This is why Valve’s business model is so totally brilliant

April 16, 2014

Valve is one of the most successful game companies on the planet. It helped usher in the idea of digital distribution. The company's version of an online app store, Steam, is known for selling games made by third parties, such as Skyrim and Call of Duty. But Steam's real value lies in the way it gives independent publishers equal footing against big corporate game makers.

Valve started out as one of these little guys. It created Steam as a way of selling games it had developed itself — titles like Half-Life and Counter-Strike. We always knew these games were popular. But now a massive study of Steam users conducted by Ars Technica shows us the scale of Valve's empire.

The study scraped play and sales data from hundreds of thousands of individual Steam users' profiles. And what the numbers show is that Valve has been incredibly successful at converting its in-house games into hits. Steam users have spent a combined 3 billion hours playing Valve's fantasy multiplayer game, Dota 2, and nearly 1.5 billion hours playing the cartoon-y combat simulator Team Fortress 2. The overall gaming universe is huge, and Valve is just a part of it; you can't play Steam games on consoles, such as the Xbox, for instance. But at least in the space it controls, Valve has somehow managed to outmaneuver even the most powerful titans of the industry.

(Ars Technica)

In the chart above, Valve-backed games account for an outrageous amount of playtime. (I've added the little black Valve icon to the left of each title that was published by the company.) You can only get games like Dota 2 on Valve; that helps explain why it's so popular, but only to a point. How players decide to allocate their time is probably as egalitarian a way to measure popularity as any.

The effect is even more pronounced if you look at the most played games on Steam. Eight of the top 10, and 11 of the top 13, were created by Valve. Those games beat out triple-A franchises that drop hundreds of millions of dollars on marketing without breaking a sweat.

(Ars Technica)

It might seem natural that Steam's hottest games would be ones that its owner made. But to say that would be to downplay the magnitude of Valve's achievement and its position in the marketplace. With access to 75 million active users, Valve enjoys immense bargaining power with other publishers who want to have their games sold on Steam. The company is able to run vast economic experiments on its users. And, of course, Valve reaps recurring benefits when people spend money on in-game purchases in Team Fortress 2 and other titles.

Valve's own games are the source of its incredible staying power — and that business model has now been totally validated.

Brian Fung covers technology for The Washington Post, focusing on telecom, broadband and digital politics. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.
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