Valve Strategy Analysis

So, I’ve been watching with great interest lots of the Valve announcements and maneuvering in the industry and other people commenting on what they are doing and why they think it is. So I wanted to add some of my own thoughts to this.

Valve is probably going to abandon the GreenLight process and go with opening up Steam for submission via API, with little to no curation and then open the Steam Front End up for others to create store fronts.

That’s a mouth full. Lets go over it bit by bit. So Valve has Steam, which is a purely digital distribution method for games. They introduced it years ago and now it’s the defacto independent (ish – we’ll get into that later) PC digital distribution method. EA and others are still playing catch up with Origin and so on.

The thing is, getting a game onto steam is a bitch. Valve has been particularly opaque about the whole process todate. You send them the game, and they either say yes or not. That’s it. No back and forth, no transparency as to why they may reject you or what you can do about it. Either someone at Valve (and you’ve no idea who) likes it, or they don’t. And you can’t pre-do this either – they only operate on a game with considerable content. So you are out the time and effort to make the game before Valve will even tell you if you can be on their platform or not.

Now this, needless to say, sucked. And Valve knew it – they didn’t want to be the bottle neck for getting games onto the platform. They realised that what they were doing sucked, but as it was, they were taking developer time away from making games to approve these games; the reason there was no transparency was purely because they didn’t want to get into a back and forth with developers that would be even more of a time suck than steam approvals already were.

So they created the GreenLight process, which basically moved the process of them approving, by crowd sourcing it. The gamers who would buy the game would basically vote on which games would make it into Steam. Sounds great on paper – the monkey is off Valves back and the gamers only have themselves to blame if shitty games make it into the store.

But, as anyone who’s ever had to deal with crowd sourcing will tell you, this isn’t going to work. Gamers are basically both graphics whores – so pretty pictures will be approved over something like Flow – and they are also dominated by a vocal minority. Greenlight has basically become high school, voting on the prom queen.

Valve is not stupid. They see this, and they recognize the mistake made here. But what can they do about it?

Now, secondary to this, is the concept that Valve is going to go into the hardware business. They are going to produce a Steam Box. Why? Because, well, why not? A SteamBox in terms of physical development is a no brainer. It’s a low spec PC in a nice box. It’s not hard to produce – look at Oyua. But why bother at all?

Well, to a certain degree, because Valve have to. Windows 8 is coming – and Gabe has ranted on about how terrible it is. Well, yeah, it is terrible. For Valve and their Steam ambitions. Microsoft is finally going the closed, walled garden route – mainly because Apple has made so much money doing so and Microsoft need to compete. So Windows 8 is going to be particularly Steam Unfriendly, because Microsoft doesn’t particularly want Steam on there. They want their OWN app store, not Valve’s. They aren’t taking 30% of the Steam revenues – Valve are.

So Steam is likely to find it hard going, going forward. They aren’t particularly welcome on OSX since OSX has it’s own app store, Windows 8 is going to have it’s own – where do they go? Well, they make their own channel, on their own hardware. They use Linux (Remember all those “Linux is the salvation of developers?” statements from Gabe? Well, what those really mean is “Linux is the salvation of Steam”) since a) it’s free and b) it’s not owned by a conglomerate who is all about creating a wall garden and shutting Steam out of it.

So basically, Steam has no choice but to own it’s own hardware, going forward, if it’s going to retain the success it already has. But it does get better. If Valve makes this bet, the hardware costs go down over time, AND it can fairly easily get integrated into other platforms, like TV’s. Look at the Raspberry Pi. That’s a complete computer on a chip, and that costs $35 – and it’s pretty much Steam Capable. Imagine that built into your TV, running Steam. So the long term prospects are pretty good here, and it’s not hard to see why Valve are eyeing the hardware route.

Now the whole issue of curation is a problem – Valve doesn’t want to be in the business of judging your game – they also want as much content on steam as is possible, (and preferably exclusive content). A curation system imposes friction on the process (as anyone who has every submitted anything to Apple will know) and does NOT stop crap from getting onto your system – again, a wander through the appstore and google play indicates that.

So what to do? If you abandon curation, your platform gets flooded by crap, and gamers get pissed off that they can’t find the quality when they want it. Apple and Google are already grappling with this problem (although it’s a nice problem to have).

But is it really the worst thing? Having lots of shovel ware on your system? Well, actually, contrary to popular opinion, no.

One of the lessons I learned on The Sims and working on Quake based products is that Free Sells. What that means is that if there is a lot of Free product, it doesn’t matter what the quality is – the fact that there is a lot of free product is enough to drive people to buy your product. They think they are getting a lot for free, and that is attractive. It doesn’t matter if 99% of that free product is dross. It’s Free, and that’s what counts.

