Steam parent company Valve announced a new revenue split for its online video game marketplace late Friday evening, with the change in its distribution agreement giving developers more money as the number of unit sales increases. Normally, Valve takes around 30 percent of all game sales on Steam, with some exceptions for games from smaller developers in its Steam Direct program. That will remain the case for the first $10 million in sales a game maker or publisher earns. For all sales between $10 million and $50 million, the split goes to 25 percent. And for every sale after the initial $50 million, Steam will take just a 20 percent cut.
“The value of a large network like Steam has many benefits that are contributed to and shared by all the participants. Finding the right balance to reflect those contributions is a tricky but important factor in a well-functioning network,” the company wrote in a statement on the Steam Community page. “It’s always been apparent that successful games and their large audiences have a material impact on those network effects so making sure Steam recognizes and continues to be an attractive platform for those games is an important goal for all participants in the network.” Valve is also letting developers be more transparent about game sales with an update to the confidentiality clause of its agreement.
This updated agreement marks the most substantial change to Steam’s financial terms in the store’s 15-year history, and it seems clearly designed to entice more developers to stick around, instead of self-releasing games or going with the growing number of competing online game distributors.
Valve is facing increasing competition from big publishers and competing game stores
Steam became the dominant platform for PC games over the last decade primarily by loosening restrictions on getting onto its platform and becoming, early on, the primary destination for PC gamers to collect and launch titles, which is all done from a single piece of software. In 2017, Valve took in $4.3 billion in Steam revenue alone, not even counting microtransaction and downloadable content, according to game analyst Steam Spy.
But over the years, big game developers and publishers have created their own distribution channels to more directly control aspects of their businesses like copyright restrictions, refunds, and game updates, as well as to avoid the revenue cut Steam would otherwise take. Blizzard, EA, Epic, and Ubisoft all now operate their own launchers, and Valve has seen its influence begin to wane.
Additionally, as Valve as found itself mired in controversies over its increasingly lax stance on letting violent, hateful, and other questionable content onto its platform, a number of smaller, more curated game distributors like Itchio have become popular alternatives, especially for big-name indie game makers. Also, game chat platform Discord, perhaps the one company with the social infrastructure to rival Steam, recently launched its own Steam competitor, posing yet another existential threat to the dominance of Valve’s marketplace.
All of this adds up to a precarious situation for Steam. Although it remains the biggest PC game marketplace, with more than 150 million registered users, the company clearly recognizes that it can’t rest on its laurels. Valve has started borrowing some social features from Discord to keep its built-in social advantage from slipping away, and it plans to launch its store in China, the world’s biggest gaming market, some time soon. But changing the Steam revenue split to more generous to developers is certainly a highly effective strategy to keep developers happy and sticking around.