Is Steam Really That Great?

Valve Turns Up the Steam

Steam was born from Valve’s idea to better distribute updates for their games and to introduce a central anti-cheat system. However, the idea of creating a platform for purchasing games also quickly emerged. In 2003, the time had come: Steam was released, and anti-cheat became mandatory for all Valve multiplayer games. Gamers at the time were not thrilled. I personally remember the outrage that swept through the gaming community when Steam became a mandatory requirement for Half-Life 2, released in 2004. Fears of data mining, being strong-armed, and always-on DRM were rampant. The latter was mitigated by an offline mode, but having Steam active on the PC and running in the background was a strict requirement. Not so great, considering the performance of PCs back then. (1)

Physical or Digital?

Let’s jump forward twenty years to the present. The gaming market has completely transformed. While on consoles, Germans still bought 60% of all games physically in 2023, the share on PC in this country has dropped to just under 2%. (2) Many PCs today don’t even have a CD, DVD, or Blu-ray drive anymore. This is true for notebooks, of course, but many gamers also deliberately forgo the drive. Only off-the-shelf computers are often still equipped with one, although these are now increasingly making way for an additional fan.

One of the main reasons for this is probably, at least in my personal opinion, Steam. Just like on consoles, almost all PC games are now released digitally, either in addition to or exclusively. In the process, gamers’ attitudes have changed massively over the past 20 years. Instead of complaining about Steam, people now complain when a game isn’t released on Steam.

The Competition Wants to Catch Up

When publishers noticed Steam’s success, they naturally didn’t want to share their revenue and launched their own platforms: EA Games with the EA App (formerly Origin), Ubisoft with Ubisoft Connect (formerly Uplay), Microsoft with the Xbox Game Store, and of course, Epic Games, which is trying to push its Epic Games Store onto the market with free games and Fortnite.

None of the competitors have had real success so far. Only Epic continues to try. In doing so, they have likely burned through several billion dollars and are, at best, breaking even today. (3) They invest a portion of their Fortnite revenue into giving away games or securing timed exclusivity for new titles on their platform. Metro Exodus and Tony Hawk’s Pro Skater 1+2 come to mind. Of course, this exclusivity is not popular with gamers, including myself. We want our games on Steam. This is partly because we want everything in one place, but also because of Steam itself.

It’s also clear that despite all the competition, Steam’s popularity hasn’t waned. Almost all competitors have now backpedaled after temporarily removing their games from Steam or not releasing them there, and their games are appearing on Steam again in addition to their own platforms. So you’ll find Ubisoft, EA Games, and Microsoft games back on Steam, at least partially. Only Epic seems to be maintaining its focus on its own store, just as it does on mobile platforms. They want to pocket the 30% revenue share themselves, but they overlook the added value that Steam offers to players and, ultimately, to developers. (4)

The Advantages of Steam

Over the years, Steam has built a good reputation. With reviews, store filters, achievements, the Steam Workshop (for mods and user-generated content), and community features, the platform offers a lot of added value for players that is largely missing on other platforms. Additionally, Valve supports an open approach. They not only make Steam available on macOS and Linux but also actively work with the Linux community to enable and improve gaming on Linux. They are so active, in fact, that they have invested millions and, with Proton, have made a large number of games run smoothly. Not always perfectly, but sometimes even better than on Windows. Only multiplayer games with anti-cheat protection often don’t work, as the necessary functions simply don’t exist in Linux for security reasons.

Compared to physical media and the digital stores on consoles, Valve offers another selling point: the Steam Sales. Smaller and larger sales events regularly take place on Steam. The biggest are surely the Summer and Winter Sales. During these, games are sometimes discounted by up to 90%. However, Valve doesn’t go the way of Epic Games and actively finance the discounts; instead, they encourage publishers to offer them. Since they receive a fixed 30% share of the sales price, their revenue per sale decreases, but this is likely offset by the sheer volume of sales. So, with Steam, it’s worth putting a game on your wishlist and waiting for it to go on sale. The studios may have to settle for less revenue per game, but they also have the chance to monetize a game for longer and thus generate income years after its release.

