.
There are two basic ways to look at whether a company is a monopoly. The first is pretty rare, but you look to see whether the company can control prices. I am not talking about those super Steam sales, since lower prices are always good for the consumer (unless they are below cost, but that’s another matter entirely), but rather the ability to raise prices about competitive levels. I haven’t seen any evidence of this. As far as I am aware the prices you find on Steam are consistent with the prices you’ll find in the brick & mortar stores and on the smaller digital distribution companies.
The more common way to try and define monopoly power is to define the “relevant market” and see what share of sales a specific company has. Defining the relevant market is key. For example, if you’re talking Coke and Pepsi and define the relevant market as carbonated soft drinks, these two companies would have a pretty big share. If you defined it more narrowly, cola-flavored carbonated soft drinks, an even higher share. If you were to define the market more broadly, soft drinks or, say, all drinks, then there shares plummet.
Same goes for Steam. If you’re talking simply “Digital Distribution On PCs”, its share is likely high. If you throw brick and mortar stores (like Gamestop, Best Buy, etc.) or even on-line stores (like Amazon) then that share is likely pretty low.
One way to determine whether two products are in the same market is to try and test to see how the price of one product affects the price of another. For example, how many consumers would switch from buying a PC game on Steam to buying a PC game from Best Buy if Steam raised its prices by 10%? If enough people would switch, then they are likely in the same market.
Market share, however, is just the beginning of the analysis. You also have to look at things like barriers to entry and alternative forms of distribution. How hard would it for another company to enter the market if Steam rose prices? Or if Steam refused to carry titles from certain publishers? Can companies effectively digitally distribute their own games without the need to use Steam?
Based on my understanding of everything and because it’s my nature, I think there are stronger arguments for the Steam is NOT a monopoly side of things than the Steam IS a monopoly. This is based on the fact that I do believe their pricing is restricted by brick and mortar stores and because of ease of entry/alternative forms of distribution. It’s not like Steam prevents you from using other digital distrubtion platforms or other digital distribution means.
Pretty much every PC game I have purchased since Dec 08 (save one game, the unfortunate “Blood Bowl”) I have bought from Steam. Most purchases were made because of price (older games) or convenience (newer games). I downloaded “Blood Bowl” from the company’s own web store beause it wasn’t available on Steam. I had no problem doing so. If it turned out Steam was jacking up prices, I would either get off my ass and walk to GameStop or remain on my ass and order it off Amazon with, like, three clicks of a mouse button.
To sum, Steam doesn’t have market power and would likely be seen to compete with both on-line retailers like Amazon and bick and mortar retailers like Best-Buy and Gamestop in a market for the “sale and distrubtion of PC games.”
As for the government “acting before it's too late”. That's not how it works. You can't place restrictions on a company becuase you're afraid they might become too powerful, unless that company is becoming too powerful through illegal means. By all accounts, Steam has reached the point it is at now – outselling everyone by a factor of 10 – because it is offering a solid product, lower prices, and is innovative. You can't shackle companies for stuff like that. That's only going to chill innovation. Why work hard and make a fantastic product that's better than anything else if the government is just going to punish you for it?
There is a reason why Microsoft got dinged by the DOJ and European Commission. They were engaging in illegal activities, such a monopoly leveraging and bundling (using their legal monopoly in system operations to grant an illegal monopoly in the internet browser market). Eventually, if a company gets too big, like a Google, competitors, customers and suppliers start complaining and that's when the door opens. Until then, you can't just go after a company based on fear and unfounded speculation.
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mani1234 on June 3, 2010 @ 7:29 am
good
good
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Pissed off Steam user on June 6, 2010 @ 2:21 pm
Well I want to play Modern Warfare 2 without requiring a Steam client to goddamn play the game!!!!!!! IS THERE ANYWAY I CAN REMOVE STEAM FROM THE GAME SO I CAN PLAY IT AS A PROGRAM AND NOT A NET-STREAMED DOWNLOAD?!!!!!!!!!!!!!!!!!!!!!
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Haha on June 10, 2010 @ 3:30 pm
I like how every company is so great when they are small and successful, but when they become too successful then they are a “monopoly” that people hate. Wal-Mart, Google, etc. You sir are an idiot.
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haruspex on June 10, 2010 @ 9:30 pm
Have you tried turning on Offline Mode for Steam?
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haruspex on June 10, 2010 @ 9:30 pm
Thank you for your detailed response. It really highlights the issues we see when people start to theorize about such things. When I first read Nicholas's article, my “conspiracy theory” alarms went off. Fear mongering is, in general, bad.
