GamesBrief ran a piece last week with the somewhat hysterical title “Five Reasons why Steam will Destroy the PC Games Industry.”
In a word: it’s a monopoly. Or it’s fast becoming one. And monopolies, historically, are dangerous, regardless of industry.
Is Steam a monopoly? Well… depends on your definition of the word. It’s definitely close. Services like GameTap, Direct2Drive, Impulse and so forth make up a minute fraction of the digital distribution business, while Steam completely dominates the space. The key question is whether it can count as a monopoly when it still competes with retail, and/or whether it’s possible to monopolize a subsegment of distribution – i.e., does the fact that Steam is in digital distribution mean that it monopolizes that and does not compete with boxed retail? I have no idea.
I love Steam. I really do. I mean, I disliked the whole idea of it when it came along, and the service was kind of a joke for about a year after launch, serving as nothing more than a Half Life 2 reseller. Then all of a sudden it went crazy and you can get practically anything on it. It does auto-patching, so my games are always up to date; it supports mods, so titles like STALKER and Oblivion are easily tinkered with; it has outrageous sales; it’s easy to use. I’ve never had a problem with it. And Valve’s behavior isn’t very monopolistic. Prices are fair, developers get a far greater percentage from Steam than they do from traditional retail publishing contracts, and indies have the opportunity to put their game in front of 25 million subscribers.
But just because Valve hasn’t acted like a monopoly so far doesn’t mean it can’t or it won’t. As the GamesBrief article points out, there’s nothing to stop the company from refusing to carry a game that’s too much like Half Life, for example; or arbitrarily cutting the revenue percentage it offers developers. Heck, there’s no reason that Valve couldn’t double the prices of all its games, or establish some horrifying DRM scheme, or announce that for every game it sells, it will donate a dollar to the Extinction for Puppies or Breast Cancer Is Really A Good Thing movement. I don’t really expect this, but just as the implied invasion that is Ubisoft’s DRM makes it unpalatable, so too there is a bit of discomfort associated with the fact that Valve could do these things.
Call me hopelessly tenderhearted, but despite all lessons from history I really like to believe that it’s theoretically possible for companies to behave decently, even when they monopolize something. Google and Valve both seem – so far – to be organizations that want to do right by people. It’s as if they recognize that they already have enough money, and that doing something nice won’t hurt them. And I also like to believe that if some companies start behaving this way, others will follow suit. Sort of a kinder, gentler capitalism. After all, Valve has never, never ignored the will of its customers, to the point of even talking openly with those fools who wanted to boycott L4D2. Most other companies don’t do that. And while I’d very much like to see Valve take a stand against draconian DRM – like refusing to carry Ubi games – I don’t really fault them for not doing so. There’s being good to consumers and there’s simply going too far.
Is Steam a monopoly? By the letter of the law, I really don’t know. In reality, almost certainly. After all, it controls something like 88% of the digital market, and while not every publisher distributes its games on Steam, those that don’t are cutting themselves off from a critical channel.
Steam was not first to market for digital distribution; Direct2Drive and GameTap were both years ahead. And it’s not a monopoly because of underhanded practices. As far as I can tell, Valve has never done anything unethical in its handling of Steam. No, the service is a monopoly because it’s the easiest to use, it has the widest selection and the best prices, and, frankly, people trust Valve.
Don’t get me wrong, I trust Stardock too – but I don’t use Impulse. Not because I’m pro-Steam, but simply because it’s a pain in the ass to use, and its library doesn’t contain much that, well, that I can’t get on Steam.
Steam has competition – retail, of course; all the other digital services, plus PSN and XBLA, GoG, the App Store, and Google’s strongly-hinted-at platform. What it’s done for the industry has, in my opinion, so far easily outweighed any possible evil it can commit. While that perception may change in the years to come, I tend to think that alarmist claims about how a service is going to destroy an entire segment of the industry are a bit much. After all, so far Steam’s given the PC games industry a needed shot in the arm. I hope that never changes.
Email the author of this post at steerpike@tap-repeatedly.com.
Interesting piece, one that you pretty much summed up my thoughts about in the last couple of paragraphs.
Legally, would it even be possible for Valve to be proven as a monopoly? As you summarised yourself, this isn’t a case where Valve are forcing others out of the market. They might have 88% or however much of their market, but it’s a market which does still have competition. Instead of questioning whether Steam is a monopoly or not, perhaps we should be questioning why the competition have failed to match what makes Steam so good for so long.
As a console gamer I’m well accustomed to at least 2 of Steam’s rivals you mentioned above; PSN and XBL. Steam is so much better at what it does well than either of those 2 platforms are that it’s almost comical.. particularly in terms of pricing and delivering content.
