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Is Steam’s tactical growth masking a strategic decline?

By on April 6, 2011

I spent a couple of hours today talking to students at London South Bank University. These are the people who will be the Miyamotos and Molyneuxs of the future, so it was great to talk to them.

I talked about whales, power laws, the rule of 0-1-100 and all the stuff that regular readers of GAMESbrief would expect. One student, though, asked me a question that set me thinking, and I haven’t got the answer yet.

“Given all that you’ve talked about, what role does Steam play in the future of games?”

It’s all about distribution

Steam logo

I love Steam. It’s a brilliant service that has kept PC gaming alive and vibrant even as retail gave up on it. Without Steam, PC gaming would be a much duller place.

I agree with Mitch Lasky of Benchmark Capital (formerly of Activision, Jamdat and Electronic Arts) who argues that distribution is king and Steam is the grand high Poobah. (My words, not his).

I also fear its de facto monopoly status, and the risks to the PC gaming ecosystem if they chose to switch from benign dictatorship (with a 70%+ market share) to tyranny.

But is distribution as important as it used to be?

I argue that we are entering the era of self-publishing. We don’t need gatekeepers or retailers to stock a product sold at a flat price.

Instead, we need to offer our games (all media content in fact) for free, and have ways to allow a small proportion (>2% of our users) to spend $100 on something of value that we can offer.

Steam doesn’t do this. Steam has enabled indie developers to find new niches because it has eliminated the costly process of physical manufacturing, distribution and retailing. It hasn’t enabled the whales who will get so much enjoyment from your games that they are happy to pay $10 a month for 10 months.

Tactical shift versus strategic shift

So tactically, in the short term, PC gaming is moving from the box to the download. Steam is an enabler of that (and they are awesome).

Longer term, I believe that people won’t pay for access to content. They will pay for emotion and status and progress and self-expression. Steam doesn’t help with that at all.

It can adapt. It has 25 million customers. It can be the most powerful filtering and lead-generation business on the planet.

But do they want to become that? And do their customers want them to?

One to ponder for me. What 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: