# Give Me Steam!

A glimpse into the quiet success story of broadband-based game distribution

If you haven’t heard much about Steam, maybe it’s because of a lot folks on the business side of the game industry would rather it just went away. The brainchild of Valve Software, the game studio behind the mammothly popular Half-Life and Counterstrike action games, the Steam network is many things: a piracy prevention system, a patch and update network, a multiplayer hosting service, and above all, a game distribution platform for Valve and non-Valve games alike.

According to Valve Marketing Director Doug Lombardi, Steam was conceived out of necessity, after the company’s vain search for a 3rd party solution to support their games online. “[A]s online gaming grew,” Lombardi tells me, “it was obvious that things such as auto-updating and more sophisticated anti-cheat measures were going to be requirements.”

Failing to find that, they went out and built it themselves. After a notably shaky launch in 2002 (gamer message boards are rife with grumbling over that troubled beginning– but then, gamers are an easily outraged audience), Stream now boasts 8 million users, 5 million of whom, according to Lombardi, have logged in at least once in the last 30 days. (An impressive retention number, for gamers are also a fickle audience.)

Unsurprisingly, the pipes and servers needed to support this subscriber base are staggering, and Valve has partnered with a number of ISPs to do that, while supplying a garrison of servers around the globe. “All told, Steam gamers are generating more Internet traffic than all PC users in Italy combined,” says Lombardi. In the beginning the legal challenges were about as intense, with Valve locked in a lawsuit with its publisher Vivendi Universal Games over control of game distribution in Internet cafes. (A huge prize, since Valve’s Counterstrike titles remain, seven years after debut, the most popular online multiplayer game out there, with significant play in the Internet cafes of Europe and Asia.) Valve prevailed in 2004, and Steam now has an integrated “Cyber Cafe” service.

Last month, Valve released Half-Life 2: Episode One, the further adventures of taciturn hero Gordon Freeman and his lithe and spunky sidekick Alyx; it’s the most prominent example of “episodic content”, an industry buzzword a few years ago that’s largely fell off the radar since then– until Valve picked it up again with this. The inaugural episode is still a retail bestseller, and while Lombardi declines to give numbers sold via Steam, it’s worth noting that for the original Half-Life 2, which sold four million total units, an estimated 1 in 4 were bought and distributed over Steam. It’s safe to assume a similar ratio will obtain for the episodic version.

There’s been other successes, too– for example, the independently-produced Darwinia and Red Orchestra were languishing on retail shelves, say Lombardi, but made the studios behind both games profitable, when they came available on Steam. A weekend-long free download of another Steam-hosted game, Day of Defeat, even subsequently increased sales of the game at retail. “[I]t was interesting to find that an online promotion through an online service can drive sales across all channels,” Lobmardi notes.

In doing this, Valve has created a viable alternative to the aging department store, off-the-shelf distribution model, where profits to studios are paltry, after publishers and retailers have taken their cut. (If the studio can even secure a decent distribution deal at all, which they often can’t.) By contrast, consider the million downloads of Half-Life 2, sold through Steam at some $49.95 each, most of which (after expenses) went directly to Valve. It’s a mystery why other PC game developers haven’t tried this channel. To be sure, it’s partly a matter of branding, with Valve beloved by gamers, and the Half-Life/Counterstrike franchises among the most popular of all time. But perhaps it’s also an unwillingness by the big publishers to invest for the long haul in broadband as a distribution channel. “[W]e’re starting to see some publishers experiement in this space,” Doug Lombardi observes, “but they’re approaching it without the experience of running online systems, and most publishers are not interested in committing resources to long-term engineering projects that carry a certain amount of risk.”  The Steam Numbers Total Steam Users 8 million total, 5 million active (last 30 days) Sales Unknown for Half-Life Two: Episode One Half-Life 2 sales via Steam 750,000 -1 million @ approx.$49.95 each