What happened to PC gaming (Steam)?

[john70t]

Is Steam a result of piracy or a conspiracy?
I've still been playing a few Win95+ games and wanted to get back into the latest and better sims offline, but must have dozed off.
Everything is Steam now.

After buying a gaming rig specific for that purpose, it's become worthless.

Gamers now have to "register" personal information and allow the internet to monitor what games they are playing, and when, in order for a person to be able to use a legally purchased product.
That, or install spyware software which of course will eventually require updating.

The result is a complete loss of consumer anonymity.


Plus, there are no longer cd's sold in most brick-n-mortar stores, and good luck finding a decent HOTAS or wheel setup, IRview, or other device within driving distance. Nobody sells them. It's like a switch was turned off at central HQ.

[Porsche-O-Phile]

Big Data. It's taking over. You are only as useful or valuable as your profile.

[stomachmonkey]

STEAM is an off shoot of VALVE. Founded by two former long time Microsoft employees.

They have managed to do what Microsoft attempted for years, turn the PC into a console with an eco system similar to the PlayStation, Xbox, Nintendo.

PC gaming has always been a bit of a problem for the industry. When you develop console games most of the time you will end up with a PC product as part of the process. It only makes sense to sell it as you essentialy get the SKU for free.

But you still need to build enough product for retail. While COGS were generally around $2-3 per copy you still had to build enough to have at least a few copies in each store so you are talking not insignificant money.

PC games also used to have fairly high system requirements which limited the audience. You have compatibility testing which can be expensive. In fact the Quake guys used to do a Mac build first, more consistent hardware, to work out bugs that were not hardware induced before they would work on the PC version.

It used to be that only 10-15% of PC games at retail were actually profitable, the rest either broke even or lost money.

When STEAM first came around everyone hated it, publishers / developers and PC gamers. Gamers did not like that STEAM was required to play the game they bought an publishers/developers were sensitive to that and the negative impact that had on sales.

Even so some of your better higher profile games started using STEAM because it actually makes sense. STEAM provided a lot of things in one package that we used to have to license separately, ex Gamespy for multi-player, lobbying, match making, leaderboards etc... the ability to push patches easily which cut down on support costs, plus one really big one, DRM.

Piracy is a huge problem. It really did not matter what DRM we used, you had roughly 2 weeks of retail sales that you could count on before the cracked games became available on pirate sites. I've personally been involved with PC games that were hacked before they hit the store shelf because someone walked out of the manufacturing facility with a finished disc instantly killing sales.

Then other things happened, broadband penetration is essentially saturated and the majority of the population has a connection equivalent to at least a T1 line making large downloads easier. Younger gamers did not care about the STEAM requirement because they were not conditioned to purchase at retail. They grew up downloading apps from iTunes on Moms iPhone.

The iPhone had very successful games that were not filled with cutting edge hyper realistic 3d graphics and features. The landscape of what could be sold got turned upside down and now small Indie dev teams of a couple guys could build a game and distribute it without a publishing deal. STEAM gave them distribution, multiplay, DRM, forums, exposure, all things that normally would have cost them money they just did not have and STEAM gave them the best royalty split on the market.

In the old days a developer needed a publisher who funded development, manufacturing, distribution etc... and they paid the dev a royalty. Just like the record industry every cost incurred by the publisher was recoupable off net sales meaning many times the developer made very little if anything from royalties and most times they had to sign away their IP rights as well.

STEAM made it easy for them to sell their product, gives the developer a 70/30 split, 70 to the dev so they make the bulk of the revenue and retain control of their IP so the STEAM catalog grew astronomically. Now there are more titles available on STEAM than anywhere else.

The nature of STEAM also makes the DLC revenue opportunity viable. One of the ways to extend the lifetime sales of a game is to offer DLC, downloadable content, additional maps, levels, character skins, vehicles, weapons etc...

You are never going to put that stuff on a disc and sell it at retail, not a good ROI model. Sure you can host the download yourself but then you need to build in transaction capabilities, set up CDN's and most important, let the consumer know it's available.

