Published , by Asif Khan
Published , by Asif Khan
Valve recently announced changes to their Steam software revenue split with developers. Going forward Valve will only take a 25 percent cut of a game's sales over $10 million and a 20 percent cut of game sales above $50 million. The majority of Steam games that don't sell over $10 million will still pay a 30% cut to Valve. This is a regressive rate structure that hurts indies, but it is also a sign of weakness at Valve.
Many game studios have created their own storefronts and launchers on PC. Origin, Uplay, Bethesda Launcher, Battle.net, Discord, GMG, itch.io, GOG Galaxy, Humble Bundle, Twitch Prime, Oculus Home, Viveport and Epic Games have all entered the fray and have provided gamers with ways to buy and launch their games without giving Valve a dollar. Microsoft's Windows Store has also thrown their hat in the ring with some more PC competition for Valve. Xbox Game Pass will be making a bigger splash on PCs for gamers in the near future.
Last year, Activision Blizzard announced that Destiny 2 would be released on Battle.net as opposed to Steam and this year the company followed up with releasing Call of Duty: Black Ops 4 on their own launcher as well. These are multimillion dollar franchises that are not coming back to Steam anytime soon. Valve's new revenue split policy is clearly an attempt to win back these larger developers. The obvious problem with this strategy is that Activision Blizzard has no motivation to give Valve 20% of sales when they can keep all of their revenues while selling on Battle.net.
Fortnite is the biggest game in the world right now, with more concurrent players than all of Steam combined. This juggernaut of a game showcases how higher-tier studios view Valve. Epic Games has over 200 million gamers playing Fortnite across a vast array of platforms and has taken some dubious steps to maximize profits. Most notably is the company's Android release of Fortnite that avoided Google Play's app store entirely. Epic couldn't pull that off on Apple's closed off App Store ecosystem, but Android allowed for the company to keep all of their sales with one hilarious workaround. In a different time, Fortnite could have been a huge windfall for Valve as the company has rested on its laurels for years scooping up 30% of other developers' sales.
It is not all doom and gloom for Steam. Valve's storefront still offers developers free matchmaking services, mod hosting, and free cd key generation as parts of the Steamworks API, alongside merchant services. These all add value to that 20-30% cut of game sales that the company is taking, but most likely will not interest the big studios. EA doesn't necessarily care about FIFA mods, and Bethesda is happy with keeping 100% of Fallout 76's sales. Steam truly offers value to indie developers who are trying to grow their brand, and it is sad to see Valve apply a revenue split that penalizes smaller devs while rewarding studios with massive profits.
Perhaps there would be a shift over from Steam if another platform begins to offer competitive services, but it seems like Valve has indies between a rock and a hard place. Steam remains a very large storefront for new and smaller devs to promote their titles. GOG, Humble Store, itch.io and several other smaller outlets are attempting to pull indies over to their stores, but Steam remains atop the market for now.
Valve needs to remember what made Steam unique in the first place. They created the store and launcher for themselves. Sure, there were other games that took advantage of the platform in the early 2000s, but what made many PC gamers download the Steam client was the migration of Counter Strike 1.6 onto the platform. Valve later made Steam the definitive place to buy Half Life 2 in 2004, carrying the momentum from nearly half a million CS players joining in the prior year. It wasn't until the next year of Steam's existence that third party developers began to flock to the store.
Valve released Artifact just last month, with some mixed reviews, but it is a start and sign of things to come from the company. Valve needs to keep making games in order to keep Steam relevant and profitable. Gabe Newell has been on the record several times saying that Valve is going to get back to making games. The acquisition of Firewatch developer Campo Santo could be a sign of things to come. There are even rumors swirling about a Half Life VR game to launch with a Valve VR HMD. Whatever is going on inside the company, it is more apparent than ever that the best way to replace the lost revenues from the Launcher War is to make Valve games again. These 5-10% cuts in fees are weak sauce, and will not bring back games from companies who have proven they can have 100% of their cake and eat it too.