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Retail

Steam's Greatest Challenge Yet

Steam's Greatest Challenge Yet

Fri 10 Aug 2012 6:40am GMT / 2:40am EDT / 11:40pm PDT
RetailPublishing

Valve may dominate digital distribution on Windows - but what happens when Microsoft itself joins the fray?

The announcement that Valve is set to expand its Steam digital distribution service beyond the realms of game software confirms a number of long-standing rumours and assumptions about the service. It suggests that Valve, a company noted for its broad ambitions and experimental approach not only to gaming but also in education, augmented reality and a host of other areas, has recognised the fact that in creating the Steam service to distribute first its own games, and later the games of other publishers and developers, it has pushed itself to the forefront of the digital distribution revolution. Now it wants to seize that opportunity.

The problem is, it's a rapidly receding opportunity. Valve presently has around 40 million active users on Steam, which is a huge community to which to sell software. However, with the release of Windows 8, Microsoft will follow in the footsteps of Apple by introducing its own software marketplace to the system - and there are indications that software on the new Windows interface (formerly known as Metro) may only be available through Microsoft's store.

"Just as Netscape was mortally wounded when Microsoft chose to bundle a browser with the OS, so Newell could see Steam facing a tough fight against a bundled software store"

That shouldn't impact on the games market - games will still be released for the traditional Windows interface, since they don't take advantage of the GUI at all, let alone requiring Metro's new tile-based interface. However, it indicates a lock-down of the Windows system, bringing it a little closer to the sort of semi-closed environment more commonly seen on mobile platforms like iOS and Windows Phone, or indeed on Apple's Mac OS X.

Despite the dire warnings about such a move which have been issued by Valve's Gabe Newell - and backed up by the likes of Blizzard - the reality is that this isn't necessarily a bad move from a consumer perspective. Just as Apple's role as a usually-benign gatekeeper (there have been slip-ups into less benevolent dictatorship, but they are the exception rather than the rule) has kept the iOS App Store mostly free of malware, spyware or viruses - my mind still boggles at the fact that Android users are encouraged to use anti-virus software on their mobile phones - a similar regime could help to keep Windows PCs safer and more secure.

Equally, while plenty of people will decry Microsoft's software store as "anti-competitive", the truth is a little more nuanced. The iOS App Store is, in theory, anti-competitive. It's the only place you can get software for your iPhone or iPad - you can't shop around for a better price (that's notably not the case with the Mac OSX App Store, which is probably more like the model Microsoft will eventually adopt). However, prices on the iOS store have dropped rapidly over the years, to the point where a price point of either free, or £0.69, is now absolutely standard. Why? Because the store itself may have no competition, but competition within the store is fierce - never before have consumers had such a selection of software available to them, which makes them incredibly picky and incredibly price-conscious.

In fact, going back to Steam, you could make the argument that it has seen pretty much the same evolution. Unlike iOS, it hasn't moved towards a free to play model for games (it's not really in Valve's interest for that to happen, although it may be at some point), but prices have tended downwards. It's hard to sell a two year old PC game for £20 when it's sitting in an immense storefront alongside countless other titles; publishers have been forced to take a strong dose of realism not by pressure from Valve, but simply by the commercial reality of being in a genuinely competitive marketplace.

Might not the Windows 8 Store do the same for other types of software? Perhaps, and if so, that could end up being a very good thing for consumers. Cheaper software, easily accessible, and sold with a guarantee that it's not going to mess up your computer, produce pornographic pop-ups or send your granny's online banking details to deepest darkest Russia.

"what Steam actually does well isn't necessarily selling software. It's an IM network, a social network, and most interestingly of all, it's a very public way to share and show off your game collection"

It's easy to see, though, why Valve would press their lips together in anger at such an idea. It has spent many years establishing itself as the premier digital distributor of software for the PC. Steam has evolved greatly and built itself a rock-solid reputation among a large consumer base. Yet despite its Mac and Linux versions, Steam remains a product that runs on top of the Windows platform - and just as Netscape was mortally wounded when Microsoft chose to bundle a browser with the OS, so Newell could see Steam facing a tough fight against a bundled software store. Bear in mind here that Newell was still at Microsoft when the fateful decision to bundle Internet Explorer with Windows 95 was taken. He knows exactly what the stakes are.