STEAM and similar distribution portals, Desura, Greenman, Gamersgate, make sense for everyone. They are highly efficient ecosystems that provide massive consumer benefit and maximize profit, especially for smaller development studios so they can continue to build games.

[jyl]

My son and his friends use Steam. No complaints. Games are reasonably priced and the service works well.

[stomachmonkey]

Originally Posted by jyl

My son and his friends use Steam. No complaints. Games are reasonably priced and the service works well.

And as a parent you can log in and see how long they've REALLY been playing.

[cstreit]

Stomach monkey, nice explanation and history lesson. Thanks!

[jyl]

I don't want to know . . .

He has a full class load, dances 15-18 hours/wk, and somehow still finds time to game and Netflix/Hulu . . . Apparently reading gets shortchanged!

Quote de jyl

My son and his friends use Steam. No complaints. Games are reasonably priced and the service works well.

And as a parent you can log in and see how long they've REALLY been playing.

[Skytrooper]

I have had STEAM for many years and it has worked very well. I like it.

[legion]

The same thing happened to me, John.

The last PC game I bought was Battlefield 1942. Then I decided that I wanted to play Duke Nukem Forever. (I knew the game would be bad, but nostalgia got the best of me.)

Bam! I have to install Big-Brother Steam to play.

I still remember booting in DOS to get better game performance and finding out that the game didn't support my audio controller...

[john70t]

Originally Posted by cstreit

Stomach monkey, nice explanation and history lesson. Thanks!

Yes. Very comprehensive writeup. Thank you.

Makes a bit more sense now, but still wish the industry had transformed in a different way.
Maybe that was just not possible...

Even when games (GPL, Operation Flashpoint, IL2 for me) had a loyal core base with a huge community following (for years and years and years), the updates etc. were released a bit haphazardly by the developer with little explanation or easy one-click comparability checks.
More often, than not, some of the best user-developed MODs or missions were missing a piece of file somewhere which made the thing completely unusable without searching through folder structures one file at a time for version compatibility. Most don't have time for that.
Then developers started cracking down on "non-approved" LANs, which kind of kills off a portion of its user base.

One duality was that all the latest updates made the existing game extremely fun.
Purchasing the next version at full cost($50 new vs. $15 a year later) only made a series 20% better.
I can see why sales profit would be affected there.
It seems like a conundrum.
How does a developer retain those new sales while expanding interest?
For a start, $50 is too high a price point for most to begin with excepting some titles.

What I'd always wished for was a system where the developer could get reimbursed for all the expansion packs and graphics updates in supporting their game.
Fans in the communities also performed huge amounts of free labor making MODS to fit every flavor of the game, and deserved compensation.
Stimulate interest. Stimulate user bases.

IMO, that's what can drive decent games and makes them big: A degree of community control, interaction, and minutia compensation.
This would require an anonymous micro-payment system that anyone could use safely.
But as of now, the banking industry doesn't have any such system.

[jyl]

Doing a full 180 from Steam, what do we think about the role for a physical retailer like GameStop?

[flipper35]

I have yet to purchase a game through Steam, but with coupons with a new video card, Humble Bundle deals and such I do have some. I don't like it as well as having the disk because it takes so stinking long to install everything since you have to wait for it to download. The updates are nice but other games have that feature build in. Origin is a huge pain as is Games for Windows Live. I don't play much online either. I guess I view Steam as the more trusted portal for downloaded software.

We still have LAN parties with BF1942 and the different mods. Mostly EoD and DCX. We also do Wings Over Europe when we want just air combat.

There are a couple stores here with wheels and HOTAS but they are MSRP.

[stomachmonkey]

Originally Posted by john70t

Yes. Very comprehensive writeup. Thank you.

Makes a bit more sense now, but still wish the industry had transformed in a different way.
Maybe that was just not possible...

