{"id":3728,"date":"2017-02-24T21:58:08","date_gmt":"2017-02-25T02:58:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/steam-digital-distribution-pioneer\/"},"modified":"2017-02-24T22:03:11","modified_gmt":"2017-02-25T03:03:11","slug":"steam-digital-distribution-pioneer","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/steam-digital-distribution-pioneer\/","title":{"rendered":"Steam: Digital Distribution Pioneer"},"content":{"rendered":"

Steam: Digital Distribution Pioneer<\/strong><\/h2>\n

Valve & Steam<\/strong><\/p>\n

Valve gained prominence as a video game manufacturer through its\u2019 award-winning single player game Half-Life, created in a time before mass high-speed internet adoption.<\/p>\n

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Half-Life<\/strong><\/p>\n

Through continued support for its\u2019 games, Valve realized that a majority of their users had access to high speed internet access. Brainstorming on how to deliver a streamlined channel of continued game support, Valve decided to create Steam. Valve expanded Steam into a direct to consumer retail channel.<\/p>\n

While early adoption was slow, and Steam was not required to play Valve games initially, a superior royalty structure and easier way to reach consumers directly lured third party software makers to the platform.<\/p>\n

Value creation<\/strong><\/p>\n

Steam enables seamless search, rating, trial, payment, download, community and game host\/launching capabilities. While Steam was initially launched as a game and update distribution vehicle for Valve\u2019s games, the platform was opened to third party manufacturers. Increased competition between Valve and third party manufacturers lead to higher quality experience for all users. Game demos and trailers added to user experience.<\/p>\n

Steam store sports 4000+ games or offerings. Steam also provides an online community where gamers can build relationships, providing a depth of entertainment quality and experiences and extend the life of both games and gamers.<\/p>\n

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The Steam Platform<\/strong><\/p>\n

Steam serves the multiplayer gaming communities by providing services such as matchmaking and anti-cheat protection. Virtual items, virtual currency and trading between players and stores provide further value to the users and revenue outlets for game makers. Through network effects, Steam provides increased competition, community, user & game selection.<\/p>\n

Value capture & business model<\/strong><\/p>\n

Valve takes a ~30% revenue royalty for hosting third party games on Steam. Software manufacturers competing with Valve are paying a fee for access to Steam\u2019s 125MM users, adding variety and attracting more users to Steam. Concurrently, Valve utilizes royalties to enhance Steam and cross-subsidize its\u2019 in-house game development.<\/p>\n

Growing Steam<\/strong><\/p>\n

Valve pioneered the freemium model, attracting new users to the Steam platform through free games. The increased userbase resulted in increased in-game virtual store revenues (through purchase \u201ce-swag\u201d such as skins \u2013 non-performance enhancing distinctive items). League of Legends, one of the most popular third party games estimated to make over $1B selling cosmetic items in 2014 [X]. Furthermore, the new Steam platform users bought more games, making the platform more valuable to all parties.<\/p>\n

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“F2P”
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