That's why Valve is getting its non-gaming software offering off the ground now. That's also why Newell is openly and publicly willing Windows 8 to fail - which admittedly at this juncture looks a bit like doing a rain-dance when the storm clouds are already gathering overhead, given that Microsoft's new OS already has the distinctive scent of Vista-style unpopularity around it.

The problem, though, is that what Steam actually does well isn't necessarily selling software. That may seem like an odd claim, but hear me out. Steam's storefront isn't very good. Its interface overall, as a piece of software, is actually fairly awful - which is a shame, given how excellent the technology it overlies actually is. On the other hand, Steam - perhaps simply because it's running, by default, on every gamer's PC - has become an extremely popular social tool. It's an IM network, a social network, and most interestingly of all, it's a very public way to share and show off your game collection.

Steam has, in effect, become the digital era equivalent of your bookshelves - specifically, the bookshelf in your front room or next to your desk, where you stash all of the books which you want people to see when they're visiting you. It can be quite subconscious, but we all do it to some extent - carefully arranging our books (or our games, or our DVDs) in such a way that the visitor will get the impression we want to give, or start the conversation we'd like to have. Some people take it too far, buying Folio Society editions of literary classics which they never intend to read just in order to impress their guests; for most people, it's just a casual way to show what kind of person you are and what you're interested in, and a surprisingly valuable (both emotionally and commercially) strand of human interaction.

Through its social networking functions, Steam has become a visible bookshelf for its users - and I don't think that's something that will be replicated with creative or productivity software. Equally, it's not something the Windows 8 Store will replicate for games, which gives Steam a huge advantage over this potential rival. When we look at the strategic decisions Valve is taking around Steam - and their obvious worry over the direction in which Microsoft is bringing the Windows platform - we have to think more carefully about where Steam's real value lies. The store components of Steam may, ironically, be its Achilles Heel - but with the right strategy behind it, the social aspect of the service could propel Valve through this challenge and on to even greater things.

20 Comments

James Prendergast Research Chemist

735 432 0.6
Origin and Totalgaming from Stardock did well with selling games and functionality software... Seems natural to move into this for Valve. I guess the only thing missing from Steam now is the ability to rent software on a timed basis like that being touted with Onlive and whatever it's called... *shudders*

Posted:2 years ago

#1

Morville O'Driscoll Blogger & Critic

1,593 1,448 0.9
Steam has, in effect, become the digital era equivalent of your bookshelves - specifically, the bookshelf in your front room or next to your desk, where you stash all of the books which you want people to see when they're visiting you
Interesting analogy. Though if I were to go with a book analogy myself, I would say it's more like the bookshelf with your favourite books. Everything that you want within easy reach. Everything from the classics you used to play (I've got a couple of emulators linked in my Steam Library, through the Add Non-Steam Game feature) to social games that you and your friends are playing now.

Interesting read. Will comment more when I've had some coffee. :)

Posted:2 years ago

#2

Kingman Cheng Illustrator and Animator

954 183 0.2
"The problem, though, is that what Steam actually does well isn't necessarily selling software. That may seem like an odd claim, but hear me out. Steam's storefront isn't very good. Its interface overall, as a piece of software, is actually fairly awful - which is a shame, given how excellent the technology it overlies actually is. On the other hand, Steam - perhaps simply because it's running, by default, on every gamer's PC - has become an extremely popular social tool. It's an IM network, a social network, and most interestingly of all, it's a very public way to share and show off your game collection."
I actually somewhat agree with this. I would say it's selling software sure, but the platform seems to be more than just that. The social connectivity is definitely one of the core features.

Posted:2 years ago

#3

Morville O'Driscoll Blogger & Critic

1,593 1,448 0.9
Yeah, the community aspect of Steam really shouldn't be undersold. On a small scale, most of the people I know have disregarded MSN/Windows Live Messenger, and now just message each-other through Steam. On a larger scale, you have a site like http://www.steamgifts.com which revolves around people just buying games to give to other people (both friends and strangers). The fact is, I could buy a four-pack of Borderlands 2, keep one copy for myself and put the other 3 copies on SG. When the draw is done, I can friend the 3 winners, and have a nice co-op game with 3 random people (who, if they're on SG, are probably fairly thoughtful, nice people). Steam has a lot of possibilities when it comes to social connectivity, and few of them are realised by competing companies.

