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Five reasons why Steam will destroy the PC games industry

By on May 26, 2010

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: thecurveonline.com
  • http://www.facebook.com/andrea.keil.18 Andrea Keil

    “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.’ ”

    …so what? SHOULD they spend marketing money in order to be “allowed to exist”?? Why do you demand for them to change anything about PC hardware? Seems totally random for me.

    Just because Sony and Nintendo and Mircosoft and Apple do this for their “each 5 years a new one”-consoles doesn’t mean that a completely different company has to do this as well. …for a platform that basically doesn’t change over the years, only gets more and more of everything.

    If users are convinced of Steam then just let them – even if Valve doesn’t launch huge marketing campaigns.

  • http://www.gamesbrief.com Nicholas Lovell

    Not “allowed”. But the after-the-fact justification for the oligopoly that the major console manufacturers have is that they have to invest in the hardware and recoup those costs. Valve doesn’t have that justification.

    Note that I don’t say that Valve should not be allowed to exist. It was one of the most impressive companies in gaming. It is that gamers and developers should be wary about sleepwalking into a monopoly.

  • http://twitter.com/Ark_kun Ark-kun

    2 years later and Steam is creating their own tightly-closed console while Gabe Newell spreads FUD about Windows being closed (which is a lie since you can install any game).

  • Biathc!

    Windows is closed to Valve… That’s why Gabe hates it. SteamBox is closed to everyone but Valve, that’s why Gabe loves it.

  • http://www.facebook.com/ry.zodie Ryan Richardson

    I see your point but to be perfectly honest steam has so far done more good than harm. Especially with the introduction of the Greenlight system

    I think the platform they have adopted gives consumers good value for money and great tools for social interactions, friends, communities and so on.

    Steam has now expanded this ethos to development tools and greenlight – which anyone in the community can be a part of. The community can vote for games it wants on steam and games they want to see on sale. – This allows both consumer and developer to benefit from the time / money placed into valve.

    Also valve seems to be supporting innovative concepts, ideas and ultimately “the little guys” by giving not only the physical tools (aka the software) but also a community as well. This will only get bigger too.

    Not only that but as others have said – there have been games I would never have heard about – in fact I actively use steam to search for new and interesting games to buy.

    Also for people whining about “needing to be online” steam does offer an offline mode and the time when you’d not be allowed to play without a connection is when the developer of a game doesn’t want you to be able to play without one. In short steam will let you play without a connection unless the game doesn’t support offline mode.

    I agree that monopolizing a market should be something to give pause, however from what I have seen so far I think valve has the right frame of mind and as a consumer and as an artist (but not a developer) I would happily hop onto the steam bandwagon because of its massive community and inclusive “everybody” wins ethos, which by the way is only possible because of the massive consumer base.

  • commenter

    While some of the points are valid, steam has also helped the PC games industry by preventing piracy for online games.

  • guest

    This article is a fucking joke. Steam is a private company and you think they created a monopoly and that they weren’t innovative? Valve put out the some of the most innovative games and steam is, by far more innovative than any console. Microsoft wants to block or charge users for playing a used game and they are a giant public company adherent to shareholders who have nothing to do with video games. What a stupid article. Steam is amazing.

  • Derelict

    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.

    The Xbox One. ‘Nuff said.

  • ine

    You don’t need to be connected to the internet to get access to your games on steam… In-fact the only time you need to be connected are for updates, or to install the game. What is wrong with an easily accessible library for all your games?

  • Matthew

    “Steam eats the souls of little gamers”

    This quote is the signature line of one of the moderators for the Civfanatics website. I 100%
    agree. Most of that reason can be found in
    “Rocks” post. My first steam game was Civilization V and after the nightmare of installing it BECAUSE of
    steam, and after seeing that all modding required steam… I decided I had wasted $50 for the game. From that time on I vowed never to get another steam game. Unfortunately I had no choice if I wanted Skyrim.

