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Five reasons why Steam will destroy the PC games industry

By on May 26, 2010
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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.

Steam logo

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?

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve:
  • Max Flax

    Steam uses the Community to do all of their tech support. I have bought Bioshock 2 on Steam and it will not run. I have spent a lot of time looking through the Steam Community message boards. I followed all of their advice, but the game will still not run.
    Steam’s “Support Center” was no help either. I selected the limited menu options, Problem-Game-Crashes and there was no information for me.
    I cannot find a email address or a phone number for any Steam help.
    This is a brilliant way to save money by having the Community do all of the tech support instead of spending money hiring and training a support team.
    Steam has distributed a lot of older games that I like. but they do absolutely nothing to ensure that they work. It is up to the customer to get the game working. It is up to the customer to find a sound fix for Max Pain or to edit a file to get Fallout 3 working.

  • SortingHat

    This is actually the early version of steam. It’s called Club Kidsoft which you could get software either thru direct download or CD room mail order back in the mid to late 90s.

    We got Creative Writer the title on the upper left that way though they went out of business because at that time peo[ple had their games stolen due to hackers who caught on to the growing trend of the PC market back then.

    Back then most people did not have anti virus software as it was not needed and Internet Explorer was NOT Free which allowed a healthy competition in the PC Industry of different browsers with different looks/features you could get at any electronic store.

    Heck even many of these games you see here you could get at Sears in their computer section which they don’t have a computer section anymore.

  • SortingHat

    The only good reason to still get a game at the store is then you have a hard copy in case the digital download is *lost* or is stolen which some of our stuff has and we had to reinstall things.

    At least having the hard copy we have the verification code for it too.

    One company like Steam was called Club Kidsoft we used to subscribe to their magazine for education and kids software back in the 90s.

    It also had a virtual *club house* of various activities on the computer.

    Here is a youtube vid of it which I call Kid Soft the grand father of Steam.

    About half the games actually had playable demos so it was fun when getting new disks of what demos it would contain.

    I got two games from it and one of them it was stolen when our computer was hacked back in 1997 which back then almost nobody had virus protection software since it wasn’t needed.

    The company wouldn’t even talk to Dad when asking for help and a year later it was out of business as they refused to adapt to the internet and compensate for loss.

    I am sure other people experienced the same issues when downloading games and getting their PC’s hacked before anti virus software companies showed up. and when they did it was too late for Kidsoft INC

  • SortingHat

    Don’t worry that’s coming. They are just ironing out the details right now but the ideas of controlling you’re car are there.

    Right now too many people own old clunkers so they know it own’t fly very well. Case in point is the Cash for Clunkers program which failed for obvious reasons.

    They likely were hoping people would either give or junk their old cars for the new electronic ones so they could do just what you described.

    Charge for ONSTAR service or no drive since driving is a privilige not a right in their minds even though you are not being paid to drive.

    Only chauffeurs should be forced to get licenses where they are paid to drive people places so they are competent to do the job.

    If we do need Driver Licenses it should actually only be for felons.

  • SortingHat

    Steam should make it easy for you to turn it off from being the first thing on you’re computer when it starts up.

    Dad who is good at computers after a good search and playing with the settings finally found it but it is not in an obvious location.

    Right away when installing Steam should be an icon to update manually when YOU want it to.

  • SortingHat

    He had to or risk losing his job. He was likely paid a bonus paycheque for it.

  • SortingHat

    My favorite MS title was a long forgotten one called Creative Writer and Fine Artists which actually taught things. It was set in a place called IMaginationpolis which is a virtual 4 story building you go in an elevator to go between floors where different activities are.

    It is designed for kids which if you click on the wrong thing a *fart* noise is made but at the same time actually taught you professional techniques on drawing and what an artist would see or make a comic strip.

    When you made a painting you could put SOUNDS on certain spots so if you click there noises would play.

    Creative Writer teaches you advance writing techniques and what you do in Fine Artist would be in a portfolio that could be transfered to Creative Writer or vica versa.

    The two programs were interchangable.

    Creative Writer could’ve had a kid friendly email service where instead of just generic smilies like :) or :( their would be actual sound effects if you clicked on the right spots.

    Like “I feel like *honk* today and just got out of the hospital after a nasty bike accident or “My friend is in the hospital now after a bike fall and I feel like *Ahooga* about the whole thing.