Edited 2 times. Last edit by Morville O'Driscoll on 10th August 2012 11:05am

Posted:2 years ago

#4

Kingman Cheng Illustrator and Animator

954 183 0.2
Yeah, goodness haha I don't really use Windows Live these days, I use that hotmail messenger thing (which is basically the same with reduce functionality) because I have a good friend over in China and it's a means to keep in touch with her. Also when you're playing on games you can see when your friends are on, when they're playing, what they're playing, and be able to jump in whenever.

No need to call dozens of your friends and say 'hey you available for a game?'. :)

Posted:2 years ago

#5

Adrian Herber

69 23 0.3
@Rob: Interesting read. I was caught off guard by the strong criticism of Steam's shop UI though, maybe I'm just used to it but it never bothers me. Any words of your own or someone else's to fill me in on what it's not doing well?

Posted:2 years ago

#6
Comparisons to netscape are a little bit of a stretch, netscape wasnt free, IE was both free and bundled and the internet was by current standards still in its infancy, with hardware and seemingly software changing all the time, no one had the time to build loyality and a browser just wasnt that important that people would want to pay for one if one better was free and didnt require fidding about with to get working, by the time netscape was free it was to late, and it was only half the problem.

Steam is free and is used by far more peeps then netscape, and whilst the company itself died the codebase didnt, transforming into more than one browser but currently its most notable offspring is Mozilla Firefox, which is one of the top 3 browsers, and their app store being metro based and selling mostly (or all? forgot)metro apps which as the average user without a touchscreen will probably curse the things on sight, and they may be some minor apps that benefit from it I doubt it'll be a true rival for steam, indeed windows is not a closed system and cannot be made a closed system, ms are unable to force the issue as customers can and are more than happy to just skip a new OS release entirely if they dont like it, which means poor profit for windows cusumer division and a harder time flogging their enterprise offerings as low consumer adoption means potentially high training costs for adoption of the latest edition, not to mention enterprise rarely feel a need to update if there still running what everyone else is.

Windows live messenger as its current iteration is called, is for little kids and the youngest teenagers at best as a general rule, steam is where most of my gaming friends can be found, and steam is no ordinary social network, its where gamers can both communicate and play together which keeps the community aspects more alive and more pertinent, I don't however think that steam can afford to ditch the games or store as the article seems to suggests at the end the community is fueled by the gaming side without them, it would dry up so to speak, but they wont need to steam cannot be "abandoned" once you own games on steam your obligation to continue using it to access them, if you "leave" it you leave access to your steam games, which keeps people coming back to steam and them draping those o so tempting sales in front of you, which by the time the holidays are nocking become to tempting to pass up for any gamer with some way of paying for it, which will keep you back in steam, its the perfect system windows will get some indie and app sales from its store and its a good idea and will be windows rival for the apple app store, neither app store is any match for steam from a gamers perspective (that includes mac with steam mac edi), at least for any serious gamer who plays anything more than the most casual game types, and even some casual gamers are pretty hardcore about it and the best selection of them remains on steam as well

Steam already has an audience of 40 million, ms will have built there's from scratch and will have a long way to go to attract numbers people to buy anything from it, and bundles software has lost its appeal specially since companies began bundling ever greater piles of crapware into new computers, now such bundled software is at a disadvantage its mistrusted by users, who often have their own preferences, as computing has evolved since netscape and so have the users, its in steam users best interest for steam to survive if we like playing the games we payed for which makes the average steam user more interested in using steam and encouraging others to to ensure its success, its built its own momentum and even in the best case for ms scenario I dont see how the windows app store could be any kind of threat to steam any time soon,

In the interests of fare play I should mention I own 531 titles on steam.... its the sales their evil:D, I spend on average 100-150 pounds a year on them round Christmas times plus the odd one off purchase throughout the year of major titles, (and yes I hardly have time to have played any of them, alas but I cant seem to help buying them), so like all steam users, I have a vested interest in ensuring steam survives, well till they bury me really, so I never loose access to my back-catalog, after that I dont care anymore, well unless I pass it on to my eventual kids by taking out a digital will with iCroak.

