I should have been posting this bite-sized news yesterday, but I’ve been feeling under the weather lately (I blame Steerpike and his relentless beatings). So I’m posting it now, instead.
Forbes Magazine in February’s issue have revealed that Steam controls up to 70% of the $4 billion market for downloaded PC games, with a staggering 200% year-over-year growth. Although Valve have never revealed their turnover or profit margins, its fair to say that their profit will undoubtedly exceed the 2005 predicted levels of $55 million in operating profit.
As the jewel in the crown for Valve and as much an experiment as it is a success, there is very little wonder that Valve show such dominance within the online market. “Steam-sale” deserves its very own dictionary definition.
To cut what could be a longer article short: Steam is profitable and popular because everything else is shit.
So what do you think of Steam? Does it deserve its market dominance?
Email the author of this post at lewisb@tap-repeatedly.com
I happen to like Steam. A lot. So much so that the amount of games I own through the platform is too numerous to count.
It is pretty scary that Valve has so much of the market, though. I mean, if you’re not Blizzard or Notch, can you release a game on PC without going through Steam and have a prayer of turning a profit?
Absolutely. Gabe Newell said some time ago that video-game piracy was simply representative of under-served customers. Steam is a video-game service for people who dabble in piracy. The sales are simply ridiculous and with that in mind it makes total sense why Steam is so dominant. They offer gamers what they want: good games for cheap prices.
I’ve even noticed the trend of the über-sales crossing over into services such as D2D, though they don’t have quite the catalog or ease of use Steam provides.
Steamworks is also somewhat of a draw. I used to consider achievements to be somewhat stupid and geared more towards console users. Since it has been creeping into so many of their games recently I’ve become somewhat obsessive about earning those achievements.
I was suspicious of Steamworks until I lost all my New Vegas saves; now I’m all for it.
As for Steam, I’ve loved it for years. Simple, affordable, amusing little cartoon characters during their sales, way to keep up with far-flung friends. Its dominance is likely to continue growing, but until it or Valve does something that makes me think ill of it, I will continue loving it.
Hey Whitebrice (and sorry for the delay approving your first comment!), Steam’s dominance of the market is a potentially scary thing. As we know, diversity and competition are generally best for consumers.
However, there is a counter response to consider – Steam has been responsible for firing awareness of many amazing indies and more obscure titles we might never have heard of. Like you, I own more titles than I can count… some of which I would not have had the chance to enjoy (or despise) were it not for Steam.
This is an incredibly naive argument, and I know it, but… Steam just hasn’t done anything that scares me yet. One day maybe it will. I hope that day never comes. Because it makes my life easier and gives me access to cooler stuff.
In a way I see Steam like I see Amazon: I can’t really remember how I managed without either. I was alive before they were, but so far I’d rather not be after.
There’s another easy counterargument to the charge that Steam’s dominance is a bad thing. It’s this: the digital download business is still very young, meaning that the probability of innovation completely remaking the market in the future is exceedingly high. We’ll see if Steam can maintain its position as the market develops.
Also, when a business is in its infancy, one company dominating from a superior product can be very good for the industry, because it quickly raises the standards for an industry that would normally be hindered by a lack of understanding of the basics of how to succeed, due to it being so new. Steam’s dominance says this: if you want to get into this, you had better figure out why we’re doing so well first. Again, this is a good thing, because in such a young market ideas can be more important than financial or material resources, unlike in more, shall we say, stagnant markets. Steam’s dominance could vanish in a flash if someone else makes a breakthrough, but until then, Steam’s keeping the bar high.
And it’s really, really hard to harbor negative feelings against a company that treats publishers so fairly. That’s a trend we definitely want continuing.
Valve are playing nice. For now. I approve of them, for now. I watch them with the caution with which we all watched Google, before the world decided they -were- ultimately evil but didn’t want to stop using their services.
