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Breaking the Steam monopoly

Greg Lockley
Breaking the Steam monopoly

For many, the first word that comes to mind when discussing digital games is Steam.

The Valve-owned digital distribution platform celebrates its tenth anniversary this year having opened its virtual doors back in September 2003. Since then, the success of the service has skyrocketed. Its most recent figures reveal there are now over 65m registered users on Steam – a jump of 30 per cent year-on-year for the past 12 months. The figures also reveal the extent of its offering, which stands at over 3,000 games.

But with a market share widely believed to exceed 70 per cent of the digital PC games sector, what effect does such a stranglehold by one firm have on the market?

“We see Steam as a platform in its own right, in the same way as Xbox Live or PlayStation Network,” says Darren Cairns, EVP of marketing at rival PC download store Green Man Gaming.

So powerful has Valve’s digital store become that for many of its rivals, the goal is not to beat Steam, but to simply be competitive in the market and unique in their approach.

“The way we want to compete at GOG is very simple: we want to be the main alternative store for gamers to buy digitally distributed entertainment from,” says Guillaume Rambourg, MD of GOG.com.

He adds the secret for success is to separate yourself from the competition, rather than mimic it.

“We could have copied other stores out there but this would just make us one random digital distributor with nothing special.

“GOG.com began as a niche service for gamers with a taste for classics and has consequently broadened its scope of operations to new releases, triple-A titles and Mac games. We have become a viable alternative to Steam.”

The success of Steam has opened the floodgates for more firms to enter the market. But following this surge of competition, there’s an argument to be made that the digital landscape has become too crowded. These new players vary from those looking to get their own piece of the digital pie, to those who have done so as a reflex to the declining state of the High Street.

“The way we want to compete at GOG is very simple:
we want to be the main alternative store for gamers
to buy digitally distributed entertainment from. We
began as a niche service for gamers with a taste for
classics and has consequently broadened its scope
of operations to new releases, triple-A titles and Mac
games. We have become a viable alternative to Steam.”

Guillaume Rambourg – MD of GOG.com


But established firms in the market don’t see this increased competition as a threat. Instead, many view it as beneficial to both their own business and consumers.

“Digital distribution is still in its infancy. There are an increased number of options available and we believe this can only be a good thing for the consumer,” says Cairns. “The new model of digital distribution and our focus on the core gamer has meant that a small UK-based company can grow to become No.2 in the global PC download market in three years.”

Rambourg adds: “I believe that variety is always good for consumers.”

This view is one shared by other players in the market. Sony DADC launched Genba – its new digital distribution service – earlier this year as a solution for those wanting to enter the digital space.

“The reception has been incredible and the response hugely positive. Sony DADC is talking to over 60 publishers and 80 retailers with a view to lowering the barrier of entry for digital distribution of games content in a variety of formats,” said Wolfgang Fuchs, sales director games at Sony DADC.

Fuchs adds that the service is a helping hand to traditional games retailers: “Genba has created yet another alternative route to market for Sony DADC clients. As bricks and mortar sales continue to shrink, the power of the online consumer grows.

“Reducing the operational overhead in the journey from publisher to digital retail means there will be more choice for the consumer when buying games.”

Despite supplying these consumer-facing digital portals, rather than competing against them, Sony DADC echoes the benefits of competition.

“As with any emerging market, there is a period of expansion. It’s an exciting time to be a digital consumer as you are likely to pick up the best deals as distributors are competing heavily on price and incentives,” says Matthew Hatton, head of business development, Genba, Sony DADC New Media Solutions.

But with so many digital options now available, even the most savvy of consumers can go wayward. While core gamers embrace digital games, mainstream audiences may be turned off by the complexity of buying digital over boxed titles.

“One can easily get lost in the flood of releases on outlets. It is important for online distributors to curate their offering,” says Rambourg.

As this offering becomes increasingly complex with triple-A releases, indie titles and open-beta products, the difficulty for consumers discovering them rises. Digital built its name on simplicity. The ability for a consumer to find the product they want with ease. But has it now become broken?

“I don’t believe it has, it’s just a case of a relatively young market looking for equilibrium,” retorts Rambourg. “There are a lot of platforms out there curating content to the best of their ability, and taking a variety of different approaches to how they do so.”

Cairns adds that if consumers have trouble finding the products they want, it’s the provider to blame.

“If people can’t discover games then it is the service rather than the sector that is broken. We change our site and offers daily, surfacing new games and new offers. You have to work your site really hard.”

“As with any emerging market, there is a
period of expansion. It’s an exciting time
to be a digital consumer as you are likely
to pick up the best deals as distributors are
competing heavily on price and incentives."

Matthew Hatton – Head of Business Development, Genba (Sony DADC)


Fuelling this rapidly expanding games offering are initiatives such as Steam Greenlight, which has lowered the barrier for entry for smaller games developers. Voted for by users, the balance between quality and quantity now lies in the hands of gamers.

“Consumers will decide on quality and what makes a good game for them. They are the people who turn good games into successful games. We’ve seen our catalogue and partners enriched with the increase in indie developers wanting us to get their game to a global core audience,” says Cairns.

Murray Rigluth, director development, Genba, Sony DADC New Media Solutions adds: “Greenlight has proven to be an exciting development within the PC space. Quality is a very subjective topic, but if consumers are voting for a game and are prepared to spend their money, then there must be an acceptable level of quality.”

But others remain skeptical about this consumer control. Distributors are ready to support indies but remain wary of Greenlight and what the vastly increased quantity of games could have on their business.

“The number of games being greenlit in batches, sometimes even up to a hundred titles, can be  overwhelming for gatekeepers and potential buyers,” says Rambourg.

“Greenlight is still a new undertaking for Steam and only time will tell if that approach is good or bad. Gamers are an intelligent bunch and they’ll be able to filter out the worst stuff pretty handily – so I don’t think that there are any floodgates being opened here – but it’s not necessarily the best way to select titles for release.

“I hope the industry will find the right balance between quantity and quality because if the market becomes too busy and has too many poor quality titles, this will only impact sales. ‘Why buy the 100th game that you haven’t bought yet, when you know it will be available online in a year and 90 per cent off in a sale?’”

As digital distribution remains in its infancy, consumers are reaping the benefits of the market that Steam built. But while they enjoy cheaper pricing and an offering dictated by their choosing, it’s these distributors that face the challenge of adapting to find their place in the market alongside Valve’s digital behemoth.

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Tags: Retail , pc , Distribution , steam , Digital , valve , monopoly , breaking

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