Even when games (GPL, Operation Flashpoint, IL2 for me) had a loyal core base with a huge community following (for years and years and years), the updates etc. were released a bit haphazardly by the developer with little explanation or easy one-click comparability checks.
More often, than not, some of the best user-developed MODs or missions were missing a piece of file somewhere which made the thing completely unusable without searching through folder structures one file at a time for version compatibility. Most don't have time for that.
Then developers started cracking down on "non-approved" LANs, which kind of kills off a portion of its user base.

One duality was that all the latest updates made the existing game extremely fun.
Purchasing the next version at full cost($50 new vs. $15 a year later) only made a series 20% better.
I can see why sales profit would be affected there.
It seems like a conundrum.
How does a developer retain those new sales while expanding interest?
For a start, $50 is too high a price point for most to begin with excepting some titles.

What I'd always wished for was a system where the developer could get reimbursed for all the expansion packs and graphics updates in supporting their game.
Fans in the communities also performed huge amounts of free labor making MODS to fit every flavor of the game, and deserved compensation.
Stimulate interest. Stimulate user bases.

IMO, that's what can drive decent games and makes them big: A degree of community control, interaction, and minutia compensation.
This would require an anonymous micro-payment system that anyone could use safely.
But as of now, the banking industry doesn't have any such system.

STEAM is a natural evolution for the industry driven as much by consumers as it is by developers / publishers.

STEAM disruption is very similar to how Blockbuster died on the vine in the face of Netflix. BB had a virtual monopoly but also lost sight of their business. If you ask someone what BB was they'd say that it was a place that rented DVD's and that was 1000% incorrect. BB was a distribution channel and did not adapt. Netflix was the 100 mph freight train bearing down on them that they may have seen coming but for some bizarre reason BB waited too long to get out of the way.

What's interesting about your wish list is STEAM actually addresses it.

It's nearly impossible for a small indie developer to profit from a $9.99 game without digital distribution. STEAM provides them with all the infrastructure, transaction processing, CDN, customer management required to bring a product to market. It's turnkey.

There are a ton of awesome games on the distribution platforms at very nice price points, stuff you would never have seen in retail because there was just no way to make money.

As I said earlier, a big part of revenue is DLC, (expansion packs) which are really easy for developers to deliver and market through STEAM.

STEAM also have something called Early Access. It's essentially a pay for beta testing program. Consumers can buy a game that is still in development. They will pay less, get all kinds of additional exclusive DLC and get the full game when it launches. The consumer also helps the smaller developer in this way by providing QA for the product. The revenue keeps the developers lights on so they can finish the game. Win win for all involved.

STEAM communities built around games keep everything pretty much in one place. No searching for obscure forums with few users trying to find answers to things.

Walmart used to be 50% of everyones PC business. You can not get your game into Walmart or any other retail chain without a publisher to sell it in.

On a $10 msrp product Walmart gets 35-40% margin so you sold them the game at $6.50 wholesale. It cost the publisher $2.00 in COGs alone so now you are left with $4.50. The publisher needs to build minimum 50k units to get enough retail coverage, that's $100k they laid out that they get back before developer royalties are paid. Since the publisher takes most of the risk the royalty deal for the developer may be around 20% of wholesale on a good day. If the developer sees $1.00 a unit they did OK.

Contrast that with selling on STEAM, 70/30 split. Developer see's $7.00 per unit.

$350k revenue for the developer vs $50k on 50,000 units.

Now that $9.99 games are a viable business model the consumer has choices for product that they would never have had before.

There is no way the industry was going to go any other way.

[Porsche-O-Phile]

Good, clear write-up. I really dislike the "big data tracking everything you do" aspect of steam but it's a convenient service. The prices are way more sane and reasonable than brick-and-mortar store box versions a lot of times too (25% or more less is not uncommon). The steam sales offer some pretty choice buys at time too. I have way more stuff than I'll ever have time to play unfortunately - and it didn't cost that much.

