Now, those games only have to meet “quality” threshold, and developers pay a one-time fee for listing in addition to royalties.
Before, independently developed games required a “critical mass of community support” via a system called Greenlight in order to get selected for distribution. Valve recently shifted from a crowd-sourced model of selecting new indie games to a fee-based model. Though the majority of Steam’s sales are from hit games produced by big name publishers, a significant percentage of its titles are from independent developers. What’s more, by listing on Steam, developers gain instant access to its massive user base and discovery engine, which highlights titles based on “previous activities, what friends are playing, and learns your tastes over time.” Tack on the price of manufacturing and distribution costs, and retail margins look dismal compared to those they can realize on Steam. While Steam captures about 30% of each sale, developers selling a $50 title on the platform net about four times as much revenue versus brick-and-mortar retail.
Pathways to a Just Digital Future Watch this tech inequality series featuring scholars, practitioners, & activists (In fact, Steam’s most popular game, Dota 2, is based on a mod!)
Most significantly, avid gamers sometimes volunteer time to create additional free content for games (“mods”), which Steam then hosts and allows its user base free access to. A messaging service and lively community forum allow gamers to interact with each other. A user-generated repository of often hilarious game reviews helps gamers assess titles prior to purchase.
Moreover, the service offers a variety of features that amplify direct network effects. Gamers don’t have to hoof it to Best Buy to get the latest title, nor do they have to worry about keeping up with physical copies of games. It provides a free, centralized service for gamers to buy, download, and manage their games. Steam’s value creation for both game developers and users is straightforward. In 2004, Valve forced Counter-Strike’s 1.5 million players to migrate to the newly-released Steam, and through a series of deals with third-party developers along with the release of Valve’s own wildly successful Half-Life 2, Steam achieved the critical mass required to profitably attract new developers and new users.īringing a gamer’s needs into a single client Steam’s concurrent user growth is impressive. Realizing that the proliferation of high-speed internet could transform how entire games were delivered to gamers, Valve began building a client with an integrated marketplace. Steam was originally conceived as a way to deliver game updates seamlessly to users and to apply anti-piracy and anti-cheating systems. Valve began as a game developer and achieved early success with blockbuster titles Half-Life (1998) and Counter-Strike (2000). Note the “Discovery” options on the left. The platform gives gamers an easy way to manage their game library and stay in touch with friends.
On a per employee basis, Valve could be generating more earnings than any other tech company (including Apple and Google).Valve’s founder, Gabe Newell, is worth $4.1B (47 th richest in tech).At any given time, between 7 and 12 million users are online out of a base of 125 million active users (Snapchat has something on the order of 150 million).
Gamers spent around $3.5B on Steam in 2015, or about 15% of the total paid PC gaming market.Released by game developer Valve in 2003, Steam is a free digital distribution gaming platform through which users (“gamers”) can purchase, download, and play computer games. You should think of it as the iTunes of video games.