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Lukio on June 28, 2010 @ 1:29 pm
Steam is full of awesome, if it weren't for Steam and only up to the PCGA (Sony, Microsoft, Konami, EPIC – all are strictly console gaming), the PC gaming platform and digital download for games on the PC would be non-existant or on the level of GFWL (which is much worse and more dominating than Steam could ever be)
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smokey on June 29, 2010 @ 8:32 am
Steam is one of the best things to ever happen to PC gaming. The gamers get a great platform to download and play games for cheap. The developers get money that they would probably have never gotten. I have 30 games on steam 23 of them i would have never bought if it wasn't for steam. Even if the game is only 7 dollars because its on sale for really cheap. thats money that the developer would have never seen. Steam is one of the only DRM that doesn't screw over the consumer. If it wasn't for steam PC gaming would be going backwards with shitty security drm, game stream services like GFWL which is the most horrendous platform to use. STEAM MADE PC GAMING WHAT IT IS TODAY. HELL STEAM MIGHT HAVE EVEN SAVED PC GAMING. get a clue man your fear ranting is plain stupid. While steam is awesome, Its just a retailer that sells a few exclusive games, if it ever rasied prices or didn't sell certain games, people would just go somewhere else.
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Nicolas Lovell = 1D10T on July 3, 2010 @ 6:58 pm
Try using steam before you talk shit about it. You're a noob. I honestly thought this post was several years old with all the fucking “I'm too good to be using beta software” idiots were roaming the internet.
Steam promotes EVERYTHING! They have sales several times a month on every genre of game.
As someone else referenced, I'm guessing your sources are FOX NEWS! Bitch! lol.
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Stefankendall on July 4, 2010 @ 1:59 am
You're really overreacting. In fact, the free market DOES NOT REQUIRE more than a single company to provide a given service. If a single company continues to innovate and offers a service for less than the competitors/better than the competitors, then that company should succeed. If Valve wins, it's because people wanted them to win. That's just it.
I should point out, also, that it's not even technically difficult to create a digital distribution network, if someone wanted to combat steam. Spore, for example, was released through EA's shitty download/license manager, which clearly needed to fail.
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Levethian on July 15, 2010 @ 7:38 am
It is a given that Steam is great now, Mr Lovell cautions us to be wary of the future. Once Valve commands the market, there will be no substantial competition for other publishers to turn to should Valve start demanding extortionate cuts.
Let's hope it doesn't come to that. I adore steam at the moment.
I think media journalism like this supposed to be inflammatory, and it is clearly not an attack on Valve or Steam as it stands. I've enjoyed the resultant debate/comments.
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Nicholas Lovell on July 15, 2010 @ 8:42 am
Thanks for the comment. I also think Steam is great. But there is an adage that you should be careful what you wish for, and not being aware that Steam is getting uber-powerful is potentially dangerous for all of us.
And I agree that the debate has been great. Some really good responses. I hope to get even more comments in the blog over time.
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Fochivoma on July 17, 2010 @ 6:47 pm
I think that Steam is an excellent idea and is far ahead of the rest of the gaming industry. In 5-10 years we will see a fully integrated media platform in which telephony, television, and the web are sold in a single unit. Right now the platform for that appears to be mobile phones, and Apple have shown the way for all over developers.
The iPad, however (along with Sony's 3D TV) is a false economy. It will not stick. Sony made the same mistake with the mini-disc and many companies have wasted millions in devs that seem to pander to the market's wants, without seeing the 5-10 year product span.
Steam, though it may seem insidious and damaging to many (along with Facebook and Google), is simply a pioneer, pointing towards that which we will all be using in the future. People are not stupid, on the whole, and developers and artists will always find a way of getting their ideas out there, and once they do, the industry responds.
Facebook wasn't created to make money, it was created to keep students at a certain university in touch with each other. Google was just another search engine but semantics and linguistics took hold (i.e. Google is a perfect verb). Steam is the next step.
Personally I would like to see Steam (Valve, their parent company and affiliates) produce a media platform that only plays Steam. A $250 / £200 'PC' that only 'does' Steam. A Steam console, if you like. Stupidly powerful Graphics cards and sound cards and immense CPU's, a console, a console, a console.
That would kick the industry in the arse and make them all sit up. What OS would this Steam console use? Ubuntu, maybe, something inhouse dev'd, anything. Just not Windows. Not Mac OS, nothing Sony or Nintendo.
Google? Could they produce a Steam console?
I wait with bated breath
The next 5-10 years, people, are going to be F***ing AWESOME.
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