Video gaming has been a staple of entertainment since its birth in the 1970s. It is increasing its size and output by the year. For example, “The Witcher 3,” the award-winning video game made by Polish video game developer CD Projeckt Red, is been said to earn 82.7 million within a half of a year of its release according to its financial reports in 2015. The gaming industry, it seems, takes up more than just a small part of the economy.
The gaming industry, like many others, derives its profit in various forms. Some companies attain profit from investing in promising titles, while others earn their share by developing such games. Other companies may make money by creating the tools necessary in programming a game or creating the hardware needed to play a game. This article will focus on Valve, the company that manages the distribution of video games, and its platform, Steam.
Steam, launched in 2003 by video game developer Valve, is an online digital store where video games can be bought, stored, and played. Steam users buy these video games online, which are then stored into their online libraries. The users can then access the games at any time to play them. In addition, Steam provides a venue for online gamers to set up communities based on their games, as well as sending news of their favorite games and commencing holiday or weekend sales on popular video games. Discount rates can vary from 30% to 90%. Steam not only appeals to gamers but also to developers. Indie game developers, also called solo game developers, can sell their games through Steam as well, which allows them more exposure to the public gaming community. As selling a game in the Steam Store is relatively easy, indie game developers or small-scale gaming companies who do not have the capacity to distribute their games can use Steam as a platform to promote their games. Steam, for all this work, takes 30% of the profit made by the games
As Steam has been the one to pioneer and constantly expand this market, gamers flocked to the platform. According to third party analytic firm SteamSpy, the platform earned a massive $4.3 billion in 2017 alone. Large-scale game developers created their own online digital stores, not wishing to lose their profits to Steam, but have only succeeded in selling their own games. Activision Blizzard’s Battle.net or Ubisoft’s UPlay are examples of those platforms. Other markets that have successfully brought in diverse game products, like Microsoft Store or GOG, have attracted miniscule numbers of users compared to Steam. Steam’s pioneering the market, as well as being the first platform to fully support indie games, was what created the current monopoly in the game distribution market.
Monopoly in a capitalist economy has problems. Consumers have no alternative to turn to when the company dominating the market has flaws. In the case of Steam, both users and game developers are in this situation.
For users, multiple aspects of the Steam client are flawed and need to be updated. For one, the client suffers from bugs in which languages are not identical between the store and the community. The store page could be in English, while the community page in Polish. Steam Chat, which is a newly implemented system that replaced the earlier chat system, is full of bugs and has slow updates. Valve’s VAC (Valve Anti-Cheat) program, while being adept at catching and banning unfair players who use illegal cheat programs, has a problem of recognizing every manual change of the game file as a cheat program. This results in fair programs like game modifications or user-made language updates being categorized as cheats, thus banning innocent people as well.
Another bone to pick with is Valve’s attitude in its distribution. The company prides itself for being a “boss-free environment”, where there is no discernible hierarchy between the employees, and employees can freely choose what project they will participate in. This policy has made Valve's Steam into an environment where creative indie games could be published. However, the environment has changed after “Active Shooter,” a game that emulates school shooting scenarios, was removed from the Steam Store after intense controversy on May 30, 2018. Valve’s reasoning for removing the game was not because the game emulated a recent real-life attack, but the fact that the developer was a “troll,” who has a “history of customer abuse, publishing copyrighted material, and user review manipulation.” A week later Valve announced that they will be “allowing everything” on the Steam Store. Valve’s reasoning is that if the company has to restrict game developers in various parts of controversial topics, such as “politics, sexuality, racism, gender, violence, identity, and so on,” it faces the issue of arbitrarily deciding “what even constitutes a 'game’ or what level of quality is appropriate before something can be release” for its users and developers. Therefore, they have decided with their laissez-faire policy to allow everything (except illegal games or outright trolling) and "give people control of what content" is seen by them. This means that the company is not willing to regulate or enforce any moral codes.
Steam’s problems also apply to indie game developers. In the past, Steam was perceived as a platform friendly to indie game developers. However, this began to change in November, 2018 when Valve announced a tiered revenue-sharing system, in which games that make more than $10 million get 75% of the revenue as opposed to the normal 70%, and games that make more than $50 million take 80% of the revenue. Valve’s intention behind the policy was to bring back large-scale companies that were starting to migrate to their own distribution platforms, but it has proved to have no merit for indie game developers. Following the announcement, indie game developers reported that traffic to their game pages decreased drastically. Jake Birkett from Gray Alien Games theorizes that Steam’s “Discovery Queue,” a system that directs users to games that are similar to ones they have played, has been broken and is now directing users to big titles that earn more money instead of the cheaper indie games. This may be a hint that Valve is losing its interest in indie games and are now pursuing the big money-making titles.
New competitors, however, are rising in the market. Epic Games, the developer of the global storm “Fortnight,” released the “Epic Games Store”, a platform where revenue is distributed in an 88:12 ratio for all games sold in the store. Also, as Epic Games is the creator of the game-making tool Unreal Engine 4 (UE4), games that are sold in the Epic Games Store that use UE4 do not need to pay the 5% royalty fee that they would normally pay to Epic if the game were sold in Steam. Epic is aggressively bringing in indie game developers to their platform, and promising indie games like “Hades” have been exclusively released to the Epic Games Store. Users are also a target of this aggressive marketing, with the Store exclusively distributing popular games like “Subnautica” for free in certain times. Whether or not the Store is able to loosen the grip Steam has on the market, it appears to be a promising alternative for users and developers. The fact that there is a second platform for users means that competition will occur between Steam and the Store, ensuring better services in both platforms and advancing the industry.
The video game distribution market started with Steam, which happily took on the monopoly it has on the market right now. In one way, this means that users have a unified platform that is not fragmented into several small-standing companies. However, it also means that users and developers have nowhere to turn to when they lose favor of the dominant company. The distribution market has been in a somewhat stagnant state from Steam’s monopoly. Now, with a new and aspiring competitor, the market may have a chance to grow from the competition. Steam may finally listen to the questions and requests users and developers have on their services.