I will never like digital distribution much. I am a hoarder who treasures beautifully made things – without a box, symbolic of my ownership, my commitment to a game or a film, my emotional connection to it is distinctly limited.
And then I think of the Morrowind papermap and the world explodes..
On the scary side of Steam there is the fact that despite purchasing a game you don’t actually own it. Valve considers you a “subscriber” to the games offered through their Steam service. It’s in the EULA which I read when my Steam account was hijacked and then banned. No one at Valve informed me of this, they just cut the cord because they could. Luckily for me they re-instated my account after an inquiry to their technical support staff, but most of the information associated with my account had been wiped out so I was left friendless for a time. However, this also happened on a Friday so I had to go the whole weekend without access to any Steam games, of which I have many (those sales are like crack). Except Fallout 3, which can run without Steam so long as you have the script extender.
Kinderplatz: That’s the part of Steam that really bugs me, and the fact that we’re all so willing (yes, me too) to hand over our ownership rights to them like that.
I’ve come to be such a heavy Steam user at this point, but I really need to start considering boxed games again, only to know I can re-play them despite internet connections or Steam account status.
Here is something I wrote about this last summer, with some new material added!
I am antitrust lawyer in my real life job, so this is the kind of stuff I do to earn a living so that I can spend my free time and hard-earned fat loots to play videogames.
There are two basic 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 on-line stores (like Amazon) then that share is likely quite a bit lower.
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.
It’s about more than just market share
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?
As someone mentioned above, the digital download “market” is still very young. Market shares are rarely that great an indication of market power in young, fast-developing industries. Things can change pretty quickly.
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 two games, the unfortunate “Blood Bowl” and the even more unfortunate “Elemental: War of Magic”) 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 because it wasn’t available on Steam. I had no problem doing so. I bought “Elemental: War of Magic” off Impulse. I downloaded the Impulse application and was buying “Elemental” in no time flat. Those are two examples of easy alternatives. If it turned out Steam was jacking up prices, I would either: (1) get off my ass and walk to GameStop, (2) remain on my ass and order it off Amazon with, like, three clicks of a mouse button, or (3) see if there was an alternative on-line digital distributor that had the game for less, such as Impulse. Given the amount of information available on the internet and the incredible low costs of switching, it’s easy to shop around and overcome any attempts by Steam to exercise market power.
To sum, Steam doesn’t have market power and would likely be seen to compete with both on-line retailers like Amazon and brick-and mortar-retailers like Best-Buy and Gamestop in a market for the “sale and distribution of PC games.”
As for the government “acting before it’s too late”. That’s not how it works. You can’t place restrictions on a company because you’re afraid they might become too powerful, unless that company is becoming too powerful through illegal means. By all accounts, Steam has reached the point it is at now – outselling everyone by a factor of 10 – because it is offering a solid product, lower prices, and is innovative. You can’t shackle companies for stuff like that. That’s only going to chill innovation. Why work hard and make a fantastic product that’s better than anything else if the government is just going to punish you for it?
There is a reason why Microsoft got dinged by the DOJ and European Commission. They were engaging in illegal activities, such a monopoly leveraging and bundling (using their legal monopoly in system operations to grant an illegal monopoly in the internet browser market). Eventually, if a company gets too big, like a Google, competitors, customers and suppliers start complaining and that’s when the door opens. Until then, you can’t just go after a company based on fear and unfounded speculation.
*nods* But the lack of distinct ownership is already implicit, to my mind, in the lack of a solid copy. Good Old Games step around this nicely – in ‘owning’ a copy of the downloaded install file if we want to, we have -some- sense of possession – something we can back up, something we can burn, if anyone uses discs anymore.
I don’t buy anything I consider truly important via Steam, unless it’s around £5. If a game matters, I’ll go to the effort of seeking a good boxed copy, possibly a special addition, as soon as one drops below RRP. It just feels.. Right.
