Got Steam? Down with the middle men!

Now that Half-Life 2 is around the corner we will finally be able to see Steam in action. A lot of entrepreneurs have tried this model of game distribution in the past (during the tech boom) and failed… one of the primary reasons for failure, I believe, is that these entrepreneurs did not have the customer base.

Since HL2 is such a highly anticipated game, Gabe has all the customer base he needs. So, if the broadband distribution of games is going to work, Steam is its best chance. I personally think it will succeed. Why? Because it is attractive to dev houses as well as (some) consumers.

Attractive to devs since they are “truly” independent now, and don’t have to rely on a publisher or a publisher’s contractual financing to get a game on retail shelves. And the devs don’t have to worry about shelf space or the extra charge that the retailer takes either. So, game prices shouldn’t be as high and the developers are no longer the publisher’s bitch. Furthermore, (some) consumers like it since they dont have to line up, drive to stores to find games on release dates and deal with the fucking geek employees at your local EB store. (Granted, some consumers like the smell of the new box, but I prefer the smell of a woman instead… but I digress…)

Havings said that are publishers/retailers not concerned about this trend? (assuming Steam will be successful, which I think it will be). Eventually other game devs will be leasing Steam technology to sell their wares, and other larger dev houses (id? the Unreal guys?) may even develop their own Steam-clones. …

… so my question is: to you guys who work in the games industry… have you heard any rumblings about the possible shift in power between the devs and the publishers IF broadband game developing becomes a success? Not even some small rumblings?

Come on… at least publishers’ and retailers’ attention should be perked by this a little bit!

Agree? Disagree?

I’m sure Valve could sell a lot of copies online, but I don’t think direct distribution is any match for the mass-market retail channel yet.

Developers making niche products for devoted fan bases will probably benefit from Internet distribution. I’m not really up on Steam, though. How is it any different from buying a game online and downloading it? I can do that now with DSL. What will Steam do for me?

Interesting musings.

I fear that game prices will not decline, no matter how much Steam or steam-y facsimiles lower the cost of production. Games have been stuck at the same basic price point for a long time now, and the rumblings from traditional box publishers is that they might have to even go up some. In that climate, I suspect that game prices on Steam or simliar services would stay within a few bucks of existing prices. Helps them recoup development costs that much faster and get straight to the black ink. I think there will be some discounting though, to nudge reluctant consumers on to the bandwagon; there I think you may well be correct in seeing some short-term price drops.

Some games I also think will do better than others with this technology. Games that rely on their users having hot-rod hardware and fast high bandwidth 'Net connections (Half Life 2 is a good example) will have a more receptive audience than games that appeal to people without the latest and greatest, because 1) they are likely to be less “technical” and more reluctant to trust downloaded content, 2) they will be less likely to have a fat pipe to suck that stuff down with. OTOH, games that are small and have wide appeal are already doing very well with download only marketing–PopCap comes to mind among others.

I know some pretty active niche developers who sell only via the 'Net now, CDs not downloads; they have completely given up on getting content into stores. Their big concern for this tech would be three things: do enough potential customers have the 'Net connection necessary to retrieve 200-600 MB or more at a pop, how can you prevent copying, and will people used to having “something” in hand for their $$$ be happy with a virtual product that lives on their hard drive but has no physical manifestation?

I’m sure Steam has anti-piracy stuff built in, but can you for instance buy a game on Steam and use it on your lap top as well as your desktop? Can you archive a CD or CDs? What if your drive dies–do you just login and re-download, as you’re a registered owner? Technical issues like this and bandwidth are solvable. The importance of the psychological barrier–“I paid $50 and I have…what?”–is harder to predict.

And of course there is the question of manuals and other hard-copy game aids. Not a real issue for most shooters–PDFs or other electronic formats will generally do–but could you see Neverwinter Nights or Civilization III with only a virtual manual? So maybe Steam technology is not suitable for all games. Or maybe you could mail-order a print-from-digital bound manual for an additional fee.

I’m rambling I know. My personal feeling is that it doesn’t make much difference to me. For games I really want, downloading like that would probably be a convenience.

One final thought. Wal*Mart. Will the “middle America” audience that game publishers seem desperate to hit buy into Steam, or will they insist on hefting the box at their local, um, box store?

Is Valve going to release it on Steam before it hits stores? Because they should. I think if they did, a couple of weeks in advance of the retail, that’d be interesting. Given the choice, I agree with Mark, people will want retail.

But I want retail (or at least online retail).
Does Steam give me a CD? A jewel case? (I know, that’s becoming rare anyway… thanks Infogratari) A box to display proudly on the bookshelf?

