You may have missed it, since Nov. 30 was a big news day (the G20 economic summit in Buenos Aires, the passing of an ex-president, an earthquake in Anchorage, etc.), but the big news in the world of video games came from Valve. The company’s Steam platform detailed several changes that are being made to the digital storefront for video games. The most notable of these is that, going forward, titles that earn big money on Steam will eventually graduate to new tiers in their revenue sharing model.
By default, as per the old rules, Steam takes 30 percent off the top of any revenue that a given title generates on the storefront. In the new system, once a game earns $10 million in sales, Steam will adjust its share to 25 percent. If a game proceeds to hit the $50 million mark, Steam’s share further declines to 20 percent. The total revenue includes any and all income sources for a given game, such as package deals, add-on packs, in-game transactions, and fees applied to trading on the Steam Community Marketplace.
According to Steam’s post on the subject, “Our hope is this change will reward the positive network effects generated by developers of big games, further aligning their interests with Steam and the community.”
In other words, this is meant to encourage big developers not to take their games elsewhere by rewarding them with a bigger slice of the income. $10 million may sound high, but at a $60 price point, that’s around 167,000 sales. As a glance at SteamSpy can tell you, that’s nothing special for a mainstream PC game. Conversely, even a successful indie game may not reach $10 million in revenue over the course of its entire operational lifetime. In practice, the terms of the new revenue system appear to mean that a big “triple-A” mainstream title is being rewarded with a more favorable income split by Steam simply for showing up on the market at all.
This change to Steam’s policy comes at the end of a year in which some of the biggest games in the industry have very publicly chosen to bring their games to digital market via platforms other than Steam. Fortnite has never been on Steam at all, and this year’s current best-seller, Call of Duty: Black Ops IV, is digitally exclusive to Blizzard’s battle.net service, alongside Diablo III. Bethesda’s notoriously troubled Fallout 76 is currently only available via the company’s own online storefront, with no firm plans at time of writing to bring the game to Steam. Electronic Arts does all its online business via its Origin service, and hasn’t put any of its games on Steam at all since 2013. Ubisoft, makers of Assassin’s Creed: Odyssey and Far Cry 5, still sell games via Steam, but also maintains the uPlay service as a separate platform; theoretically, a dedicated fan of an Ubisoft franchise could stick entirely with uPlay and abandon Steam entirely.
The theory, then, from outside Valve, is that the change to Steam’s revenue sharing policy is an olive branch extended to big developers, in an attempt to keep them on Steam, rather than making their products exclusive to their own independent digital storefronts. At that point, at best, it represents a significant loss in revenue for Steam, and at worst, those storefronts could develop into full-fledged competitors at a point in time when Steam is already going head-to-head with Apple, Microsoft, and Discord.
On the one hand, as Steam’s community post says, big mainstream games play an important role in the ecosystem of a network like Steam, by attracting new users to the service. Someone who installs Steam to get a good deal on a triple-A shooter or RPG is more likely to come back later and pick up a few other products. Steam will always have Valve’s own products on it, particularly DOTA2 and Counter-Strike, and some third-party developers are so notoriously platform-agnostic (Capcom, THQ Nordic) that they’ll always publish on every service that will let them do so, but every big game it loses represents that many fewer customers interacting with the platform.
But the alternative is that the rich get *even richer* off-Steam, not bringing more people to Steam at all, making it a less viable platform for everyone involved, including indies, as well as forcing players to another client that *don't allow indies at all*
— Freya Holmér (@FreyaHolmer) December 1, 2018
On the other, Steam is already turning into a cutthroat environment for independent developers due to the marketplace being flooded, as well as Valve’s ongoing problems with curation in the marketplace. (To be fair, Steam is continuing to work on its community moderation.) The lower price points and frequent flash sales for indie games have traditionally left their publishers with a razor-thin profit margin on Steam, which was theoretically compensated for via exposure, ease of use, and the ubiquity of the platform. Now, with triple-A studios being effectively rewarded simply for bringing their products to Steam at all, it further chips away at the advantages that Steam offers to an independent publisher.
One of the earliest pushbacks on the new policy on Twitter came from Vancouver-based indie developer Greg Lubanov, the designer of this year’s Wandersong.
“This feels like a slap in the face to small developers on Steam,” he told me. “The 30% cut that Valve takes from Steam sales is supposedly ‘earned’ by the large audience and exposure that they provide. But their algorithms heavily favor games that are already popular, so most devs on their platform get less, and now, pay more.
It’s just such a tone-deaf move by Valve. The number one thing devs ask me at conferences, without fail, is “do you think Valve are still within their right to ask for 30% anymore?”. My answer is always “Kinda, they do X, Y and Z which is really cool”
This has changed my answer
— Mike Rose (@RaveofRavendale) December 1, 2018
It’s a complicated issue. Steam is by far one of the best things that’s ever happened to independent video game developers, as it automates a great deal of grunt work such as software patches, provides even a shoestring production with automatic access to a global marketplace, and even does some of the marketing via things like automatic recommendations.
However, as the market continues to flood and new competitors enter the market, Steam is in the odd position of being so far out in front that it gets to make all the first mistakes. Going into 2019, things are more precarious for Steam than they’ve been since the start, and it’s anyone’s guess how this will shake out, particularly as independent games have become a major factor in every platform’s content policies.
It may come to pass that every major studio ends up with its own separate storefront, leaving Steam as a relic and driving Valve back to focusing on its own products; however, if major players are coerced by a flexible revenue plan, Steam may continue its position as an industry leader. It’s too soon to tell, particularly in an entertainment industry that moves this quickly.