Steam, the Disruptor of the Traditional Gaming Industry

Opened a new chapter for the PC gaming industry

Steam

Image:  Steam, All rights reserved

 

The internet era has opened a new chapter for the world, causing dramatic changes in many industries. Steam is the first to get internet tickets in the game industry and brought great changes to the industry. Steam is a video game platform from Valve Corporation, which is the largest digital distribution platform for PC gaming, Occupies a 75% market share. There is no doubt that steam is the leader in this $137.9 billion industry, and it is also a revolutionary in the entire gaming industry.

 

This article will be divided into five chapters, each about the introduction of Steam; the history of steam; the business model of steam; the internet ecology of steam; the changes brought by steam.

Introduction

Steam is the largest video game digital distribution platform, provides multiple functions around games(Toe, 2018). Although the main purpose of the entire platform is to sell games through the Internet, its functions are not limited to this. According to Griliopoulos(2013),he points out that “Steam is turning the PC into Valve’s own walled garden.“ The company almost monopolizes the discoverability and community aspects of games, such as social networks, gifts, modifications, multiplayer games, cloud storage and promotions. The completeness of its functions makes it more like a hybrid of Facebook and online shopping mall for game players, than a simple video game digital distribution platform.

 

Source: GamingTaylor, YouTube

 

The history of Steam

 

In 2002, Valve had problems updating its games, so it wanted to create a platform that could automatically update its games (Kohler, 2013). Subsequently, Valve issued a large number of questionnaires to its users to study the feasibility of this idea. Through the analysis of user questionnaires, Valve is keenly aware of the development trend of the network, and realizes that with the rapid construction of network infrastructure, there will be more and more network users. Therefore, Valve expanded its original idea and realized that establishing an online game sales platform would be more efficient and more profitable than offline retail (Kohler, 2013).

“Valve Software” by Long Zheng is licensed under CC BY-SA 2.0

 

After extensive testing in 2002, Valve launched the official version in 2003 after confirming the stability of Steam. At first, because of concerns about server overload, Valve only uploaded one game on the platform, Half-Life 2 (Kohler, 2013). After the server was expanded, Steam put on more games developed by Valve, and finally put on the games of third-party game companies in 2005(“Strategy First “, 2005). Because the profit margins you can get from selling on steam are much higher than those from traditional offline retail, and the funds arrive faster, game developers are very welcome to this new way. So since 2005, steam has begun to enter the explosive development. According to PCGAMER, by 2019, the number of games released on steam had increased from the original game to 30000+. As of 2018, steam has 90 million online active users(PCGAMES, 2018). Steam has also added many new features, such as a creative workshop that allows players to exchange mods, an online game community where players can freely discuss games, and online games that can be played through cloud servers. Up to now, steam has become an indispensable platform and player communities that everyone knows about on the PC.

 

Who owns Steam and its business model

 

Steam is a platform created by the gaming company Valve, which was created by Gabe Newell and Mike Harrington. Among the two people, Gabe Newell is the company’s largest shareholder, controlling 50% of the company’s shares.

Picture of Gabe Newell
“gabe newell” by Stratageme.com is licensed under CC BY-NC-SA 2.0

Steam’s business model is very unique. For game makers, steam helps them simplify the originally very complicated release process and avoid a lot of unnecessary time wasting. And because Steam’s sales commission is only 30%(Boris, 2017), which is far less than that of many middlemen, the profits of game developers have also increased a lot. Due to the reduction of time and money costs, Steam has lowered the threshold for launching games a lot. This move not only makes big-name companies more willing to publish games on Steam, but also makes many independent games without much funding, available to have the opportunity for sale on steam(Boris, 2017). In terms of the result, the number of games on steam has reached a very large number, covering almost all types of games. From popular games with tens of millions of active users to niche games known by only a few hundred people, almost all the games players want to find can be found on Steam.

 

For consumers, the huge game lineup brought about by lower publishing costs is extremely attractive. Therefore, a large number of consumers have come to the steam platform to become users, and this amount of users has attracted game manufacturers to settle in. The increase in game manufacturers and game users has thus entered a virtuous circle, and each other has become a factor in each other’s growth.

 

According to Business Model Navigator(2020), the model like Steam is described as a long-tail model combined open-business model in business, which describes a model actively cooperate with suppliers and complementors to expand their business. Therefore profits are obtained through a large number of small transactions. The huge amount of games from its suppliers and complementors on the platform has brought extremely huge commission income to steam.

 

Steam’s internet ecology

 

Steam locates itself as the revolutionizer in the gaming industry. Its functions includes social networks, gifts, online shop, modifications, multiplayer games, cloud storage and promotions, which almost monopolizes the discoverability and community aspects of PC games. Therefore Its main competitors include but are not limited to traditional offline game retailers, such as GameStop or Target, and game discussion communities, such as the game section of reddit (Griliopoulos, 2013).

 

Some big game companies are not reconciled to their products being 30% of the sales of Steam as a commission, so they created their own game sales platforms, such as Blizzard platform and Epic mall. These platforms have almost the same functions as steam and are the main direct competitors of steam. Among these platforms, epic has the best performance. They made many games for free through their own subsidies and successfully attracted a large number of users(Minor, 2020).

 

The main suppliers of Steam are many third-party game companies, such as Ubisoft and Rockstar. Steam’s parent company is also its main supplier, contributing several of the most popular games in Steam. The users of the Steam platform are not only those who have purchased games on the platform, but also include third-party game companies, because 30% of their sales contribute to Steam’s commission(Boris, 2017). The regulators of steam are governments of various countries, and steam has designed specific partitions for users in each region to cope with the different censorship requirements of various countries. Steam’s partners include payment companies such as Google Wallet, Apple pay, Alipay, Mastercard, Visa, and Paypal, which allows users of steam pay conveniently and quickly.

