Gabe Newell: Valve Are Very Rich. It’s Awesome.

By Kieron Gillen on February 19th, 2009 at 7:44 pm.

I miss the staring eyes running gag
Well, that’s what you get reading between the lines of Gabe Newell’s keynote at this year’s DICE Summit, which featured the Valve boss speaking about his company’s experience with Steam and how digital-download direct sales are an enormous success. G4 liveblogged the event in loving detail while Gamasutra did an overview of the whole thing. I’d read the whole G4 thing if I were you, if only to have a chuckle at the comment thread at the bottom full of PS3 owners who just won’t let go. However, I’ll pick out the key points – and some exciting percentages – beneath the cut.

The top level trends will be familiar to RPS readers. Direct Download closes the distance between the creators and the audience. Plain DRM actually seems to encourage piracy. (Though Steam is a DRM system – just one which offers a enough bonuses which makes the pill easier to swallow for the customer) Pirates are actually customers who aren’t being served – and arguably the pirates are actually providing a better, more convenient service than actual retailers.

Some fun facts? Well, try these:

  • There’s twenty million people on Steam now. That’s 100% year on year growth since 2004. Which sounds like some good year on year growth to me.
  • The TF2 updates really pay off, with sale spikes after every update. 106% increase in sales. The ability to gift accounts has lead to a 71% increase in sales. It also helped retail, with revenue increase 28%. Also, a 75% increase in new users of Steam generally. The point I’d take from that is that Valve’s policy of offering more to consumers is actually the smart commerical thing to do, assuming the increase in revenue is enough.
  • The sales are having an enormous effect. The recent Left 4 Dead sale lead to a 3000% increase over the previous numbers. That is, more than in the weekend it was released. Plus, another 1600% in new customers to Steam. None of this effected retail numbers.
  • One third party game – annoyingly, they don’t say which one – saw increases of 36,000% in a weekend sale.
  • The holiday sales lead to interesting numbers. A 10% reduction lead to 35% increase in amount of money which came in (i.e. Not just sales). 25% lead to a 245% increase. 50% lead to 320% increase. And 75% lead to 1470%. Which is an interesting one to interpret in a few ways.
  • The people who made the TF2 videos are going to make TF2 comics. Interestink!
  • And bloggers are important, apparently. Thanks, Gabe! We think you’re pretty important too.

As I said, it’s worth reading the whole liveblog but lots to think about, if only it’s “I wish I had a lot of money”.

Man, I wish I had a lot of money.

:(

:(

:(

Yes.

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120 Comments »

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  1. Retro says:

    “One third party game – annoyingly, they don’t say which one – saw increases of 36,000% in a weekend sale.”

    Bioshock, what else?

  2. Retro says:

    Err, except that it was not a weekend but a holiday sale.. nevermind me

  3. yxxxx says:

    sigh the comments make me weep.

    Mind you why he seems to dislike the ps3 is a little strange.

  4. fulis says:

    boo I tipped you off on this morning! but yay for steam

  5. nakke says:

    The holiday sales numbers are really interesting. Yay for companies discovering price elasticity (hopefully)!

  6. nabeel says:

    It was pretty cool to see the numbers finally, I have always been very curious about how sales have been affected by their various deals. Also nice to see confirmation of my suspicion that they have a psychologist on hand for sale strategies.

  7. Zed says:

    I reckon Audiosurf was the game with the 36,000% increase. Whoever made it must be pretty chuffed.

  8. viper34j says:

    Mount & Blade had a pretty good weekend sale a while back. I doubt it’s had a large amount of sales since release due to an absence of PR. Since that time I’ve seen increased love being given to it by the reviewing community (and RPS). I bet the advertisement from Steam and the price tag of only $10 had it flying off the digital shelf.

  9. Theory says:

    One third party game – annoyingly, they don’t say which one – saw increases of 36,000% in a weekend sale.

    That has to be Prey’s $5 sale.