Those who want to play a game immediately pay full price. Those for whom a game is not so important wait. Without sales, the game would likely not have been bought or would have already disappeared from the shelves by then. And the discounts on consoles… compared to Steam, they’re a bit of a joke. At least for the Nintendo Switch, I still buy my games physically - a 20% discount on all toys and games at Müller almost always makes the games cheaper than in the eShop.

Valve’s Plan

But Valve is not a non-profit organization that invests such sums for ideological reasons. Although, there’s probably some ideology involved, but it’s certainly not the main reason. According to Valve’s statements, their dependence on Windows and thus Microsoft is a thorn in their side. With the introduction of the Windows Store and Xbox Game Store on Windows, Valve became concerned that Microsoft might want to follow Apple’s path: a single, central store for their system as the sole point of contact for obtaining and managing software. That includes games. Sure, the reality on Windows looks completely different right now, and few people use the store at all. But at least for a time, such a path from Microsoft was not out of the question.

How do you reduce dependence on Windows? By simultaneously building the capability to play your games on another operating system and establishing your store as the go-to place on that OS. An initial attempt with SteamOS, based on a heavily modified Linux, had little success with gamers. However, it laid the groundwork for the further development of Proton and the new SteamOS, based on Arch Linux. It’s certainly important that Valve has adapted to the open-source mentality and supports and releases Proton as free software. This means that not only SteamOS users but all Linux users benefit from Valve’s efforts, which earns them a good reputation in the open-source community.

And finally, of course, Valve released the Steam Deck. A handheld console for gaming on the go. Powered by their new SteamOS, it shows how far gaming on Linux has come and how simple gaming can be when you’re not relying on Windows. The growing focus on cloud and artificial intelligence in Windows is also making Linux an increasingly interesting system for people beyond the nerd community. So, although slowly, Valve’s plan could be working out. And should Microsoft ever truly lock down Windows, Valve could pull a largely functional alternative out of a hat almost overnight.

A Rosy Future?

So, for now, Valve is the kind of company every gamer wishes for. They restrict players as little as possible, offer many free convenience features, and with Proton, they are developing a way for players to game on other platforms. In return, we throw a lot of money at the company, bringing Valve a revenue of $13 billion in 2022. (5) The ownership and structure of Valve are very simple. There’s the CEO, Gabe Newell, who is one of Valve’s co-founders, and the developers. They form project-based teams and organize themselves as needed. Decisions are made by majority vote. Valve is not a publicly traded company but is (presumably) owned only by the two founders, with Gabe Newell believed to hold the larger share. (6)

This means the company is not accountable to shareholders and doesn’t have to increase its numbers from quarter to quarter. It is this structure that allows Valve to make long-term investments and plans, like with Linux and Proton. This independence allows Valve to experiment and to redefine and find itself. And apparently, it allows for enough autonomy within the company that neither management nor employees feel the need to jump on numerous projects just to boost the numbers, thereby bloating the company.

This is certainly, in large part, a credit to Gabe Newell, who introduced and fostered these structures. Sure, the man is rich enough—according to Wikipedia, his net worth is $5.5 billion—and he apparently resists the urge to always want more. But Gabe Newell is now 62 years old and, at least when I look at pictures of him, not exactly in the best physical condition. He does seem to have lost a significant amount of weight, though. But we don’t know his plans for Valve should he decide to retire or pass away. What comes next? Will his heirs sell the company to investors who will restructure it for maximum profit? Will he hand it over to the employees, hoping they will carry on his philosophy? Or will a new leader emerge in the spirit of Gabe Newell?

To be honest, we don’t know. Currently, Steam and Valve are one of the few good constants in the gaming business. Sure, Steam could use a modernization. Some features, like the chat, are also just not good. Steam had a chance to build an alternative to Discord there. But still: I enjoy buying and managing my games with Steam, and I’m glad there are still companies that focus on their customers, not just short-term profit. Will it stay that way? I hope so, but I fear the end of the Gabe Newell era. Until then, I’ll remain loyal to Steam. The alternative? There isn’t one.

Kernic