Perhaps this comes down chiefly to my love of sharing, and showing off games – what I own in material form I display on a shelf – I lend to friends to introduce them to the genre – I am a gateway to gaming for everyone I meet who remains a sceptic. With Steam, we’re all just part of a paying audience – we cannot be part of the show.
One thing I would like to see Steam do – though it is out of Valve’s control as the publishers would never allow it – is empower its users to “lend” games they own to friends on a temporary or controlled basis.
The irony is that if publishers did allow it, it’d likely be good for their bottom lines.
My brother asked me the other day whether “Dungeons” was any good (it isn’t). I told him to wait until it was $3.99. However, some people are saying Dungeons is pretty good… and Marcus’s tastes don’t always match my own. If I could have loaned him my copy via Steam, for like, three days or something, during which time I would not have access to the game and he would, and after which it got returned to me and I could not loan it to him again, what might have happened?
If Marcus had liked Dungeons he might have bought it for $39.99 instead of $3.99. Or he could have opted to “buy” my copy, so I was rid of it and he assumed the cost. As it is I told him the game wasn’t worth it and he should wait for a Steam Sale.
Of course, once Dungeons is $3.99, Valve’s own statistics suggest that it will see a brief but massive spike in unit sales that will far outshine the equilibrium of full-price unit sales, like a supernova that outshines its whole galaxy for a day or two. So maybe it doesn’t make economic sense. Still, I’d like to be able to loan games to friends.
This whole comment was a recursive waste of your time. I apologize.
@ Kinderplatz / Armand,
That’s bogus. Sure you don’t “own” your games on Steam but do you think they’re ever really just going to turn off? It’s like the fear of games that require an internet connection, whether constant or simply for registration: the internet is so prevalent in our society that most of us are constantly online. How often do you actually pull out that 386, hook it up and play brand new games that require an online presence? Never. And has The Giant Internet Failure of 20?? happened yet? No. And how often are you in the wilderness and at the cottage and really craving a new game that requires an internet connection? Bring an old boxed game for those times. Sure, the requirement of an internet connection to play games seems like crap, but at the end of the day most of us can still take advantage of that and for those who can’t it’s hardly infringing upon their human rights.
As for “owning” your boxed PC games, or console games, you don’t really own those either. Read the fine print on anything. You own nothing. You don’t own your movies, you don’t own your music, you’ve just purchased a license to enjoy them. And that’s all Steam is as well.
Until that Doomsday when all the fine print about your “owned” property being revoked comes true. Then you’ll be right!
I want to purchase a license to steal, please.
I lost my internet a couple of months ago and tried to play one of my Steam games but my settings were to always be online so I just kept getting the error window. I guess I had to go online to change the settings to play offline and I couldn’t get online to change the settings to play offline and I couldn’t…. I was down for an hour.
Granted, it’s not a great argument to say “go do something else for an hour,” but I mean, that’s a minor annoyance if anything, right?
Xtal: I’m not worried about Steam disappearing, but I have heard of many instances of people getting their account revoked (like Kinderplatz.) I’m sure 9/10 times there is a very legitimate reasons, but companies often change their use policies on the fly.
Who’s to say Valve doesn’t decide to become a lot more strict about who has access to their account, and who doesn’t. Companies constantly change their user agreements, often without even notifying the user, or doing so with a long booklet of fine print.
With a boxed game, no matter what the conditions of the internet, the developer, or the store I bought it from, I know as long as the disk works, I can install and play it. With a game that I’m essentially “leasing” as is the case with Steam, I don’t have that same sense of security.
I’m not worried about the internet going away on some giant level (though my access to it is another question.) I also don’t understand what you mean about the 386, as mine doesn’t play new games or connect to the net.
I’m thinking I’m going to buy my copy of The Witcher 2 from gog.com. As much as I like Steam (and I do) I think the one company doing it REALLY right is gog. Full download, no software to download with, or run, and REALLY DRM free. They are the people’s digital distribution system!
