“We have tried to be completely transparent in giving folks control over Steam and trying to let them know what we’re doing,” says Doug Lombardi, vice president of marketing at Valve. “It’s one of [company founder Gabe Newell’s] pet peeves to have a software application that is, in any way, obnoxious or intrusive on a user’s machine. That’s something we take to heart.”
Analysts note that while the complaints are sporadic, it’s important for Valve to stay on top of them.
“The reason they’ve been wildly successful so far is they offer positive incentives for people to authenticate online,” says Billy Pidgeon, senior analyst at M2 Research. “If people are seeing performance hits with their system, they’re getting into dangerous territory.”
Valve doesn’t release sales numbers for Steam, but recently reported unit sales increased by more than 205 percent in 2009. And even though the PC market is often given second-class citizenship by game publishers, that’s enough money to start raising eyebrows—and that means more competition is on the way.
Who Would Compete?
Electronic Arts , Activision and Microsoft are all taking different approaches to digital distribution, but could all chip away at Steam’s market share.
EA is taking the most aggressive approach. The company is investing heavily in its EA Store and other digital platforms. Digital revenues at EA were up 33 percent in the just-completed fiscal 2010, hitting $570 million. Management expects that number to grow to $750 million in fiscal 2011. (The figure includes income from advertising and subscriptions as well as the store.)
EA, though, is a direct competitor to other publishers, which would likely prevent them from aligning with the company. Valve, on the other hand, has succeeded in wooing companies like Ubisoft and Take Two Interactive Software to Steam because it is less of a direct competitor (and likely offers a lower fee than brick and mortar retailers).
Microsoft, whose Xbox Live service is considered a leader in the console digital distribution field, has so far been unable to transfer that success to the PC world.