Steam becoming the games-equivalent of iTunes, Retail threatens Steam ban.

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Steam’s dominance of the digital distribution model for PC games is causing unrest with Retail outfits, according to a report by MCV.

MCV states that key retailers may drop titles that integrate the popular Steam service as fears mount that the service has a ‘monopoly’ on the download market.

Steam, run by US studio Valve, serves a massive 80 percent of the PC download sector. Retailers don’t want that share to grow any more. They have a feeling that with new games being powered by the Steam platform, it pushes the customer to making their future purchases from the steam store.

Gaikai CEO David Perry believes Steam could become the games-equivalent of iTunes, where it dictates the terms of the market, not the other way around.

Steam has made it so easy for everyone and they have lots of users. But how long do you wait before you take control of your own digital strategy? Like with iTunes, at some point it’s going to be too late.

The problem with the Retailer argument is that everyone including retailers ditched the PC except for Steam.

Take a look back in history to when Steam came about. Steam was launched in September 12, 2003. A mere two years earlier Microsoft was making a major push to gain a piece of the console gaming’s massive 6.6 billion in yearly revenue with the release of the Xbox in 2001, and the Xbox 360 in 2005.

US PC software sales between 1998 and 2001 remained at similar levels, and even saw small growth in 1999. Following the launch of the Xbox, PC software sales dropped a massive 26%.

US PC Game Software Sales
1998 – $1.8 billion
1999 – $1.9 billion
2000 – $1.78 billion (84.9 million units)
2001 – $1.75 billion (83.6 million units)
2002 – $1.4 billion (61.5 million units)
2003 – $1.2 billion (52.8 million units)
2004 – $1.1 billion (47 million units)
2005 – $953 million (38 million units)
2006 – $970 million

Retailers are also responsible for this situation – they cut back on PC game floor space when the next generation of consoles were released; attempting to take advantage of the explosive growth in console gaming sales, steadily increasing by approximately $1 billion each year, and now these retailers are reaping the results.

US Console & Handheld Total Sales
1997 – $5.1 billion
1998 – $6.2 billion
1999 – $6.9 billion
2000 – $6.6 billion
2001 – $9.4 billion
2002 – $10.3 billion
2003 – $10 billion
2004 – $9.9 billion
2005 – $10.3 billion
2006 – $12.5 billion

Following 2008 the PC game market took another huge hit, dropping 23% to $701 million. Capcom’s Christian Svensson explains why,

“One of the problems, to be candid, is that retail is falling away,” said Svensson. “What are the reasons for that? Partly it’s that return rates are very high. Returns of a PC title are usually double that of a console title–why? Because it’s not a great consumer experience because there’s variation in minimum spec, and it requires a lot of consumer knowledge to figure out exactly what is in their box, and what that will run…”

Russian publisher 1C Games international publishing director Darryl Still says that retailers are holding the murder weapon.

“You just have to head into a games store and look for their PC titles,” he says, “and you’ll see there is no focus, listings or promotions for them.”

If anything it is primarily Steam’s responsibility for causing the recovery and growth in PC game sales, PC gaming revenue grew in 2009 even as retail PC game sales shrank. In 2009, 21.3 million PC games were downloaded to computers in the U.S. via online game services such as Valve’s Steam, compared with 23.5 million purchased at stores.

The top five digital retailers (those who have the games that are also typically offered in stores) are:

1. Steam (No surprise here)
2. Direct2Drive
3. Blizzard.com
4. EA.com
5. WorldofWarcraft.com

Steam is also very supportive of games makers and has made many of the up and coming indie studios profitable. Steam nursed the PC gaming market back to heath and now these companies are complaining?

About the author

Matt (@ANBUgaming) is a gamer and web designer based in Seattle, Washington. Currently playing World of Warcraft, Civilization V, New Vegas, and Photoshop. ANBUgaming.

5 Comments

  1. br1ggs says:

    Steam provides an excellent service, which is more than I could ever say from retailers.

  2. Toaster says:

    It’s embarrassingly hilarious to think how easily the publishers could have made their own digital distribution channel and thus controlled the sale end-to-end, cutting out the retailers.

    Blizzard is doing it right now with Battle.net. Valve saw a hole in the market (PC gamers getting treated like second-class gamers), they capitalized on it, and now the publishers are getting pissed at the solution to a problem THEY CREATED. The two companies who are doing really well in the digital PC game sales market (Blizzard and Valve) are the two who have been 100% dedicated to PC gamers in the first place. It isn’t a coincidence.

    That’s not even to mention that Steam works 100 times better than any other competitor. And it’s cheaper.

    But…now that I think about it…How would you react if the new Black Ops game required you to register with…oh…Direct2Drive, and it only authenticated with D2D? I would be pissed, and would probably boycott the game. So they do have a point that it is a really hard marketplace to get into.

  3. LaughingMan says:

    I was in a GameStop last week and they had Hellgate: London for sale. Sad sad day.

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