Industry execs called it the ‘digital gold-rush’.
It was a period when every publisher, developer and retailer – big and small – hired their own prospectors to help them break into the exciting new digital marketplace.
But when they finally got there they found that most of the gold had already gone.
And no more so is this true than in the PC download space.
At the beginning of this year barely a week would go by without MCV reporting on yet another company wanting to take on the might of Valve-owned digital retailer Steam.
Almost 12 months on and Steam has seen its revenue grow by 200 per cent, with the number of users rising by almost 178 per cent to 30 million. Meanwhile, a number of its rivals are struggling – some are forced to re-think their strategies, while others are facing financial ruin.
THE RISE OF STEAMWORKS
The reasons for Steam’s dominance are twofold. Firstly, it is excellent. Everyone I spoke to, even bitter rivals, admit Steam has done an incredible job.
But it’s the other half of Steam’s success that is causing the most tension. Valve has created a free development API called Steamworks, which is utilised in some of the world’s biggest games – including Call of Duty: Black Ops.
This API means gamers who buy these titles have to install Steam and create an account – even if they’ve bought it from one of its competitors. Steam’s rivals face the choice of either not stocking these games, or risk giving their customers away to Valve’s platform.
Publishers don’t give a shit, they don’t care what happens to the customer. Which is the crucial point, because Steam do,” blasted the boss of a fast-growing Steam rival.
I’ve fought hard for my customers, and never before have I had to give them away. Steam is killing the PC market and it is no wonder digital retailers are failing.
Steam is locking down the market, and some say they have an 80 per cent share of it. Do publishers really want to be reliant on one retailer?”
The idea that publishers are making a huge mistake by giving more power to Steam is shared by Gaikai boss David Perry.
When you outsource your digital strategy you are giving away your customers,” he said. Like iTunes, Steam has made it so easy and they have lots of users. So if you give them your product then you will start receiving cheques from them. And that’s very convenient.
But now people are starting to think about their own digital future. How long do you wait before you take control of your own digital strategy? Would you say, ‘here take my digital customers, and I’ll see you later?’
Like with iTunes, at some point it is going to be too late. Just try and negotiate your royalty rates now with Steve Jobs. At some point I think the same thing is going to happen with Steam.
Steam is growing and it is growing fast, and they are making it easier and easier. But it’ll be interesting to hear what the publishers do.”
WHAT’S THE SOLUTION?
Steam’s rivals have suggested publishers create two versions of their games – a Steam and non-Steam SKU, which will help level the playing field for them.
But why should they? If content owners and developers are making most of their digital revenue from Steam, why should they care about its smaller competitors?
The sales boss of a big name digital service provider feels the High Street holds the key.
At the moment the big digital distributors simply have to stock Steamworks games,” he said.
The power resides with the bricks and mortar retailers to change this, they can simply refuse to stock Steam games. Publishers are currently hesitant to create multiple builds, so it’s up to the big retailers to put pressure on them to do so.”
So far, UK games retailers have been reluctant in launching their own download platforms – primarily, MCV has been told, because of Steam’s dominance.
But from the beginning of next year the first wave of retail digital PC services will go live. And these well-known retailers – both online and bricks and mortar – will be telling publishers to take-out Steam, or they will not sell their games – digitally or in boxed form.
Steam is one of the reasons retail has dragged its heels on getting into the download market,” said the head of digital at one of the biggest UK games retail chains.
We are not going to sell games that force us to send customers to Valve. Unless Valve give me royalties for any extra sales they make with my customer.
Publishers are creating a monster, because they’ll get to a stage where developers can cut them off.
We are going to suppliers soon to tell them to stop putting Steamworks in their games.”
But could it already be too late? Those against Steam contradict themselves when saying publishers need to take digital into their own hands. Perry for one admits that publishers need to put titles where the gamers are – and those gamers are on Steam.
12 months ago key industry players were talking about launching digital platforms and creating iPhone, free-to-play browser and MMO games. But now the App Store is overcrowded, converting free-to-play gamers into paying customers is proving difficult, and pressing questions are being asked of the MMO subscription sector.
Those who were making serious money from digital and online a year ago – Apple, Blizzard, Steam and Zynga – are the same companies making serious money today, and it’ll take something or someone special to break into that group.
The fact is, one year on and the digital future of this industry has not proved to be the goldmine everyone thought it would be.