Edited 3 times. Last edit by Alexander McConnell on 10th August 2012 5:53pm

Posted:2 years ago

#7

Nicholas Pantazis Senior Editor, VGChartz Ltd

1,020 1,467 1.4
Completely disagree with the article on pretty much every point (other than that Steam is a powerful social network). Steam is more like Chrome than Netscape. Valve already competes with many other services, including Games for Windows Live provided by Microsoft, and easily trounces them. Furthermore, as IE vs Chrome and Firefox clearly shows, we're well past the days of consumers being so ignorant that they just use whatever crap Microsoft has pre-installed on your computer. This is even more true for the types of consumers who use Steam; they're far more tech savvy.

And Steam doesn't sell games well? This is the biggest joke of the article. You have to be kidding me. I bet half of Steam's users have at least 50 games on the service, many have games in the hundreds (almost 300 here). Steam's the single best digital store in existence. The sorting tools, the positioning of ads and new content, and the ability to sell games from both indies and big publishers makes Steam, without question, far more successful and usable than the App Store, XBLA, Google Play, and PSN. I'm sorry you don't like it, but you're so incredibly obviously in the minority.

Posted:2 years ago

#8

Fyzard Brown Sales Associate, VideoGameAdvantage

39 6 0.2
Seem like when the owner of the lawn your lemonade stand is on decides to open his own stand.

Posted:2 years ago

#9

Abraham Tatester Producer

71 53 0.7
With a few hundred games in my collection, I'm heavily invested in Steam, and I like having all my games in one place. This (and other things) has kept me away from other digital distributors like Origin and Impulse (though I do occasionally buy Steam codes from GreenManGaming). I would expect this to continue to be the case once I eventually upgrade to Win8. Besides, if Xbox and GFWL Marketplace "sales" are anything to go by, MSFT won't come anywhere near the discounts offered by Steam on a daily basis. All in all, I don't see a Microsoft store providing any serious competition to Steam (assuming Steam will be allowed to live peacefully in the Win8 ecosystem).

Edit: I too would like to hear Rob elaborate about what's so bad about Steam's UI. With the genre buttons at the top and the tabs for new releases, best sellers, and discounted games at the bottom, I'm not sure how their vast library could be better presented.

Edited 1 times. Last edit by Abraham Tatester on 10th August 2012 7:52pm

Posted:2 years ago

#10

Morville O'Driscoll Blogger & Critic

1,593 1,448 0.9
Indeed. The only problem I have with the UI is that I tend to use a browser to view the store, not the client, since then I can open multiple tabs when there's multiple DLC for a game.

Posted:2 years ago

#11

Tim Carter Designer - Writer - Producer

578 322 0.6
Personally, I don't think Valve has as much to worry about as they think.

Microsoft is always doing a wait-and-see thing, then chasing the trend. That's not innovation.

The tablet battle is almost already settled. It's iOS with Android shaking its fist a long way back. If Windows thinks it can move in... Well... good luck.

But Microsoft has to understand something: they might alienate their core customer base. That is never a good thing. It's never a good thing to tear apart your basic bread-and-butter business in an attempt to chase a trend.

Posted:2 years ago

#12

Al Rhodes Web producer/designer

24 15 0.6
Yes I couldn't agree more, I am one of those people that uses Steam as a primary IM resource. However, Steam's interface and online shopping window is just really an attempt to replicate a console dashboard within a PC or MAC environment. I think they do a pretty good job in the circumstance. Works for me.

On the other hand the PS3 dashboard is starting to look old and clunky. Especially if i have just been on my Xbox. I don't feel that when looking at Steam. Maybe my expectations are lower or just managed better.

Posted:2 years ago

#13
The only way I can see this ending well for Valve is agreeing to pay some sort of tax to Microsoft otherwise I can see Microsoft totally locking down the OS within a few years preventing other stores completely.

To continue Fyzard's metaphor, if you own the lawn how long are you going to allow a competitor to continue selling on it? Ironically the relative weakness or perceived weakness of Windows compared to 10 years ago would probably protect them from any anti-trust suit which is the only thing that I could see stopping it from happening.

Posted:2 years ago

#14

Adam Campbell Associate Producer, Miniclip Ltd

1,184 979 0.8
Competition is always scary when you're dominant... But we can't go on like this, if they're fantastic at what they're doing with Steam they need to show it and continue to compete. Give people reasons to use the service.