Valve knows this. In order to compete with Apple and Android and, to a certain extent, Oyua, they have to have a LOT of content to choose from in order to persuade people to put that new device under their TV. So, from a certain perspective, abandoning the curation and opening their platform to anyone works. Now a certain contingent are going to be pissed at this, because for them, the value of steam is that it is curated. They know what they are looking at is good. This will not be the case going forward.

But to a certain degree, this is a solvable problem (as we’ll see in a moment), because this is actually a problem of finding the good stuff, not the fact that the crap exists. And also, if Valve is really going to compete with Apple and Goggle and Microsoft, they have no choice. They HAVE to throw those gates open to allow more content and not burden themselves with the problem of judging it all.

So, ok, now we have a store full of large amounts of shovelware and some gems. How do you find the good stuff? Addressing this problem, Valve has had a master stroke of daring and audacity.

They aren’t going to solve it.

You are.

The idea is that Valve is going to open the Store API’s so that anyone can create their own front end for Steam. Oh, all transactions are still done through Valve and Steam – you’ll just be able to request all game information, and then display it, based on any filters you choose to put in place. So if you filter and only display games YOU think are good, eventually you earn the trust of gamers, and they’ll come to you to find out what games they should be looking at. Think of it as the movie critic effect. Those people who consistently filter out the crap and only display the good will get repeat visits, but those games are still actually bought through the Steam APIS (presumably there would be some kick back mechanism from Valve to the forwarding front end, so you get 5% of the sale, Valve gets 25% and the developer gets 70% – this would make sense since it incentivizes the great unwashed to provide Steam Front Ends). This means there are now multiple ways to get Steam games and multiple filters out there in the world for gamers to find what is good and what is not.

Now this is very smart, but also a heavy bet – because if no one does pick up on this, Steam is now no better than the Appstore of Google Play to find stuff relevant to your interests, and at that point, why would anyone bother with a specific SteamBox under their TV?

After all, Google Play wanted to do the same thing with Google TV – they had the devices and persuaded a few TV manufacturers to put their hardware (which again, was peanuts) into the TV’s, and it has NOT taken off. Why? In a word, content.

All of these front end stores require two things. 1) a frictionless, easy method to both find and buy games and 2) the content to actually buy, preferably exclusive content. Valve needs both, and while they have a massively good start with Steam as it is now, they need to evolve it. With 1), they are hoping you, the web savvy gamer, will help and with 2), well, the only solution there is to throw open the doors and cross your fingers.

I think that, from a personal perspective, this is an enormously ballsy bet. I can completely see why they are doing it and frankly, they are turning a potential platform killing event into an opportunity to, if not own the living room, be a large competitor in there.

I gotta say I applaud this. I think there are several things that Valve needs to be doing to make this more of a success – for example, they need a couple of Steam Evangelists, to get out there to websites like Evil Avatar, Kotaku and so on, and persuade them to build some of these front ends – they are the perfect place that already have gamer credence, and they also have the design and web skills to actually pull it off. Valve is notoriously insular, so it’s questionable they’ll actually do it, but if they did, it would help stack the deck on this gamble.

They also need some Linux Evangelists on staff. All of this is precedented on the fact that they can persuade developers to write their games for Linux, since that’s what the SteamBox is going to be running, and that is not going to be easy, as Microsoft has found by trying to push developers into XNA (And giving up) for mobile. The whole point of the success of Steam is that it is windows friendly, and windows has the best developer tools (Sorry Apple and Sony, they do. This is a fact.) and windows has the biggest market penetration. Switching platforms is a massively risky thing to do, and despite assurances that “this will be easy, it’ll be like writing C++ code for IOS”, not a lot of developers are going to go for this without some help and coaxing from Valve. They are going to need a Dev Rel team there, and I’m not sure that a company like Valve is built along those lines.

The only thing I think Valve is doing actively wrong is by not spinning off Steam into it’s own company, or siloing it within Valve itself. Currently all developers at Valve can see all sales figures within Steam, and this is a clear conflict of interest. Activision and other distributors do not do this and Valve shouldn’t either – policy of internal transparency or not.

Still, the next couple of years are going to be majorly exciting to see what happens in this space, and if Valves bet pays off.

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2 Responses to Valve Strategy Analysis

  1. Haruna says:

    There are a number of bloggers out there that have been making pretty good money off Amazon Referrals and what have you, adding your own Personal Steam Store can only make things even more exciting for these people.

    I’m sure Cheap Ass Gamer among others will be there day 1. I plan to be!

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