  • SortingHat

    Before BIll Gates left MS they used to actually have their own software lineup.

    One branch was called Microsoft Kids where I used to rent the Magic School Bus computer games from the Library which our Library rented CD roms in the late 90s. BY that time most of the games were made for Windows 95 or 3.1

    Microsoft also had a MS Catalog which had all sorts of cool content from serious use software known as *Home and Office* to the generic sports games to the arcade style games to simulation games like Combat Flight and Microsoft Flight SImulator series.

    Anybody remember the old MS geeky looking joystick they used to sell for the more advanced games?

    Anybody remember playing Mid Town Madness racing down the streets of Chicago and you could set you’re own check point races?

  • pc hardware

    I know this if offf topic but I’mlooking intyo starting my ownn weblog and was wonderkng what all is required to
    get set up? I’m assuming having a blog like yours wouhld cost a pretty penny?
    I’m not very internet savvy so I’m not 100% positive.
    Any recommendations or advice would be greatly appreciated.
    Thank you

  • Nicholas Lovell

    It’s funny. The games press I read is full of indie game devs complaining how hard it is for small devs to get a look in (point 3), that sales are devaluing games (point 4) and that if you aren’t on Steam, you can’t make a decent living from the alternatives (point 1). It seems to me that many of my predictions are coming true.

  • Braustardo

    this article was shit at its time and is shit now, 5 years later steam is the best thing the pc gaming industry could have, see you in hell

  • Miner1999er

    You’re given all the program files. They’re only locked so much as to prevent pirates from adding the game to their Steam library. If you wanted to play the game 100% without Steam’s influence at all you could just remove it after your game’s installed. That’s why all Steam games are totally mod-able and pirate-able. You really don’t need Steam to run any of your games, unless you play Valve’s games, in which case that’s like saying you like Assassin’s Creed but hate Ubisoft and it’s UPlay UI. Cmon, you don’t make any sense.

  • Miner1999er

    “The little guys don’t get a look in,”
    You heard of Steam Greenlight?

  • Truth

    Yet another steam employee.

  • Truth

    I bet you work for them.

  • Truth

    Steam = Pyramid scam-enjoy getting your computer and vital information scanned on a routine basis:)

  • Lloyd Franklin

    For me Google has always been the anti-Christ of the technology world. I only use YouTube and then I didn’t use my real information.

  • Lloyd Franklin

    I hate Steam myself but I use it because games require it. I get really angry when I see people write GabeN is god, GabeN saved PC gaming, bow down to our lord and saviour GabeN, I hate these people so much.

  • Roberto Markham

    Steam is an arrogant organisation and a stupid, waste of time. Want to run a game, sign in. Want to join a forum, sign in…….oh but must use a different username and password. Want support, sign in………oh must use yet another username and password. Nothing works on the site………forgotten password? Hard luck. Try to open another account NFW! I have had it up to the eyeballs with Steam. My games no longer work I am unable to contact anyone to complain and so I now have heaps of useless expensive junk with no sale price. I always enjoyed purchasing a game, getting a CD, installing it and then……..believe it or not, playing it with very little trouble. With the advent of Steam this has become an expensive NIGHTMARE. I will no longer buy ANY game which needs Steam [or any other on-line scam]. So, OK, I miss out on a few of the better games. At least I am not suffering headaches and frustration.
    Steam has wrecked the gaming industry completely, just as Microsoft has wrecked the OS industry. Monopolies are like dictatorships and with the same outlook.

  • JohnGahris TheImmortal Squirre

    Don’t try trolling me.

  • Nicholas Lovell

    I fear for your soul, infected with the cynic’s canker.

  • JohnGahris TheImmortal Squirre

    and which of valve’s competitors sponsored this article, I wonder?

  • I hate steam

    You all forgot about the players, or should we say adult gamers, we prefer good old buying a game and installing it and playing it without the hustle of downloading anything, many of us wait for the game to cost less to purchase and have it ready to play and worst of all, what about gamers in developing countries in wich internet connection still costs $50 usd (that´s right people!) to have good internet connection, i guess we don´t matter for we are poor. Everything is downloading now, hate it. F*** Steam!

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  • 66 Biker

    In a lot of ways Steam reminds me of Microsoft. Mainly because of how they do business with smaller companies in that mafioso monopoly sort of way.