 

 

Steam’s transformative and disruptive innovation

Before using Steam, game manufacturers must first find a publisher to work with, and/or provide their own funds, and find a retail partner(Boris, 2017). In addition, this kind of distribution also uses optical discs and other carriers, and the cost must also be borne by the game manufacturer. Here, Steam as a disruptive innovation, brings a new business model based on internet. Game manufacturers no longer need to experience layers of exploitation by middlemen, and only need to give a small part of their sales to steam for the achievement of games for sale. This not only saves money but also time. This is a fatal blow to traditional retailers and publishers, but it is a good thing for the game industry.

 

The reduction of distribution costs has brought new vitality to the game industry. There are a large number of independent games in the game market today, which was impossible before the emergence of steam. Unlike 3a games that are funded by large companies, independent games are often completed by individuals or small groups and lack funds (“The Pros and Cons of Indie Game Design & Development”, 2020). The brand-new business model brought by steam makes it possible to distribute independent games on a large scale. This makes the game market more diversified, and art works of various games gradually appear in people’s field of vision without the limitation of distribution cost.

 

To the Moon is an independent game made by college students. Although its picture is very simple, but because of its excellent plot, so it is very famous on steam. So far, To the Moon has received 36,811 comments and a 96% favorable rating. If there is no steam, it is impossible for this game to achieve such a high achievement. Because it will be impossible to sell due to lack of developer funds.

Picture of To the Moon display interface screenshot

Image: Steam, All rights reserved

Steam has completely changed the way players buy games. Now PC gamers can buy their favorite games without going to offline retailers. Steam’s huge game library allows players to find almost any game they want to play.

 

In addition, steam’s unique community culture makes players have a home. Steam has an online community function. But unlike other social media platforms, the members of the steam community are highly consistent, and they are all game lovers. This kind of community culture makes steam players have a unique sense of belonging, and this sense of belonging is one of the reasons why they choose steam instead of other competitors’ platforms.

Picture of Steam community screenshot

Image: Steam, All rights reserved

 

The Steam community also allows game developers to have direct conversations with players, which has also brought revolutionary changes. Prior to this, game developers could only communicate with their players limitedly through game magazines or emails. And now they can directly understand the feelings of players directly through the Steam community.

 

Steam riggered new regulatory processes. The comments of the Steam community are not supervised too much, but its global scale and its overly free atmosphere have begun to cause some countries to worry. Many countries are beginning to fear Steam becoming a political propaganda tool, which might has the emergence of netwar on this new platform and its impact on the values of their residents (Brooking & Singer, 2016). Due to China’s Internet firewall policy(Roberts,2018), any platform that may pose a threat to government rule will be strictly reviewed. Steam, as a platform with an online communication community, has naturally attracted the attention of policy makers. But unlike Twitter and Facebook, which are completely banned social media platforms, Steam is partially banned. People who log in to Steam in China cannot access Steam’s online community, but can only use the online store function.

 

Conclusion

 

By reducing distribution costs, steam has transformed the gaming industry into an online mode and made offline retailers of PC games history. Players can easily and quickly buy the games they want to buy on the Internet. The online community also provides players with a good interaction space, but the regulatory risks need to be warned.

 

References

Boris. (2017). Steam: Digital Distribution Pioneer – Digital Innovation and Transformation. Retrieved 22 November 2020, from https://digital.hbs.edu/platform-digit/submission/steam-digital-distribution-pioneer/

Griliopoulos, D. (2013). Is Steam evil?(computer game market)(Games / Steam Feature). Australian Personal Computer, 33(5).

Kohler, C. (2013). Full Steam Ahead: Inside Valve’s Grand Plan to Replace Game Consoles With PCs. Retrieved 22 November 2020, from https://www.wired.com/2013/11/valve-steam-machines/

Minor, J. (2020). Steam vs. Epic Games Store: Which PC Game Store Deserves Your Dollars?. Retrieved 22 November 2020, from https://www.pcmag.com/comparisons/steam-vs-epic-games-store-which-pc-game-store-deserves-your-dollars

Roberts, M. (2018). Excerpts 1.1-1.3 Introduction: Porous Censorship and 2.5-2.6 What is Censorship and The Mechanism of Censorship. Censored: Distraction and Diversion Inside China’s Great Firewall (pp. 1-10 , 37–44). Princeton University Press.

Strategy First – Press – Strategy First to Deliver Multiple Titles On-Line via Steam. (2020). Retrieved 22 November 2020, from https://web.archive.org/web/20060328053420/http://www.strategyfirst.com/press/DisplayArticle.asp?sLanguageCode=EN&iArticleID=3250

The Pros and Cons of Indie Game Design & Development. (2020). Retrieved 22 November 2020, from https://www.gamedesigning.org/gaming/indie-game-development/

Toy, E. (2018). Large-Scale Cross-Country Analysis of Steam Popularity. 2018 International Conference on Computational Science and Computational Intelligence (CSCI), 1054–1058. https://doi.org/10.1109/CSCI46756.2018.00205

Valve Corporation Business Model | Business Model Navigator. (2020). Retrieved 22 November 2020, from https://businessmodelnavigator.com/case-firm?id=104

WAR GOES VIRAL. (2016). The Atlantic Monthly., 318(4

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