I just don’t think, unless you’ve obviously violated some law, which I don’t know how you would on Steam simply by accident (my own ignorance?), that Valve is going to rip anyone’s game collection away from them.
What happened to Mr. (Ms.?) Kinderplatz?
p.s. GOG.com is great but truthfully I haven’t visited the site since those weird “re-launching” videos. I practically LIVE on Steam. Except for when I live in my own apartment. YOU REMEMBER THE PHYSICAL WORLD, DON’T YOU? TUNE IN NEXT TIME…ON NIGHT SPRINGS!
He/She/It had their account revoked over a weekend cause someone hacked it and did some ill shit with it. Or something like that. In the process they lost their friends list and went a whole weekend without their games.
That just doesn’t happen with gog or boxed games.
It’s a healthy paranoia.
When you’re used to buying and owning your games, the recent trend for digital distribution, and online-activated DRM puts the customer in a position whereby the games he purchased can be whisked from his hands at any moment. The fact Valve momentarily have no compelling reason to do so does not remove that potential for loss – a risk you do not suffer when you own the game.
On the other hand, it’s worth taking into account the value of digital ‘ownership’, whatever that means – if my house burns down, if I’m robbed, if I have to move at short notice and cannot take the majority of my possessions with me, only my digital games will follow me across the world, accessible from most places you can get online.
That’s what insurance is for! 😉
Really though, I agree with what you said, and you said it better than I could.
I wasn’t bothered. I thought it was funny though…the first time I’ve felt like playing a game all that week and Comcast foils me.
This post has got me to thinking how everything reproducible in digital form, games, applications, text, film, music is slowly going to vanish on the physical side. Half of the stuff I have lying around my house is media in analogue/physical form. Books, magazines, records, CDS, DVDs, games. These objects have shaped my experience of media. These objects have given me a sense of ownership in the system. Soon it’s all going to be in the cloud. Soon STEAM, Apple, Amazon and Google will have it all boxed up and centralized.
Steam has mistakenly banned groups a few times now, either for inadvertently thinking they were cheating or whatever other crimes. In most cases the company is quick to restore unfairly banned accounts.
I can imagine what a huge pain in the ass it would be to get wrongly banned… but then, I think, I’ve been through five Xbox 360s. In which case is the inconvenience worse? All my boxed games were just as useless while those Xboxen were in surgery.
And xtal is right, most EULAs make it very clear that you’re not buying the software, you’re buying a license to use the software. It is comforting to physically own objects, but to me trading that for simplicity, selection, and plain old ease make it fair. To me. Others’ mileage may vary, of course.
As Scout says, shit be changin’. Books, games, movies…
GOD FUCKING DAMMIT, I JUST BOUGHT FRONT MISSION EVOLVED ON STEAM
Why?
BECAUSE IT’S EVIL. I take back everything I said.
Haha Steerpike, it really is that easy though. I save my credit card details to Steam so it’s literally two clicks to purchase. I generally feel much better for purchasing on Steam too as I hate disks lying about, and love the fact all my games auto update and the publisher gets more money.
I have never once had a problem where I couldnt play my games.
Vinyl records will survive the digital revolution. If any of you want to trash your own collection please send them to me through the mail/post!
“One thing I would like to see Steam do – though it is out of Valve’s control as the publishers would never allow it – is empower its users to “lend” games they own to friends on a temporary or controlled basis.
The irony is that if publishers did allow it, it’d likely be good for their bottom lines.”
Surely you could create support for it with a study that proved that lending increases consumer knowledge and interest? And while I certainly don’t see the big publishers agreeing to this, there might be a number of struggling indie developers that might be willing to gamble on an experiment to stay afloat. Valve should offer lending as an opt in agreement in their contracts with publishers.
[…] PC gaming has fallen off a cliff lately but I recently saw this article (via Tap-Repeatedly) about Steam owning 70% of the PC download market (a mere 4 billion dollar market). That blows my […]