    You steam enthusiasts don’t see how we can hate steam because either you don’t know any better (don’t have experience with anything better) or you have already bought into the mindset of sacrificing freedom of choice for convenience . I am not going to go through all the reasons why this is true and why I DESPISE steam but I will list the ones related to your objection to the above post. The only “bias” I will admit here is that I am a modder. I am willing to bet that a majority of modders hate steam. At least one of those reasons have also been listed below. The rest of my hate is based on my experience with steam.

    1. I HAVE MY OWN WAY of organizing a game library that I have used for years. Many people have been using third party systems for years to organize their games. Nexus is only one example. Not me. I have my own. Steam’s installer will not allow me to take advantage of my own system because it requires that I put the game in its own directory which is incompatible with my own way of doing things. Regardless of whether you use your own or whether you use another system, Steam games FORCE steam. NO FREEDOM.

    2. EASE OF ACCESS != (not equal) FREEDOM. Steam and other institutions built on the same principle rely on people’s desire for ease to keep them ignorant. The less that you know, the more you will like and need to rely on their system. unlike other game organization systems which you can learn from. As a result, steam has no learning value. It prefers you remain ignorant of what goes on underneath. NO FREEDOM.

    3. You mention that steam is required for installation. That is one of the BIGGEST reasons I DESPISE Steam. You cannot install a game from the cd/dvd. There is no point to even buying the game in a store because you will have to download it anyway. I tried avoiding steam by buying it at the store… boy was I duped. So basically STEAMS WASTES HUNDREDS OF THOUSANDS OF DOLLARS IN NATURAL RESOURCES (used in installation media) AND SHIPPING and prevents people abroad with extremely limited internet access (such as people in the army) from enjoying a game because they cannot install it. Too bad that there wasn’t a warning label… another waste of $40 not to mention the thousands it took to ship games all the way to the middle east. NO FREEDOM.

    4. Steam is all about lack of choices (except in the games you can get). That is why games that make use of steam ARE REQUIRED TO BUILD A CALL to the steam executable within their own game code. NO EXCEPTIONS. AND NO FREEDOM.

    5. Steam has NO USERS GUIDE. I get cryptic messages from steam about stuff and I have to search the internet in order to find out what the hell they are talking about. And half the time that doesn’t even work. So I don’t really want to be part of the steam community. But… I have no choice. NO FREEDOM.

    6. All in all my experience with steam has been 100% detestable. I don’t like steam. I don’t want it on my computer. But I have no choice. I have to have that useless (to me) piece of crap running in order to play or MODIFY Skyrim (Or Civ 5 if I ever find it worth playing). NO FREEDOM.

    7. Steam developers are LAZY. They do not care about the logistics of the games or the mods being loaded for their own clients. Steam’s mod loader WILL FAIL with certain types of mods unless the load order is modified by hand since it does not distinguish between types of mods (master mods versus regular mods). In most cases making this distinction is very simple. Yet steam developers cannot be bothered with it. Luckily, Nexus has developed a much more intelligent system that hacks and overrides steams own system. But unlike nexus mods (which can
    be downloaded whether you have the nexus mod manager or not) steam does not allow downloading its mods without the steam client. NO FREEDOM.

    So are you catching the pattern here? Convenience is nice when it does not sacrifice freedom and encourage laziness. But I am afraid that this pattern of lack of choices is only the beginning. Mr. Lovell has hit the nail right on the head. And Steam MAY OR MAY NOT take further freedoms away on purpose. But regardless, the slow removal of further freedoms is inevitable. Just as their developers have gotten lazy with their mod system, the more of the market they control, the less they will care about what you want as an end user and a gamer (Just like EA… played any good games by EA lately? 100% crap. Remember the SimCity catastrophe.). And you my friend will be stuck with the results of their laziness because of the lack of choice that is central to the Steam business model.

