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Brad Wardell's picture

By Brad Wardell

March 10, 2009

Why the "Age of Steam" May Not Last

Brad Wardell is CEO of PC game developer Stardock, which also recently launched the digital distribution platform, Impulse.

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I read with interest Edge's Age of Steam article. I must confess that I am surprised to see Edge, or anyone else for that matter, imply that Steam's early lead in digital distribution translates to permanent dominance.


By Valve's own admission, it only has 20 million accounts of which around a million and a half logon each day due to Steam defaulting to auto-starting when someone launches. To put that in perspective, that's about 1/10th the number of users Gamespot or IGN gets in a day.

We're at the very beginning of digital distribution. Steam may indeed become the Facebook of digital distribution but there's just as much chance it could become the next Friendster.

When one of these services has 20 million active users per day, then I think we can say that they have reached a critical threshold. Right now, however, by Valve's own statistics, about half of Steam users use it for just Counterstrike -- not including all of Valve's other games.

Steam certainly has a commanding early lead. Valve has made a number of shrewd business decisions such as acquiring Counterstrike and requiring those players to become Steam users. That instantly gave Steam a large installed base. Combined with Valve's outstanding releases of Half-Life 2 and Left4Dead have cemented Steam's position as the leading digital distribution platform.

As new titles come out bundled with Steamworks, which requires a user to become a Steam user in order to play the game (something I would normally think that the press would raise alarm about if this were being done by say EA or Microsoft or even Google), the Steam user base has continued to increase.

The real test for Steam, however, will be how it does as it faces competition as it becomes more common for titles to be released on multiple platforms at the same time. At that point, responding to customer requests, competitive pricing and quality of service will determine its continued success.

It's far too soon to assume that Steam will continue to dominate five years out. Thus far, it has largely operated without serious competition. With other services such as Impulse, Games for Windows Live, Amazon.com, GamersGate and others upping their own services with unique and compelling features, expanding their catalogs, and focusing on providing good customer experiences, I would be very surprised if Steam continues to have such a large market share (as a percentage) even 18 months from now.

Steam does a lot of things right. But there's certainly room for improvement which viable competition encourages. After all, MySpace once looked unbeatable in the social networking world but such premature assumptions look quaint in "the age of Facebook".

Kaizen's picture

I'd like to give Brad Wardell a round of applause. When I first read the title of this post, I immediately thought 'underdog', but an underdog does have his plays. The applause of course is for tagging Impulse and Stardock to the world's leading digital distribution service, Steam, by writing this article. Without doing so, I would have never heard of these services, or at least for a considerable amount of time seeing that Valve hit my grounds running several years ago.

I'm a games producer, but I always use my left eye for a perspective on business and my right for the perspective of customers. As far as what I want as a customer, I don't want digital distribution plainly, because the internet is not new to me, and neither is next generation gaming or technical specifications. What I want, is to turn on my computer and play the game I want in no more than 3 clicks - it's called 'empowerment'. This is the equivalent of waking up in the morning, going to the garage, hopping in my custom M3 GTR and driving to work everyday without refueling, service checks or cleaning because my garage automates all this for me. It sounds ridiculous, indulgent and expensive, but that's what the Steam service gives me. The brilliant thing is, it's cheaper than the competition and it's tailored to my needs. I can get games distributed to me digitally many other ways, as you mentioned Brad, but not like Steam, and it does matter to me as a customer.

I'm still not sure if you're insinuating that Valve isn't going to solely dominate digital distribution because other companies offer digital distribution services also, or that other companies are going to match the precise formula of the Steam 'type' of digital distribution and even the playing field. There's a difference between the terms. I wouldn't sign up for Impulse because it's products are considerably more expensive, it has less variety of games and looks cheap. But that's me. In fact, it looks like a product developed by an entrepreneurial mind looking for trends in the market more than a natural evolution of customer service developed by the industry itself. The evidence between Impulse and Steam clearly shows it's not industry savvy, which is the difference between a business man and a gaming business man like Mr. Gabe.

The thing about E-Myth minds and the 'band wagon following' is that there is only so much room to tag your band wagon onto the leading industry flagships. Watery alternatives occur quickly in the competition seeing there aren't many holes to fill. Gamers say to me, "Oh, it's like the flagship, BUT it doesn't dot dot dot, or it's not dot dot dot." You simply can't give a soldier a gun, or a pit crew mechanic a wrench, or a gamer a PC. E-Mythers seem to think you can buy into something at face value based on opportunities that look good. But true sentimental trends grow over time and create empathy between the supply and demand before establishing a profitable relationship. You have to give them a specially formulated tool that fits them ergonomically. Some of us know that you can have a 99% system, and the customer will complain about the 1% missing. If you're missing 40%, then you have a long way to go.

kuddles's picture

While I agree that competition is good (While the majority of my PC game purchases are on Steam, I have used Impulse, Direct2Drive and GamersGate), and I also think it's too early to declare anyone the winner, I think you're a little quick on the gun. I read the EDGE article as saying that Steam has an impressive lead, both by number of users and brand recognition, I don't think it ever implied Valve was the de-facto "winner". If anything, it made suggestions of how it might crumble under it's own weight.

Ted_Brown's picture

Drawing parallels between Steam and Myspace is easy, but misleading. They were both frontrunners, true, but Myspace is a cluttered, schizophrenic mess of poor design, eyeball-assault graphics, and outmoded technology. No wonder its throne was usurped by Facebook. But Steam has remained elegant and user friendly, despite the occasional bug, and that makes me think it's good to go for the long haul.

alexthecamel's picture

Brad,

As your quoting figures, given you highlighted Valve has "only" 20 million users, and it would be fair to assume any serious competition would need to be in that ball park. How many users have you got, and how many of them sign in each day. Or to put it another way, how long to you project it will take to seriously compete with Steam. Genuine question, not being facetious.

