Epic Games’ new digital games marketplace, announced earlier this week and launched by surprise at the Game Awards last night, raised eyebrows in the industry. With its favorable revenue split of 88/12% and Epic CEO Tim Sweeney’s commitment to better support creators, many in the industry are wondering if this will be the game store that could really compete. along with Valve’s Steam, which has been the dominant platform for the distribution of PC games. for well over a decade.
We won’t know how successful the store will be for some time. Last night, Epic announced the first batch of games that will support its store, and that list remains tiny compared to the tens of thousands of titles available on Valve’s storefront. And although Epic has the advantage of positioning its store in Epic Launcher, which is the software needed to update and start playing its mega-hit Fortnite, there remains the distinct possibility that consumers no longer wish to fragment their game libraries. In this scenario, Steam remains dominant and Epic’s store becomes just another less popular alternative, like GOG or Green Man Gaming, while smaller stores like Itch.io and Humble Bundle focus on the indie game market.
But the question of why Valve needs a competitor in the first place is still an important question worth exploring. That’s because the current state of game distribution says a lot about the looming platform war that has been brewing for years. The result could change the way millions of people buy and play games in the future, and how developers, in turn, make money from those sales.
As it stands, if a developer makes a PC game, there’s a good chance they’ll sell it on Steam. If they don’t sell a game on Steam, it’s probably for one of two reasons: it’s a big publisher like EA or Ubisoft that operates its own digital store; or it is a game console maker or studio owned or paid for by a game console maker like Microsoft or Sony. In these rare cases, a developer takes the loss of not selling a game on Steam because a larger company is paying the bills, and there may be a strategic business reason, such as a console or console exclusivity. a store, so that a company like Microsoft, say, not to sell the PC port of Gears of War 4 via Steam, but on the Microsoft Store instead.
It’s the old way of doing business in the games industry, and Valve has reaped the rewards for years. The company is estimated to have made $ 4.3 billion in Steam revenue last year, not including its standard 30% discount on in-game content and add-on purchases. As part of the current arrangement Valve could never develop another video game and remain one of the top-grossing companies in the business simply by being the middleman between PC consumers and game developers and publishers. Not only does the company take 30% of almost all sales on Steam, it also earns revenue from classics like Counter strike, Half life, and Team fortress, while its e-sport juggernaut Dota 2 remains one of the most popular games on the planet.
In other words, Steam has been sitting well for years as the Apple of the PC gaming marketplace, operating an app store and deciding how much money it takes for each sale. The only problem is, unlike Apple, Valve has no control over the hardware people use, and in turn, no control over the software they use. Valve cannot prevent a user from downloading another game store and purchasing their games elsewhere, just as it cannot prevent Epic or Ubisoft from creating their own game launchers and forcing players to download the software for them. get started Fortnite Where Assassin’s Creed on PC.
Until now, this hasn’t really been a problem for Valve. Gamers, and PC gamers in particular, tend to take offense at what are considered transparent crashes at the expense of the consumer. It turned the storefronts and launchers of EA and Ubisoft – known for locking down games with DRM restrictions – into the bad guys in the industry. Valve, with its flexible restrictions and generous refund policies, has always seemed like the more consumer-friendly option.
That has started to change and Epic is coming at the perfect time to shake things up. Just like he did Fortnite At the perfect time to capitalize on the battle royale trend, Epic is now putting pressure on Steam at a crucial time for game distribution. Because of the billions of dollars he earned from Fortnite, Epic now has enough in its war chest to properly fight Valve, and it does so by offering more developer-friendly revenue splits and using its Unreal Engine toolkit as a strategic weapon. If you use Unreal to build your game, Epic will now give you back the 5% you typically need on all game sales, in addition to allowing you to keep 88% of all sales through the Epic store.
The timing couldn’t be worse for Valve, and Steam has started to lose its shine as a user-friendly marketplace and not to go wrong. The company has, for years, taken a hands-off approach to moderating its storefront and the way users behave on its platform. This has given rise to some high profile controversies around games like Hatred, a mass murder simulator that was pulled from the company’s Greenlight program only to be reinstated, and unsavory tactics from users like hateful and trolling Steam Curator pages, widespread fanaticism on the community forums of games and a mass bombardment of indie games deemed too progressive by alt-the right communities. Valve’s philosophy around Steam solidified over the summer, following the rare draw of a school shootout-centric game, with a new policy that allows “everything” on Steam unless it is not illegal or deliberately designed to infuriate people.
The result was more developers keen to sell their games elsewhere, and more consumers interested in alternatives to Steam as the store became overrun with mediocre games and weakly moderated community forums. Meanwhile, Valve’s virtually non-existent curation strategy makes it harder than ever to find games that you might like, while developers have long lamented the issues with Steam’s recommendation algorithm and discovery features that affect direct traffic to the game listings.
This has created an opportunity not only for Epic, but also for other companies who view Steam’s weaknesses as issues to be exploited. The game chat platform Discord now operates its own game store as it already has the social infrastructure around how PC gamers connect with their friends and chat via voice and text. Selling games to those same consumers and giving them a destination to launch them and play them with friends could make Discord a more engaging storefront.
Valve clearly feels the heat. He started copying social features from Discord and announced in September that he would start moderating community forums. Last year, he said he would try to fix the bombardment of notices by temporarily freezing notices. But more importantly, ahead of the Epic Store launch, Valve said last week that it would change its revenue allocation terms for game developers. That way, if you sell more than 10 million copies, you’ll keep 5% more revenue (70-75%) and then another 5% if you’ve sold 50 million or more. It was a clear admission from Valve that they know their platform isn’t untouchable, and improving financial incentives to sell a game on Steam may be the only way to keep developers from flocking. somewhere else.
It might not be enough. As game developer Rami Ismail, who co-founded independent studio Vlambeer, pointed out, Valve’s new policies aim to appease big-budget developers. “Have things really gotten so bad for Valve in the increasingly competitive storefront scene that they now have to subsidize the big studios?” He wrote on Twitter last Friday. “Are they so undesirable for the big headlines now that the big headlines tend to be able to launch their own store?” ”
Have things really gotten so bad for Valve in the increasingly competitive storefront scene that they now have to subsidize the big studios? Are they so undesirable for the big headlines now that the big headlines tend to be able to start their own store?
– Rami Ismail (@tha_rami) December 1, 2018
“Steam’s new 25% and 20% levels are a big improvement for the top percent of games and make Steam a much better deal for top games than Google Play and the iOS App Store,” Sweeney joked in an interview with The edge this week, making it clear that Steam’s new terms don’t favor all creators, just the bigger ones.
How will this ultimately play out for consumers? It’s an open question, but competition usually results in lower prices. If game developers get a bigger reduction in sales from Epic’s store, there’s a chance they’ll cut the game’s original price by $ 5, or even $ 10. A perk like this could take consumers away from Steam or, at the very least, reduce the financial burden on some developers and give them the freedom to make another game or produce an expansion. Either way, Epic’s decision – not only with the revenue split, but also its waiving of Unreal royalties – will earn developers more money. That could be all the incentive they need to side with Epic going forward.