People will take a swipe at STEAM because it is the best on the market. It does everything people want in a digital distribution platform. If it’s a monopoly, it is only one because of its success and everyone else’s failure to compete. Not because it is forcibly using its weight. People want to use STEAM and so do developers; it makes them money.
Of course, with time and the sheer number of people who now use it, Valve are in a precarious position. It’s a bit like Tesco- it’s success could be its downfall as people start to bite at the ankles and usually, biting at the ankles of giants results in the little man getting squashed.
Tesco, Microsoft, Google, they can all flex their financial muscles to make things go their way and very little gets done about it.
People need to get with the program and make something equal or better than STEAM. There is plenty of room for it!
I’ll chime in with a purely anecdotal response with no useful content whatsoever:
I had Gametap at one point and found it hard to use for reasons I no longer remember. I’ve had Steam since HL2 and yeah, it sat unused for a long time afterwords and then…suddenly it had all these games and they were simple to download.
I never subscribed to the “it just works” mantra with my pc cause I liked to stick my paws into the guts of the thing and moved stuff around at will. That was part of the attraction. But downloading a game from an online source I just want it to freaking download. Steam does this. I fully expect them to become evil at some point.
Woah. A fella travels for a couple of weeks and misses this…
A large part of my job is trying to convince people (i.e., governmental regulators or juries) that the companies I represent are not monopolies and/or do not have market power. It’s the path that I have found myself on.
There are two ways to look at whether a company is a monopoly. The first is pretty rare, but you look to see whether the company can control prices. I am not talking about those super Steam sales, since lower prices are always good for the consumer (unless they are below cost, but that’s another matter entirely), but rather the ability to raise prices about competitive levels. I haven’t seen any evidence of this. As far as I am aware the prices you find on Steam are consistent with the prices you’ll find in the brick & mortar stores and on the smaller digital distribution companies.
The more common way to try and define monopoly power is to define the “relevant market” and see what share of sales a specific company has. Defining the relevant market is key. For example, if you’re talking Coke and Pepsi and define the relevant market as carbonated soft drinks, these two companies would have a pretty big share. If you defined it more narrowly, cola-flavored carbonated soft drinks, an even higher share. If you were to define the market more broadly, soft drinks or, say, all drinks, then there shares plummet.
Same goes for Steam. If you’re talking simply “Digital Distribution On PCs”, its share is likely high. If you throw brick and mortar stores (like Gamestop, Best Buy, etc.) or even on-line stores (like Amazon) then that share is likely pretty low.
One way to determine whether two products are in the same market is to try and test to see how the price of one product affects the price of another. For example, how many consumers would switch from buying a PC game on Steam to buying a PC game from Best Buy if Steam raised its prices by 10%? If enough people would switch, then they are likely in the same market.
Market share, however, is just the beginning of the analysis. You also have to look at things like barriers to entry and alternative forms of distribution. How hard would it for another company to enter the market if Steam rose prices? Or if Steam refused to carry titles from certain publishers? Can companies effectively digitally distribute their own games without the need to use Steam?
Based on my understanding of everything and because it’s my nature, I think there are stronger arguments for the Steam is NOT a monopoly side of things than the Steam IS a monopoly. This is based on the fact that I do believe their pricing is restricted by brick and mortar stores and because of ease of entry/alternative forms of distribution. It’s not like Steam prevents you from using other digital distrubtion platforms or other digital distribution means.
Pretty much every PC game I have purchased since Dec 08 (save one game, the unfortunate “Blood Bowl”) I have bought from Steam. Most purchases were made because of price (older games) or convenience (newer games). I downloaded “Blood Bowl” from the company’s own web store beause it wasn’t available on Steam. I had no problem doing so. If it turned out Steam was jacking up prices, I would either get off my ass and walk to GameStop or remain on my ass and order it off Amazon with, like, three clicks of a mouse button.
To sum, Steam doesn’t have market power and would likely be seen to compete with both on-line retailers like Amazon and bick and mortar retailers like Best-Buy and Gamestop in a market for the “sale and distrubtion of PC games.”
Love you Ajax! Appreciate that!:)
I’m more concerned about the EULA meaning they can deactivate accounts for no reason (And certainly won’t explicitly tell you more information). Someone I know online had this happen to them (presumably someone guessed their password, he still isn’t sure how).
People who get into accounts use them to cheat, thus VAC bans them – and that deactivates their account etc.
The onus is on the user to secure that, yet they hold the switch to ban you and remove the right to use things you’ve paid for and of course never just block an account until it can be investigated or anything sane. It wasn’t until, what, last year that they allowed an email to be associated with an account? Before then it was impossible to even reset a password properly.