As it turns out, devs can’t take all the time they want, because the possibility of running out of funding before the game ships is still there. Unless you’re 3DRealms and flush with money, you have to rely on someone else to fund you, and those funds don’t come in an endless, happy stream of golden coins. Most self-funded ventures tend to be either uber projects by Sony, Lucas, or Microsoft, or almost invisible labor-of-love projects. And big companies still have to turn around a product in a time frame pleasing to their investors. With a very large corporation, the investor usually comes first. Because he or she is already paying for the product, while the customer is a statistic.

Second, Steam is a middle-man, for a non-Valve game. Having no middle-man means driving over to the dev house and having one of the team members burn you a copy. Steam is just a digital distributor instead of a physical one. You’ve cut out having to pay the retailer for shelf space and floor positioning, but there’s still someone in between the dev and customer who’s going to get paid.

Right now, you can get games to customers all you want; you just put it on a website. The hard part is actually customers finding out that your game exists in that case - which Steam will apparently solve.

I’ve got to wonder what the end result will be, though.

Right now, a cartel of just a few companies control the retail distribution channels and can demand extortionist rates on both financing of new projects and shipping those projects. I think this is the biggest problem with the game market; why on earth do you have to get financing of your project from your distributor? It’d be nice to eliminate that conflict of interest, at least; Steam does that, and over the long run should theoretically take a huge chunk of the market.

However, my Econ 101 says that replacing a cartel of distributers with a single distributor (Valve) isn’t going to reduce the costs to get your game from gold master to the consumer.

Will the gains from separating financing from distribution outweigh the costs of going to a single distributor? Some competitors to Steam will spring up if its successful, but how much of a winner-take-all market is online game distribution?

I saw Gabe give the Steam pitch at GDC a couple of years ago. It sounded pretty incredible: just-in-time data delivery, background updates, lower distribution costs, variable support packages for developers. Of course, it was a pitch; they don’t tell you all the things that can go wrong in a pitch.

I had a mixed reaction to it. On the one hand, there was an almost awestruck “He’s trying to take over the world…”, and on the other was the nervous “Do I really want this guy taking over the world?”

After I had some time to reflect on it, I became much more skeptical. As a number of people have already pointed out, there are advantages to retail channels (the mass-market, the physical product, the spontaneous purchase, the relatively low penetration of broadband, etc.). I’m pretty sure that Steam will never replace the now-standard distribution channels for the same reason that hasn’t put Barnes and Noble out of business.

At its best, Steam offers an additional distribution channel, and I could see a variety of publishers, in addition to developers, trying it out to see if they could make additional profit by distributing games at a similar (i.e. slightly discounted) price to retail but at a significantly lower cost. The bottom line for the consumer, however, is that game prices are not going down in general; the market has established that it will bear the current price structure and some increases on top of that. You won’t get more of a discount because of Steam than you would by waiting a few months or shopping around on the internet for the best deals.

At its worst, Steam will crash and burn. The anti-piracy stuff is all based on the distributed file system, which means either A) any time your broadband connection acts up, you won’t be able to use the games you’ve bought or B) hackers will simply get into the “failsafe” part of the code and distribute versions that you can use without having a subscription. On top of that, development of Steam started when bandwidth was cheap; it’s still relatively cheap now, but not like it was during the tech boom, and once you start turning those broadband connections into regularly full pipelines (instead of the wide swings in use between almost none and a lot), the people on one end or the other are going to squeal, then raise prices. Already, some broadband providers have gone to throughput caps because they’re getting burned by a few subscribers whose use the connections way more than the average user.

Regardless, the big issue that I see that no one has brought up in the Steam discussions is customer service. Essentially, Valve is creating an MMO environment: a service, not a product. Their whole business model revolves around a connection that is available 24/7, 365. Any time you start getting connection problems (and you inevitably will), people are going to start getting on the phones, and while bandwidth is relatively cheap, people time is expensive. Regardless of where the hitch is (the local provider, some network node, or the actual Valve servers), people are going to go to the application that’s not working, which means calls to customer service. Now, considering that Steam is predicting millions of accounts, and their cut is the “middleman” portion, not the whole enchilada, the costs of customer service alone may put their business model on its ear. And as so many MMO launches have proven, once you lose a customer, you’re going to have a damn hard time getting them back.

So, on the whole, I wish Valve the best. If they can provide a service that people can use and that provides benefits not only to the consumers but also to the developers and the publishers, more power to them. However, I doubt that Steam will be revolutionary in any real way. It’s a great concept, but there are too many problems in the realities of the market.

Just my two cents.


This idea sucks ass. I don’t like the current system, where we have a physical CD but we only have a license for the software.

