Full Steam Ahead

Given the renaissance that the music industry has enjoyed thanks to digital distribution sites such as iTunes, it was always going to be just a matter of time till the games industry followed suit.

Now, with the rise of Valve Software's Steam - which recently surpassed 10 million registered user accounts - coupled with an increasingly net-savvy public, the digital distribution of games has become a highly viable alternative to retail purchases. And that goes not only for the upper echelons of the publishing and development world, but also for smaller developers looking to ply their wares to a wider audience.

With the cost of game development skyrocketing and retailers growing increasingly reluctant to stock all but the most commercially viable games, Steam has entered the equation as a genuine alternative (or, in many cases, partner) to retail sales.

Steamy Windows

Back in 1999, after the titanic success of Team Fortress Classic and Counter-Strike, Valve Software realised that there was an opening in the digital distribution market, and began work on Steam - its very own online software delivery system, which came to prominence with release of Half-Life 2 in 2004.

Surprisingly, Steam's original purpose wasn't primarily for selling games. "The first Steam feature list was a direct response to us preparing for the growth of auto updates, better anti-cheat measures, being able to access your games from any PC, in-game communication systems, etc," explains Doug Lombardi, Valve's Marketing Director.

"Once we were that far, the idea of selling the games was just another piece of the puzzle that made sense."

But the launch of Steam hasn't only benefited Valve's ability to shift their own products online. It's also aided smaller, less prominent developers to showcase their talents without having to battle for shelf space in high street stores such as GAME and Electronics Boutique, who have become increasingly reluctant to stock anything other than AAA products and established IPs.

Already, titles such as Ritual's episodic shooter Sin Episodes: Emergence and pioneering niche products such as Mark Healey's Rag Doll Kung Fu have enjoyed widespread success thanks to Steam's substantial consumer base.

Going Live

A similar situation has been created on Xbox 360, thanks to Microsoft's Live Arcade, which has nurtured the rise of many niche products that would struggle to make it to the shop shelves - most notably the massively popular Geometry Wars, which has amassed some 50,000 sales since launch.

The success of both Steam and Live Arcade has opened up the possibility of less mainstream gaming coexisting with its more lucrative big budget cousins in a way that has until now been impossible.

As well as providing an alternative to retail sales, Steam also has another inherent advantage over its retail counterparts. With piracy accounting for an estimated $3 billion in lost revenue per year for the industry, developers who opt to ply their wares via Steam now have the option to protect their work against illegal copying, due to software verification techniques pioneered by the system.

"The anti-piracy measures enabled by Steam authentication is one of the many benefits offered," explains Lombardi. "And like the functionality in the system, it is optional meaning [developers] can make it mandatory with their game, optional for use with their game, or not required at all."

Despite initial controversy when consumers realised they couldn't run Half-Life 2 without a connection to Steam, and the subsequent bandwidth problems that this caused on the game's launch, the system has prevented tens of thousands of worldwide attempts to verify illegal versions of the game. It also allows for the automatic patching of games, meaning the consumer will always have access to the latest version of each product.

Charting success

For some, such as former Sony Online Entertainment CCO Raph Koster, digital distribution systems like Steam aren't just an inevitable evolution for the way we purchase games, but how we make them, too. "When you walk into your friendly neighbourhood Gamestop, you won't find the game that is twenty one in the charts," commented Koster during his recent speech at the Austin Games Conference.

"It's not worth having it compared to having game twenty twice or better yet, The Sims and all of its expansions. Games have to adapt to new conditions, they have to be built for digital distribution. That means smaller and cheaper games, less emphasis on assets."

Unlike Koster, Lombardi believes that retail sales and digital distribution can and will continue to coexist in harmony, a belief backed up by Valve's simultaneous retail launch of Half-Life 2 and Half-Life 2: Episode 1.

"I don't know if there will ever be a day when releasing at retail won't make sense. For us, it's not about eliminating any given channel, but rather opening up new services and options for our customers," he explains.

Such confidence is of course easy when you own one of the largest and most successful FPS franchises on the market, but perhaps, for smaller developers with less commercially successful IPs, digital distribution sites such as Steam, or even smaller ones such as Battlefront.com - an online retailer of war and strategy games - could well represent the future.

Back to basics

What's more, with many mainstream publishers hanging back (Microsoft aside) from any substantial commitment to digital distribution, perhaps the biggest benefactors of online sales have been backroom indie game coders - so long overlooked due to the meteoric rise of retail games.

With a worldwide forum from which to showcase and sell their games, indie developers such as Ethereal Darkness Interactive have been able to reach a significantly wider audience and generate far greater sales as a result.

"For us, digital distribution has really made the impossible, possible given its extremely low overheads and start up costs," explains Raymond Jacobs, Ethereal Darkness Interactive's owner.

"Because of this we can offer our product at lower prices - increasing the number of units sold - and it allows us to focus our time more on the game than finding retail distribution. I think that ultimately digital distribution is the future for all games, Indie or not."

With the likes of Steam and Xbox Live Arcade leading the way, it's clear that digital distribution is set to play a major role in how we purchase games in the future. And while the big guns such as Valve continue to forge a successful balance between retail and online sales, it's likely that the true benefactors of digital distribution won't be those developers that have regularly amassed large sales in retail stores, but those that haven't.

Martin Korda is a freelance games journalist and the founder of VideoGameConsulting.com.