Steam - New Revenue Splits

Henriquejr spotted an article about Valve's new revenue splits on PC Gamer:

Valve's new Steam revenue splits favour big-budget games, and indie devs aren't happy

If a game makes more than $10 million, developers get to keep a bigger cut of any extra earnings.

Valve has changed the way it shares revenue with developers on Steam--and it's good news for games that make a lot of money. Currently, revenue for Steam games is split 70/30 between the developer and Valve. But from now on, Valve will only take a 25% cut of any earnings over and above $10 million, and only 20% of earnings beyond $50 million. The first $10 million will still be split 70/30, and the change will impact any revenue earned after October 1 this year.

In a Steam post, Valve said the change will help "developers of big games", which will in turn benefit the entirety of Steam because of the "positive network effects" those developers generate. But some indie developers don't see it that way, and have branded the move a "slap in the face" to smaller companies that will never reach the $10 million threshold.

More information.

EA already left for Origin, Blizzard ain't coming, some others launched own platform (example Bethesda) of course Valve needed to make this move in order to keep big fish on Steam.

As for indies who can't earn big bucks, well, tough luck. There are two options:
- make a game everyone wants and not yet another cheap RPGmaker/retro/chronotrigger clone
- ditch PC and earn billions on phones or Nintendo Gameboy Switch

I'm not much of a AAA title gamer. I can see this being seen as giving big players a boost, and obviously it is. I can also see it trying to retain those bigger titles on the platform, obviously for steam's benefit. The trickle down effect for me though is something I personally prefer than having multiple (often shoddy) game distribution clients/eco systems.

Way to roll over for the big guys, Steam. I think this is a bad precedent for gaming in general. I'd rather have Steam control their own marketplace than see them knuckle under to a small handful of companies already dominating the market.

Well even a 20% share of the profits seems ludicrous. Why isn't it 2%? For everybody? Steam's just another middleman. Maybe they improve profits by limiting piracy? Even so, 20-30% seems too high.

Yeah, we often see people complaining about all these distribution platforms popping up, but while this is the slice that Valve demands, it's almost guaranteed that companies will move to their own solution as soon as they can. If it were priced in a way that made it a good value outsourcing proposition for digital distribution, that would be one thing, but it's far steeper than that.

No matter how I look at this, I see nothing positive about it. Valve capitulating to the big companies isn't something I expected to happen, but I don' think there is anything to be done about it.

I’m not a huge fan of this but I understand it. Valve trying to keep every publisher from opening thier own storefront. Like Bethesda with fo76.

20-30% is not an unreasonable sum for steam to charge. 25-40% is a pretty standard wholesale discount for physical goods and I’ve seen up to 60% if you can’t negotiate a good deal.

For digital distribution, though, I don't think it's good value. If you look at other digital distributor platforms like BMT (which also used to distribute games before Steam dominated), the cut is about 5 - 10%. I think that's a point at which outsourcing digital distribution looks like sensible value. Steam operates a pricing model which is much more, "We control bridge - you pay toll!"

Once a company gets to the point where it's large enough not to need Steam's marketing effect, it's almost certainly going to want to run its own platform to retain that very significant extra percentage.

Originally Posted by Carnifex
No matter how I look at this, I see nothing positive about it. Valve capitulating to the big companies isn't something I expected to happen, but I don' think there is anything to be done about it.

The alternative is that the big companies won't use Steam at all, which is a rapidly increasing trend right now. So why wouldn't they capitulate? Wouldn't make much sense not to.

Originally Posted by Ripper
For digital distribution, though, I don't think it's good value. If you look at other digital distributor platforms like BMT (which also used to distribute games before Steam dominated), the cut is about 5 - 10%. I think that's a point at which outsourcing digital distribution looks like sensible value. Steam operates a pricing model which is much more, "We control bridge - you pay toll!"

Once a company gets to the point where it's large enough not to need Steam's marketing effect, it's almost certainly going to want to run its own platform to retain that very significant extra percentage.

I hear ya, but steam isn’t just a digital distributor. They’re an entire ecosystem. Profiles, friend lists, groups, curators, chat, forums, reviews, largest built in customer base, on and on. I don’t have to tell you Steam is much more than just a storefront. Many other “distributors” just sell you a key and then you go to steam to actually get the game.

If I want to get my product in to a mom and pop local store it won’t cost me much but if I want to go nationwide at a Walmart or target I’m gonna have to make it worth it for them.