Competition can only be a good thing for the consumer, so I genuinely hope that we do see another serious player enter this space. To give one of the most respected companies in the industry a five year start and then catch them will take quite an effort.

I feel a fairer comparison would be against iTunes, they dominate their space, mainly through locking people into the iPod ecosystem. I don't think many people would disagree that it will be a good while before they get knocked of their perch if at all, why will digital distribution of games (rather than music / video / mobile apps) follow a different pattern?

jazzbrownie's picture

I don't like Steam, personally. It checks your system specs and tells you what you can and can't play. It was pretty frustrating after I installed HL2 on the XP side of my macbook and steam told me that I can't run the game because it doesn't recognize my video card. I know for a fact that it can run the game (I got my hands on a steamless version that worked at a perfect 60 fps) so I got annoyed and emailed customer support. All they had to say was that they didn't offer any support for users on Macintosh machines.

mentor07825's picture

That's really bad man. Sorry to hear that. I so want to play that game as well. Ah well, nothing seems worse though when you have a game that you know your system can run but can't play it.

The_KillSmith's picture

I absolutely LOVE the idea of digital distribution and keeping all my games in one easy to download/access service. What I DON'T want are a whole handful of mediocre services out there making things confusing for consumers... this is one area where I'd LIKE someone to have a monopoly and sort of centralize everything. (This coming from a PC user is odd, I know. I’m just really tired of format war type scenarios and the horrible results from someone adopting the “wrong one” in retrospect.) Of course, the very word conjures up fear of abuse. So then I have to think: who is the ONE company that I trust enough not to abuse the customers. Who is it that has really listened to the customer and what they want. The answer is simple to anyone that pays attention to this industry: Valve. That may sound naive, but I'm tired of people only paying lip service to customers. Valve's track record speaks for itself. Valve is also the answer to who is currently providing the best services. When I think of Steam, I think of ease of use, the best DRM solution to date, constant up-to-date patching, pre-loading for instant on-the-hour release dates, free content, INSANE sale pricing, great community features, Steam Cloud (which blows my mind), and NO BLOAT. Yeah, right now Steam IS winning, and in this article I detect a whiff of whining through clenched professional teeth. This whole spiel was written trying to look non-biased, but come on... dude's just a bit irked because people are recognizing Steam is going to own this market. It was the end user that put Steam up on the pedestal where it currently resides, not some marketing campaign or biased review network owned by a conglomerate with interests. And when something gets so much credit from such a complaining audience as the PC market, you know it must be something special. I, for one, am completely happy with the thought of Steam being “it” in the gaming digital distribution/service space. Maybe it's too early to tell, but it's never too early to hope.

SCTakara's picture

Nice piece. And I'll be honest? I think he makes a good point at Steamworks...

I think in the long run Brad is right; the game shouldn't be declared over and won already. I really don't care who's 1st, 2nd, 3rd, etc., so much as that the minimum level of service from all services is constantly headed upward, and that all of them learn and improve based on each other's activities. Hopefully consumers will pay attention and take note also, but I think most will be too comfortable with one to ever really look at others.

And thinking of MySpace and Facebook, lets look back earlier to search engines... Its Google today, but I remember when Yahoo! was the big thing... to say things might be different in 18 months isn't much of a bet.

ShamanNY's picture

All i can say is that if it is too early to assume Steam will dominate, then its also too early to assume it wont!

SCTakara's picture

One can only hope no single service utterly dominates. I don't trust companies to "compete with themselves." Not even companies I like.

Philosophytutor@gmail.com's picture

First of all I use both Steam and Impulse and I love both. Both are great platforms for digital distribution. I hope that both continue to thrive and innovate as they both have made PC gaming much better over the last few years. I also think some of the things that Brad Wardell has said about PC gaming are important and needed to be said (especially by a developer). For instance see http://www.edge-online.com/blogs/the-gamers-bill-rights.

However, this piece just seems weak. The basic argument amounts to “Steam is not as big as most people think it is and it might not dominate the market forever so….” Brad Wardell mentions Steam’s usage numbers and then talks about other competitors, Impulse, GamersGate, etc. I am genuinely curious how many people use those services. How do the numbers compare? I point this out because I am not sure comparing Steam (a games client) to Gamespot or IGN (websites) is really fair.

More importantly, if you are going to argue against Steam say something other than “Its not as big as people think it is.” As a user of Steam I know it has its issues. I missed the Empire: Total War snafu but I have seen reports that others weren’t so lucky. Also, while I don’t want to put words in your mouth, the “Gamers Bill of Rights” seems to indicate several other issues you have with Steam. These include the required use of the client, the DRM, and the required use of the internet. These arguments may or may not deter people from using Steam (they don’t stop me) but they should be heard. Usually they are either presented in forums where the poster is preaching to the choir or they get drown out by the cacophony of worshipful voices silencing any dissent. This seems like a missed opportunity to discus some of the core philosophical problems that Steam may or may not present to the gaming community.

lifeat30fps's picture

It's good that Stardock recognizes there is room for improvement in the arena of online distribution. It's a market in its infancy. To think that it was perfect would be beyond ignorant. Let's hope that all of these services continue to compete and innovate for at least a few more years before some of them start dying out and innovation is left to atrophy.

Brian
www.brianwoods.com