Steam Rising

One of the leaders in digital distribution for games is the Steam service from independent developer Valve, creator of Half-Life and Left4Dead. Michael French speaks to director of business development Jason Holtman about the interplay between physical and digital – and the contentious issue of a download chart…

What impact has Steam had on the wider games industry?
The biggest impact we have had is connecting a lot of people and making games a service. It’s not just that we can sell things digitally – that’s something folk have done for a long time. Steam gives gamers the features they wanted, such as friends lists, multiplayer and auto-updating – that’s how it started back in 2002, as a solution for CounterStrike. It’s stayed true to its roots in that respect.

But in time we’ve improved it as a service by adding in Steamworks, which is our platform for third parties to add downloadable content and have better stat tracking. In that sense, we have solved a lot of headaches for publishers and developers.

Today Steam has over 20 million registered users – and by that we mean players who actually own something. There are a lot more Steam clients out there, as there are a huge number of people who also use it just to watch movies or play demos.

Did you expect it to get that big? What does that kind of scale offer?
We hoped it would, certainly. It was built to make sure we could keep scaling up.

For some smaller companies and individuals – such as indie developers – it really has changed the rules as they have received exposure they wouldn’t have had before, or chances they would not have had before, as it’s less risky. There are games here that simply would not exist if they were packaged in a $50 box.

Look at games like Rag-Doll Kung Fu, Audiosurf or World of Goo – digital distribution lets people experience things they otherwise might not have had the chance to.

And they can reach a lot of people too, that’s a major thing digital distribution brings – Steam is in 21 languages and we are all over the world. We’ve got content servers in places like Greenland, and what that means is that all of a sudden you can reach a wide audience in the right language and get to places that it’s really hard to get to if you are relying on a box, or a marketing plan, or a holiday. So the tendrils are very wide.

Who is the average Steam user? Is it a core PC user?
There is definitely a broader mix of consumer – if you had asked me two or three years ago I would have said it was definitely a core gamer. But if you look now, it’s clear the average Steam user is just someone who plays on their PC – because we have a mix of content, ranging from SimBin’s racers, Sega’s Empire: Total War, the indie titles I mentioned, some key MMOs, and casual games.

Steam is now used by all the major publishers – but that wasn’t always the case. What won them over? Did they want to get into the space those indie developers were exploiting?
It takes time. So at first major publishers for us were Strategy First, Activision and 2K Games. Since then, it’s been a gradual process of companies getting ready with their catalogue for the digital space – and some move first and some move second. One of the things that won people over was that, as our customer base grew and we expanded into more languages, there was
more data on how the digital market is a success.

A few years ago digital was seen as this force that could put people in the industry out of business. From your point of view, when did that change?
I think that as the various publishers and developers in the video games industry came online and started experimenting, they realised that the myth of cannibalisation is not true.

You are right; when people first came to digital they thought that if there was only 100 units you could sell and you sold 20 of them digitally then you’d only be selling 80 at retail.

But that just has not happened. It’s absolutely additive. It means you can just go ahead and sell more.

Think of it like Amazon and how it works with local booksellers – people use both. You might browse online to look at a new book, but they don’t always buy it – they might pick it up when they are next out and about.
So consumers flow between both digital and physical products – they don’t replace each other.

Plus, the feedback loop and connection to your consumer – something we provide with our Steamworks service – has changed completely. Thanks to online, publishers now have an ongoing relationship with their customers. They can tweak and change games based on player behaviour to make them more appealing – and more commercially successful.

But digital distribution did disrupt the retail landscape for music. Are there any lessons to learn there?
I don’t think you can draw parallels that closely between games and any other medium. Games are their own thing and are played and consumed differently to music. They are also at their own price point.

Are we going to suffer the way the music industry has? No, because we don’t sell or make things that can be cut into 99 cent increments.

I think some of the bugbears that are out there about music and digital distribution just don’t apply to games – and publishers that are experimenting in this place are learning that.

There is a call for an official digital chart here in the UK – and the US’s NPD group has said it will do the same. What’s Steam’s view on that? You’d have to contribute data to help make it happen…
We already share our charts to show what is selling the best. The data we aggregate to publishers, however, is not as simple as feeding retail numbers into a database, and it’s not ours to share – the data belongs to the publishers.

A lot of the people calling for that kind of chart already have lots of good data on their games. So I know that some think this would be great, but we have partners who say: Well, I have all my data already.”

Perhaps they want to see other publishers’ data too?
It very well could be that. But we don’t see the need for that information being so strong.

For retail that’s a great way to see the market with all the data piled up in one place. But for us its very difficult to aggregate that data – which says a lot of interesting things about the digital market. It proves that the needs of digital and physical are not the same. For publishers in this space, having a third party tell them how well their games sold – that isn’t as important. Because the ones that use us can log on and see their sales figures, up to date within the last five minutes.

If the call for that did grow stronger, and publishers asked you to work with the likes of Direct2Drive and Metaboli to form that global downloads chart, would you do it?
We have those conversations about sharing data a lot – but I don’t think the conversation is as easy as that. But those conversations, and people wanting data and business information about the market, are always ongoing. It just isn’t as simple as ‘let’s just publish all the data’.

What is your view on the competition? Digital is growing more than ever, and now publishers like Electronic Arts are opening things like the EA Store for downloads. Doesn’t that create a level of conflict?
They should open their own stores. The way we approach digital distribution is this: We think that the people making PC games should go to as many channels as they can. And reach as many people as they can. If a publisher or developer wants to b