I really don’t know how much steam needs to operate but I bet just servers and bandwidth cost alone are astronomical for them. Then there is all the other costs. I’m sure it’s not cheap and much more than any other distributor on the internet.

Look at what ea, gog or ubi offer beyond a storefront. It’s not even close.

Originally Posted by sakichop
Look at what ea, gog or ubi offer beyond a storefront. It’s not even close.

Yeah, and I would also add that even though I'm not a Steam fanboy, the less money I have to give to EA the better. Ubi at least made some redeeming moves in the past. EA is cancer.

Another aspect of Steam that doesn't seem to get a lot of play is that being global, they handle a wide range of tax regimes - so there's a lot of background accounting going on before you get your monthly royalty payment.

The first slice is $10M. Nothing unreachable by a small developper.
That is 250 000 units at $40.

That is just economy of scales in action: big customers get big discounts. Big sellers are big customers to Steam.

Originally Posted by sakichop
I hear ya, but steam isn’t just a digital distributor. They’re an entire ecosystem. Profiles, friend lists, groups, curators, chat, forums, reviews, largest built in customer base, on and on. I don’t have to tell you Steam is much more than just a storefront.

Steam, the best thing to ever happened to gaming (after the crowdfunded scene) according to self proclaimed proponents of SP products, has attached tons of services and features to what is in the case of a SP product, a single case of delivering a product.

SP gameplay does not call for profiles, friend lists, achievements, groups, farmed data to feed devs etc

At the end of the day, all those unnecessary services come with a cost.

Valve has changed the way it shares revenue with developers on Steam—and it's good news for games that make a lot of money.

Welcome to the philosophy of Corporate America ! Where the "Matthew Effect" is something serious !

Originally Posted by Alrik Fassbauer
Welcome to the philosophy of Corporate America ! Where the "Matthew Effect" is something serious !

That’s a worldwide occurrence. America doesn’t have a monopoly.

I'm mixed. I think the original 70/30 split came from publisher model in general and in the early days there was quite a bit of cost involved. Not just building up infrastructure but also BW.
-
Today I suspect their margins are quite high and 15% or 10% would still be quite profitable but they provide a much higher value than alternative with regards to virtual store front. In addition a lot of gamers are hooked on them over alternative and in fairness they are probably a more reliable platforms than alternative with regards to longevity (but i do have concerns about what will happen when Gabe passes away). So the value they offer is marketing. While it would be nice if they lower rates for indie and I think they would lower rates if they could pull in some of the major do it yourself folks (ea,…); it is probably tough for them to just give up the $$$ (greed?). As a gamer the best I can hope is they spend a few of those dollars developing quality single player games (something they haven't done in a while but we can hope).

I don't see what the indies are bitching about. Before the change they paid 30% to Valve; after the change they pay 30% to Valve. They are no worse off. Nothing has been taken from them.

A slap in the face my tailpipe. Valve is still charging 30% of the first 10 million. It's only charging less for games that earn more than that.

Originally Posted by rjshae
Well even a 20% share of the profits seems ludicrous. Why isn't it 2%? For everybody? Steam's just another middleman. Maybe they improve profits by limiting piracy? Even so, 20-30% seems too high.

It probably would be 2% if all they did was enable payments and refunds - but credit card companies already do that. Steam does a lot more:

• It provides a store front for people who want to buy games and/or DLC.
• It provides forums for users to discuss the game.
• It provides an area for screenshots, artwork and video links.
• It provides a setup structure to get games installed, updated, and verified.
• It provides a central place for achievements.
• It does that whole market place thing
• It provides a streaming service that can show up right on your storefront.
• It provides the friends, review, and curator systems that let folks know about games.
• It's also THE biggest software store by far. You can put your game up on Steam and leave it there for decades!

And probably more that don't jump to mind. They're earning some serious pay all right.

Originally Posted by sakichop
That’s a worldwide occurrence. America doesn’t have a monopoly.

Yet.

Edit: Also, the Steam post states that the 10M comes from all revenue, including DLC and market item sales.

The indies are really lucky that Steam allows anyone on who pays their very small fee. Other platforms have a much more stringent selection process and a much smaller customer base, so many of those games would either not make the cut or not find many buyers. In fact the single biggest problems for indies are the sheer number of other indies they are competing with. In the early days of Steam the few indies lucky enough to be on the platform sold quite well.