  • K1dX

    1 how can steam out sell other publishers steam is a client to sell games now Valve on the other hand could.Also I have a steam account and its great on windows/Linux also steam offers those so called free to play games so this who article is BS.When a company like valve release steam a gaming client so trusted for years and then has indie,AAA and F2P games on there proves this article to be crap also I talked to the guys that made Haunted Hells reach and there games don’t sell cause they don’t have money to fund the project how is this any ones fault you give awesome content to us free or cheap we will buy your game also game has to be good we don’t buy shit.

  • K1dX

    Lol Linux is open Windows being closed to Gabe Pfffftttt windows is closed to every one where is windows source code and can we alter windows and redistibute no we cant and Linux out preformed windows.Windows is just shit how can you even compare windows to a steam box Hardware vs software its like saying PS4 vs windows who wins lmao stupid crap only morons think like that.

  • Jacques Shellac

    I haven’t bought a STEAM game since they started. Now that they’ve monopolized the market, I’ve been essentially forced out of the PC gaming hobby – but I still refuse to buy STEAM exclusive games. Shameless arrogance and obnoxious insults from STEAM promoters have only reaffirmed that decision.

    Now I’m beginning to hear about STEAM threatening to cancel game accounts of people who don’t agree to their terms – without any refunds or compensation of any kind. So apparently I was right all along.

  • AugustineThomas

    Not true. Every game on Steam never ever stopped being available through piracy (except when they first come out, which is the same for any game while people figure out how to crack it).

  • AugustineThomas

    Do you really love Steam this much, or do you have a thousand dollars of games on there and you don’t want it to recede in popularity and you lose your games like people did on D2D?

  • Nope

    I think honestly that this is probably one of the least educated discussions of Steam I’ve ever read.

  • Gaz Wkd

    Reading this article now and it’s quite funny :) If anything Steam has saved PC gaming from going the way of the dodo ;)

  • 67

    2 beez

  • Anonymous

    To be honest, I despise Steam. Steam keeps me from playing my favorite games because I don’t have a fast enough internet to constantly update it or even run it. I like it better when I can just put in a disc, install and play. I live in an area where high speed internet that is suitable for gaming is nonexistent. My internet is too slow to even access Steam. It’s impossible for me to play any game on Steam, and I don’t think that’s fair for people that prefer PC gaming, but live somewhere high speed internet doesn’t exist.

  • Steamfree

    Steam saves me over $2000 a year….ever since the 90′s, I used to walk into 1 of several computer stores nearly every weekend and walk out with at least 1 game….sometimes a stack. I used to rebuild/upgrade PC every year. But when steam came out i refused to jump on the bandwagon. I just prefer having the disc and not lownloading crap. Plus me and several buddies of mine would each buy a game and we would let eachother borrow them. Alot of the time we would buy it, especially if it was good and was multiplayer. Kind of like an extended demo. In ’08 I walked into another store, like i did before and NOT 1 single game worked without having steam. I have not bought a single PC game since. I have not bought a new PC or upgraded current one. Thanks to steam I can safely say i’m no longer a gamer…which is not something I like saying. If it wasn’t for all the money I noticed I was saving, I would say SCREW STEAM! but instead I have to say… Thank you steam!

  • charlyfox

    I have a retail box of Shogun 2 and cannot install from the discs. My initial installation took 8 hours on my 3.5 megabit connection. I had to uninstall and spent several hours trying to find out how to install from the discs but no method I have researched will do that. Even advice from Steam says you can and indeed it took just half an hour to complete the installation. But then comes the update window – just another 9 hours or so before I can launch the game. So they’re a bunch of liars. I can’t believe that the rest of the pc gaming industry have allowed this bunch of dictators and liars so much power. The jumping through hoops system that Steam have is ridiculous. You even have to set up a separate account just to get help from their system. There is an explanation for this – Make pc gaming as unpleasant as possible and drive users to the consoles. This is what is happening. I suspect a conspiracy is going on between Steam and Sony/Microsoft.

  • Rye

    Well worth suppressing the troll instincts to read the deeper meaning. Articles like this keep the big boys in check. Keep speaking out, it is almost four years later and the market and community is still going in the right direction