The service uptime is okay, steam app passable (it still won’t let you choose another location for installation files though), the friends service is passable – I’m just happier having disks to install off if possible so the whole “I own it” thing works. I don’t like having a kill switch ever available to ban me from my own account. That and the longer term issue of long term game and server support and the fact they’re pretty black box with customer support and the whole “who owns what” issue when they can turn off accounts for no reason.
It’s a shame because Valve, the developers, actually make really good games.
Given all of your concerns, Andrew, then I think you’d be a good test case for the whole question of a monopoly. If you think you can still get access to the games you want and at prices that are fair, then you have reasonably alternatives to Steam. Granted, there might be some “Steam exclusive” content from some publishers (Valve?), but having some exclusive content is nothing new or anticompetitive.
I don’t worry about the issues you raise, mainly because I am unaware they really exist. I am pretty unsohpisticated when it comes to PCs. So long as I can get on the internet, play the games I want to and feel relatively safe about any personal info, then I am A-Ok.
I would imagine I would be singing a different tune if all of a sudden someone high-jacked my Steam account, got me banned and then lost access to all of the games I bought.
I can’t really add much here but based on my experience with Impulse and Direct2Drive, Steam is head and shoulders above the competition, that’s why it’s got such a massive cut. That and, y’know, they’re Valve.
Oh, yeah, they’re not a monopoly as such yet on PC. It’s still hilariously fragmented with just “online activation accounts” from every publisher, developer and even every game having them (on top of Steam sometimes…thanks GFWL).
They might tend towards the monopoly for digital distribution but the brick and mortar (or alternatively; downloads without major DRM, or online stores selling boxed games) are still the majority at a guess.
I use Steam (I have about 7-10 games I’ve downloaded though it) and overall am happy with the service.
My one comment or question is the issue of DRMs. I’ve pretty much sworn of Ubisoft games because as a gamer who’s been paying for video games since the early 90’s, I find their DRM practices to be downright insulting. As much as I enjoyed the first Assassin’s Creed, I won’t be purchasing the sequel.
That said, isn’t the Steam client more or less the same sort of thing? Maybe I just haven’t figured out how, but far as I can tell, in order to play my downloaded games, I have to stay logged into Steam, and have it running on my computer in order to play the game.
I’ve used Direct to Drive and Impulse as well, and neither required me to be connected the whole time I played. Again, maybe I just don’t have all the information, but that certainly seems like DRM to me. If I have the option of getting the same game for the same price from either Steam or Impulse, I tend to go with Impulse.
It’s funny, Armand, and you make an important point: Steam is an “always on” connection that no one complains about. There’s something… psychologically different about Steam, though to be honest there’s no reason Valve couldn’t use it as an anti-piracy validation system. I think it’s possible to play Steam games without a connection, but I personally have never figured out how.
Isn’t it odd, though, that nearly no one complains about Steam? Honestly I think it might simply be because Ubi acted so proud when they announced this new system. “You are all thieves,” it seemed they said. “So we will watch you all the time.” Everyone revolted.
Meanwhile Steam constantly slurps up computer stats and learns about subscribers, but they release their data and genuinely seem to be trying to help the human condition. Maybe it’s just a matter of how you frame things.
‘Steam > Go Offline…’ is your best friend. 😉
Dude! Gregg! Thank you!
I can’t believe I’ve never noticed that over all these years. Steam just got bumped up a few notches in my book.
Geez, I never saw that either. Gregg, you’re a genius!
Hey, on the subject of Steam maybe not being evil, apparently a bunch of Modern Warfare 2 people were accidentally banned over the past two weeks. What’d Valve do?
Well, fixed the problem, obviously. And apologized. Gabe Newell wrote a nice little email explaining what had happened. Then to make up for the inconvenience, everyone who was banned got copies of Left 4 Dead 2, either for themselves or to gift to someone else. That’s pretty classy!
Mmm, Matt, one thing to read into (from the realm of “I do privately have grievances against Steam” – we are out there!), is that; they claim that VAC is infallible still, and will continue despite this occurrence. I didn’t bring up bannings, but people can be wiped off from Steam if VAC claims they are guilty – no recourse (well, nothing by talking to Valve directly it appears), as happened massively here – I just wonder if it has happened, or will happen, more frequently in the future except for smaller groups or individuals.
If it ever happened to me I’d be straight to my local citizens advice bureau though. No going down without a fight for me.
They hold all the keys to the castle. A classy free game is fine, but they are obviously now two faced about their VAC system being infallible.