This is even worse. Let me give you an example of why this sucks:

A couple of years ago, I was playing Might and Magic 6, and I liked the in game MTG style card game Arcomage so much that I “bought it.”

Well, I have the installer package, but if I try to install it it tells me that I can’t. Why? I don’t know…they had a complicated distribution thing from VBox or somebody. So I have a game that I paid 20 dollars for and the only way that I can install it is if I call up some crappy company…no, not 3DO (aren’t they screwed now)…that VBox company.

Who even knows if they’re still around.

So Steam = count me the fuck out.

Ok, let’s say I do grab HL2 via Steam, and I play it an enjoy it. And then I want to format, but I have not completed the game. Can I reinstall the game from an installer that can sit on my hard drive? Can I burn that installer to a CD? Is that legal?

Don’t forget that Galactic Civilizations was offered online (to be downloaded) far before it was available in stores. It sold online really well too, mostly due to the early earliy release, but also because buyer received a bunch of freebies (3 free games, 1 free app I believe).

welp, it may not work out as a distribution system but for updating and cheat reduction it sounds like it’ll be a good thing…I hope.

I was digging through an old shelf the other day when I found my Realms of the Haunting discs. I really liked that game, and decided to give it a try. So I did. I can do this, because I own the game on a physical CD.

My big worry about downloaded content - especially if being shovelled live, like Steam seems to be pushing - is that the second a title or company becomes unprofitable, click, I have no access to what I paid for any more. It’s bad enough with all the applications that land on my desk each day, more and more of which are going for idiotic Product Activation systems on the basis that the company will be around until the end of time. If it’s for multiplayer stuff, like Everquest, it doesn’t matter that much - but while I might like to be able to play the game immediately while the CDs are posted to me, I don’t want to give up my CD rack.

For full games, it seems to me that Steam can only challenge retail if the price of the game is dramatically cheaper via Steam. Who really wants to pay $40 for a download when you can drive to Wal-Mart and get the box and CD for the same price? But if you price your Steam-delivered game at $24.95, say, then Wal-Mart expects you to give them that price too, and if you don’t, Wal-Mart probably won’t carry your game.

OTOH, maybe Steam will allow Valve and others to sell new maps and add-ons for a few bucks and generate some revenue that way. Of course, we consumers lose then because we’re used to getting a lot of that for free. I could see Valve selling monthly Counter-Strike 2 updates for $1.99 or so.

Electronic download will greatly decrease game prices in exactly the same way as CD did - at least in the long term. A-freaking-hem.

Because having 100,000 people downloading a 400mb game won’t cost you more in bandwidth than you’ll get in profit for distributing the game. Ahem.

Right now, a cartel of just a few companies control the retail distribution channels and can demand extortionist rates on both financing of new projects and shipping those projects. I think this is the biggest problem with the game market; why on earth do you have to get financing of your project from your distributor? It’d be nice to eliminate that conflict of interest, at least; Steam does that, and over the long run should theoretically take a huge chunk of the market.

No one is forcing development studios to accept funding from the publishers/distributors. Nothing is stopping them from self-financing via loans or other methods. If they self-finance and make a good game, they probably won’t have any trouble finding someone to publish it. Throwing Steam into the mix isn’t going to change the costs of development or the potential sources of financing.

I saw somewhere the other day that Microsoft Research pays about $1/terabyte; let’s use that. The bandwidth for each game is then 40 cents.

I think mastering, printing, shoving it in the box, and shipping is way more than 40 cents. Not bad.

I’m don’t think there’s a very flexible market for game production; there’s only a few big players that’ll fund anything (EA and so on.) Can you get a loan from the bank to open a game development studio?

I saw somewhere the other day that Microsoft Research pays about $1/terabyte; let’s use that. The bandwidth for each game is then 40 cents.

I think mastering, printing, shoving it in the box, and shipping is way more than 40 cents. Not bad.[/quote]

The problem with that, Jason, is that Microsoft doesn’t get the rates for bandwidth that other corporations, private or public, get. Comparing a startup to Microsoft is ridiculous.

Well excuse me, I don’t have any numbers handy. I’d imagine companies are going to be buying time from established bandwidth providers like Akamia or whoever it is Microsoft uses, anyway.

Sorry, I didn’t mean for that to come off rudely.

Basically, the reason Microsoft gets their bandwidth so cheaply is because of how much they use. Unless something’s changed, bandwidth providors generally cost anywhere from $2-10/GB for dedicated servers. Chet can chime in if I’m incorrent, but those are what I remember from when I used to know.

Big bandwidth users get discounts, of course. Buying in bulk is still better than buying small.