Also, Microsoft will not completely lock down Windows. That would be a nonsense and completely uncompetitive as well as a major loss for the general openness of the Windows platform in that respect.

Posted:2 years ago

#15

Robb Lewis Director of Marketing and Consumer Products, PlaySpan

5 0 0.0
It will be interesting to see if Valve’s Steam - essentially a social network for core gamers to buy and play games - can successfully apply it’s platform to business applications. I’ve been a big fan of Steam and Gabe since they basically crushed our activeMARK digital distribution platform back in 2007. They almost single handedly revitalized the PC games business and have shown the market the right way to build a service - a platform for gamers designed and built BY gamers. Is going after business applications in their DNA? If I were advising Gabe I would suggest he work a deal with IBM to have them run the business services that use Valve’s platform. That would allow Valve Steam to keep it’s core company culture and identity while still monetizing its digital distribution platform.

As for Windows 8 app store impacting Steam, I just don’t see core gamers leaving Steam for this, except for possible exclusive titles (like Halo 4 / Xbox). But the users wouldn’t leave steam, they’d just use both services

Posted:2 years ago

#16

Nicholas Pantazis Senior Editor, VGChartz Ltd

1,020 1,467 1.4
@ John if Microsoft ever completely locked down Windows then PC gamers would move to Mac (which is still open enough to allow Steam) or Linux, but it will never happen.

@ Tim Really? The tablet space is already decided after existing for only TWO YEARS. Come on now, that's ridiculous. Two years into the smart phone war you could have said the same thing (iOS in first, Android way in second). Heck, Android isn't even as far in second as you think, and it's just now releasing some pretty huge devices like the Nexus 7. I predict next year they'll be neck and neck in monthly sales, with Android taking the worldwide lead in 2014. As much as people love Apple devices, not everyone wants the same device. This is the strength of Android and Windows, and hopefully Windows will make the tablet market even more interesting.

Posted:2 years ago

#17

Curt Sampson Sofware Developer

596 360 0.6
I also don't see the issue with Steam's shop UI. Other parts, yes. (How about multiple tags, rather than single categories, for games in your library, and having them stick with the Steam account rather than the PC?)

I too think that Steam as a social networking platform, as well as shop, for gamers is part of its power, but they really could be doing a lot more here. Their achievement functionality, which I use both to compare my tastes in games with others and figure out where I and my friends stand in terms of game progress, isn't even up to the level of the PS3. Simple things like sorting the achievements in different ways, comparing overall progress amongst all games between two people, and comparing a game's achievement progress between me and several other people, are all absent. And of course there's a lot more that could be done in other areas, too.

Posted:2 years ago

#18

Bruce Everiss Marketing Consultant

1,692 594 0.4
It is very pertinent that given a completely free and open market the PC has become almost totally digitally distributed for games.
Gabe saw the demise of physical product before anyone else and has reaped the bountiful rewards.
But eventually the 800 pound gorilla sitting in the corner noticed.

Throughout their long history Microsoft have come to markets late. They are not pioneers. But when they apply their firepower they have a tendency to win. Gabe's best move would be to sell out to them as quickly as possible whilst he has the maximum value to them.

Posted:2 years ago

#19

Morville O'Driscoll Blogger & Critic

1,593 1,448 0.9
@ Bruce

If you honestly believe Gabe Newell is in this solely for the money, then I think you really need to reappraise your view of him. He's already estimated to be a billionaire. He's definitely in the industry for more than money.

Also, it makes very little sense to sell to MS. Judging by his past comments about competition, it would make far more sense to sell to EA or Activision, since they would both provide a form of actual competition against the would-be monopoly of MS. Further, selling to MS would also give them such a vast amount of dominance in the OS and digital distro markets that I can see regulators nixxing the acquisition straight away.

Edit:

And for those who appreciate the community aspects of Steam, it appears Valve are moving things up.

http://steamcommunity.com/communitycontent

(no, I really don't work for Valve, I just like to make sure people are as clued up about things as I am. :) )

Edited 1 times. Last edit by Morville O'Driscoll on 13th August 2012 7:31pm

Posted:2 years ago

#20

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