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Steam isn’t Google, or Facebook, or Microsoft… yet

By on September 5, 2011
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I came in for some pretty heavy flak for my article on the risk to PC gaming that Steam’s de facto monopoly poses. Perhaps the most cogently argued piece came from Andrew at Systemic Babbler (Steam is not the great destroyer), with whom I agree on many points, while US anti-trust attorney Peter Boivin gave some pretty good reasons why Steam is not a monopoly.

So why did I write such a provocative piece?

I think, at heart, the answer is my disquiet with Google.

Huh?

Well, Google was the great, selfless provider of services that could take on the evil Microsoft, and get unprecedented insight into *everything* about us. We were relaxed about this because they said “Do no evil”. Only after a series of mistakes and PR mis-steps (the rollouts of Streetview and Buzz leap to mind”) did we suddenly realise how much power and information Google had actually taken when we weren’t looking.

Steam logo

In my discussions with developers for How to Publish a Game, I was genuinely shocked to discover how much market power they had developed. They outsold *everyone else put together* by ten to one. All the commentators who reeled off a list of competitors (Direct2Drive, GamersGate etc) were missing my point: despite these competitors, Steam is still the only game in town.

Twelve months on, little has changed my mind. Steam are still an incredible boon to the PC games industry: they may have saved it from retail apathy and turned into back into a thriving platform.

But Markus Persson of Minecraft fame has said that he can’t work with Steam, because Valve is not flexible enough about business models. The reason we hate monopolies is not because of their pricing power; it’s because of their ability to stifle innovation. Markus is suggesting that Steam will would have limited his ability to break out.

Of course, Minecraft was a breakout hit without Steam, and to many detractors of my argument, they would argue that Minecraft’s success is evidence that Steam is not a monopoly.

I say that the Persson got lucky (he was also very good at what he does, but luck was important, as the man himself says). If he had been dependent on Steam for distribution, Minecraft may never have got off the ground.

For me, that is enough of a reason to continue to be fearful of Steam’s lock on the PC market.

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
  • I agree that the primary issue is B2B, not B2C. I’m not sure that doesn’t stop the monopoly risks I identify, particularly that it will stifle innovation.

  • “In that sense Steam has little supplier power: if customers don’t like Steam, they will move.”

    But you can’t take your games with you, and that’s the rub. The more people spend on Steam, the more they have themselves tied to that ecosystem. At the moment Valve keeps itself mainly clean on the PR battlefield, but there have already been minor outcries around things like being banned from all your games because of a single PayPal transaction failure. Consumers should be worried about Steam’s market dominance, made all the more worrying because people aren’t (worried, I mean).

    Remember, even Electronic Arts started out asking the question “Can a Computer Make You Cry?”

    http://johanistan.wordpress.com/2011/03/16/the-electronic-arts-manifesto-can-computer-make-you-cry/

    Now they’re just asking themselves how they can make more money. Nothing wrong with that, but history tends to have a habit of repeating itself.

  • Your guest poster is right in “Steam is not a monopoly” in that if Steam stops giving a great customer experience (including reasonable prices), customers will and can switch. Similar to Amazon, say — it has a dominant position because it serves the needs of most customers best, not because it can lock you in and abuse you.

    In that sense Steam has little supplier power: if customers don’t like Steam, they will move.

    What Steam does have a is a lot of BUYER power. If you are a game developer then whether you like Steam or not, you will have a hard time if you’re not part of it. In its relationship with game developers Steam can all the shots.

    Notch isn’t just lucky. He’s done the hard work of building a direct and unmediated relationship with his customers. He has a successful business with strong revenues without needing Steam. And that’s a great position to be in.

    If your company couldn’t survive without an intermediary between you and your customers — whether that’s the App Store, Steam, or Facebook, then you really should work on that.