[stomachmonkey]

Originally Posted by flipper35

I have yet to purchase a game through Steam, but with coupons with a new video card, Humble Bundle deals and such I do have some. I don't like it as well as having the disk because it takes so stinking long to install everything since you have to wait for it to download. The updates are nice but other games have that feature build in. Origin is a huge pain as is Games for Windows Live. I don't play much online either. I guess I view Steam as the more trusted portal for downloaded software.

We still have LAN parties with BF1942 and the different mods. Mostly EoD and DCX. We also do Wings Over Europe when we want just air combat.

There are a couple stores here with wheels and HOTAS but they are MSRP.

Humble Bundle is a great service. Lotta value for consumers there.

Origin is EA. But EA does not run it, they pay Digital River to take care of it all.

Games for Windows Live was MSFT's last effort to turn PC gaming into "consoles". There is no benefit to it for the consumer or the publisher for that matter. You give up more in revenue and the branding does not increase sell through.

[stomachmonkey]

Originally Posted by jyl

Doing a full 180 from Steam, what do we think about the role for a physical retailer like GameStop?

Their whole used game / console model is a real bone of contention for the industry.

No one and I do mean no one likes it. But we are pretty much stuck with it for now because you gotta be in Gamestop.

Xbox One was originally slated to ship without a disc drive. It was all going to be digital distribution through Xbox Live.

Sony also considered going discless for the PS4.

Consumer backlash put a stop to that this hardware cycle but it's coming.

Gamestop will face the same challenges that Blockbuster did.

It's one of the reasons they have their own digital distribution channel.

[legion]

Steam may have reasonable prices now, but I guarantee that when they are the sole distribution channel, they will not be reasonable.

See cable TV for reference.

[jyl]

My son goes to gamestop and another local competitor pretty often. The stores are always busy. They have a tiny footprint, rent costs must be low. The customers like the used goods, of course, but about half of what my son buys is new. I think he likes the feeling of community, the tribal vibe. The employees are gamers, the other customers too, there is the magazine, all the new games to look at, lots of affirmation there.

I confess I don't understand how GameStop's current business survives through the next console cycle, but for the next several years I guess they can make a lot of money as the last man standing. Then . . . At least there still are books and DVDs, but it seems plausible that one day there will no longer be game discs. I mean, optical drives are pretty much obsolete elsewhere in computing.

[john70t]

Originally Posted by stomachmonkey

Consumer backlash put a stop to that this hardware cycle but it's coming.

Consumers already seem accepting of using pure digital content vs. something tangible.
But I'd guess that trend would affect sales to a portion of user base over thirty years old, who grew up "having" and "owning" a product instead of "licensing" it.

With STEAM, you can't just install that Win95 game onto your new computer and start playing.
You have to re-purchase it.
I have a real problem with that concept.

To go on a small tangent:
That "licensing" aspect in business models is a growing trend, and not just in the gaming industry.

The entertainment industry went through a round of using DRM rootkits(viruses) and other draconian measures(bankrupting families for life) to quash the piracy for $10 worth of "lost" product which may not have been purchased anyways.
In a way they were justified but have really soured the whole field.
Moreover, they quenched new interest and actually made consumers afraid of their product.
It also seemed myopic. I illegally(probably legally actually) downloaded a few songs from artists I hadn't listened to before, liked it, and then went on to purchase several CDs from brick-n-mortars and then saw them in concert where the artist makes their real money.

The scary part: When that "licensing" trend spills over to other products, vehicles even, with all types of legal clauses attached(i.e. no pubic criticism), then the world turns upside down and all sorts of pitfalls await the average consumer who just wants to own and use their fully purchased product.

[stomachmonkey]

Originally Posted by legion

Steam may have reasonable prices now, but I guarantee that when they are the sole distribution channel, they will not be reasonable.

See cable TV for reference.

They actually are pretty much the sole distribution channel.

They are easily 85% of the digital distribution market which accounted for 90% of PC game sales last year.

I know this because I get sales reports from them as well as everyone else and they are the dominant player.