PC gaming has existed since the dawn of desktop computers, but rather than fade into oblivion as mobile devices and game systems took over, the industry has remained a juggernaut.
By the end of 2016, PC gaming sales will reach $29 billion worldwide, compared to $28 billion for console gaming platforms like Xbox and Play Station, according to research from PricewaterhouseCoopers published on CNET. That projection is thanks, in part, to the growing legions of PC gamers in developing countries like India and China. PCs are also the chosen medium for hosting innovative virtual reality technologies like Oculus Rift.
Few companies have been able to benefit from this trend as well as Valve Corporation--and its digital subscription platform, Steam. And while consumer choices would seem to favor the company, it helps that Steam--which got its start in 2003--had a first-mover advantage. Tack on the company's willingness to listen to its customers and adapt along the way, and Valve would seem to be a business case study with which any entrepreneur should become familiar.
The Bellevue, Washington-based game development company first launched Steam as a way for users to more easily manage and update their Valve games. Before Steam, Valve was best known for making successful games like Half-Life and Counter-Strike.
The platform now has more than 100 million users and supports nearly 5,000 games from various developers. And it's estimated that 75 percent of all online PC games are purchased through Steam. In other words, it's kind of like the video-game equivalent of iTunes.
Kyle Orland, senior gaming editor at Ars Technica, has been covering Valve and Steam for years. "I think what they did, really, is make it a much more streamlined experience," Orland explains. "Now, you barely go to a store and pick up a game."
In 2011, Forbes estimated that Valve's value was somewhere between $2 billion to $4 billion, with Steam generating roughly $400 million every year. The company didn't respond to multiple requests to participate in this story. However, it's only logical to venture that those numbers have surely grown since 2011, especially considering Steam's growing legion of users. Recently, Steam hit a record-breaking 10 million concurrent users.
"I like our customers. They like me, they like us," Valve co-founder Gabe Newell told The Washington Post in an interview last year. "That's where the validation of our business principles and the choices that we make happens."
Steam, in Action
Steam users have to pay for most games downloaded from the service, but unlike other game distribution platforms, it's completely free to sign up. Developers who distribute their games through the platform share a portion of their proceeds with Valve. On average, Steam developers earn an estimated 70 percent of the profits per game purchase. That's generally a better deal than selling through traditional retail outlets, Orland says.
Tripwire Interactive, the developer behind PC games such as Killing Floor and Red Orchestra, was one of the first to sign up for Steam 10 years ago. Tripwire vice president Alan Wilson says the Steam release of Red Orchestra paid for their entire development budget in a single day.
Today, with around 1,500 different developers on Steam, the environment is much different, Wilson adds. "But without Valve having done what they've done, 90 percent of those indie developers would have never seen the light of day."
One of those is Subset Games, an independent developer whose 2012 game FTL: Faster Than Light was funded entirely by a Kickstarter campaign and attracted the attention of thousands of gamers. Logistically, Subset wasn't prepared to host so many players.
"We approached the guys at Valve about possibly getting Faster Than Light on Steam for launch," explains Subset co-founder Jusin Ma. Steam agreed, launching the game and helping set up a safe beta version.
"I'm not sure how we could have done it otherwise," Ma says.
Staying on Top
To cement its prominence in the gaming world, in 2007, Valve developed the Steam Community, a social network within the platform where users can make friend lists, join gaming groups, and connect with in-game voice chat and instant messenger.
"The company is made up of gamers itself," Orland says. "They're not driven by some sort of business analysis. They're making the kind of system they want to use."
For instance, when gamers began complaining about having to maintain an online connection to play games through Steam, the company adapted and introduced an offline mode for users. Steam also recently announced that they will give full refunds to users who are unhappy with any game purchase, as long as they've played it for less than two hours.
Some developers are unhappy with the new policy because they are seeing serious hikes in refunds on their games. But, Orland says, the policy is meant to help gamers.
"Consumers were tired of taking a chance on a game and coming away with a bad experience," he explains. "With refunds in place, you're more likely as a consumer to give something a try."
Ultimately, gamers and developers stick with Steam because it's essentially the only game in town, says Orland. "If you want to play PC games, you have to tolerate Steam," he says, comparing the platform to the Roman Empire. Maybe it's a dictatorship, he says, "but it's a benevolent one."
Asking a PC gamer if they are happy with Steam is like asking a fish if they like water, he says. "Steam is the distribution method out there for PC games, and they got to that size by making gamers happy and by doing it so well there was no reason for anyone to jump to any competitors."