  10. Muzman says:

    Do they talk a bit about the way they broker sales and deal with royalties and such?
    I’d be curious to know how that works compared to regular retail (suppliers and producers basically have to ‘buy’ a ‘sale’ as well as discount their stuff usually. But there’s various sorts of deals retailers have set up. Valve’s policies are probably out there if I just went and looked I guess) .

  11. Doc MacRae says:

    6:01 PM – The keynote is officially one minute late. Jeez. Valve can’t even ship a keynote on time!

    6:04 PM – I just got word that Gabe’s beta speech was stolen from the green room and it wasn’t very polished. He’s hard at work refining his speech and we expect to kick off “when it’s done.”
    Snicker.

    And suck, PS3 kids with sour grapes.

  12. Doc MacRae says:

    Suck *it*, that is. If I register and/or subscribe, do I get to edit my posts?

  13. noexes says:

    I <3 Gabe, but yea, the PS3 boys have reason to be a bit angry. He is taking full credit for this free updates business plan and saying that it is impossible on the consoles but at the moment it is only impossible on the 360. Games like the PS3 versions of Unreal Tournament 3 and Burnout: Paradise have gained a lot of goodwill by releasing free updates. If they fully supported the PS3 version of TF2 there is no reason it couldn’t reach near parity with the PC version feature wise the way UT3 has.

    And that is all that needs to be said on the topic.

  14. aiusepsi says:

    I think this is interesting juxtaposed against the Pirate Bay trial going on in Sweden.

    The fact of the matter is that the Internet and technology is fundamentally transforming the way that entertainment is distributed and consumed, and the attempts of the big companies to shut down places like the Pirate Bay just seem to me like King Canute telling the tide not to come in.

    On the other hand, Valve are proving how damned smart they are. Again.

  15. cyrenic says:

    I agree with viper, I would bet money that 3rd party game mentioned was Mount and Blade. The decrease was from $30 to $7.50, which is huge, and it’s an obscure enough game that the normal sales would have been low enough to see such a huge % increase after a sale like that.

  16. Nighthood says:

    The comments thread has made me lose all faith in humanity. One thing that can be said for PC Gaming is that, in the most part, the people on it are mature and intelligent. It’s easy for anybody to put in a disc and play, but harder to install a game.

    Ah, I don’t know. Sometimes I think that Console players are the Trendy kids in school and PC Gamers are the nerdier, clever ones. The trendy kids might walk around with a swagger and make jokes about the nerdy ones, but in the long run, you know which one comes out top.

    This post is also entirely irrelevant to the Valve thing. Oh well. VALVE FTW!!!!1!1

  17. Jim Rossignol says:

    Doc: I think being logged into the forum provides some degree of editing on comment thread post.

  18. redrain85 says:

    The comments on that G4 Feed article are just atrocious. :p

    Blimey. Steam has 20 million users now? And it seems like only yesterday that it had 15 million users. That’s some enormous growth.

    So let me get this straight. The secret to Valve’s success is:

    – Keep updating your games, either by patching bugs or introducing new content.
    – Release said new content for free whenever possible, instead of nickel and diming customers to death.
    – Have sales on your titles that make them very reasonably priced.
    – Don’t treat all your customers like potential criminals.
    – Word of mouth is far more important (and cheaper) than any PR campaign.
    – Provide the necessary tools and encourage players to create new content, instead of intentionally withholding them due to (baseless) fear that free content will eliminate the demand for high-quality paid content. (And the key words there are “high-quality”, not cheap map packs knocked out over a week or two.)

    Really? Using common sense works? Who woulda thunk it.

  19. Nighthood says:

    The comments thread on the G4 site that is. RPS is all goooood.

  20. subedii says:

    I suspect that the 36,000% figure might have been from when they dropped Half-Life 1 to a dollar to celebrate the 10th year anniversary. Heck, anyone on Steam who didn’t own it by then probably bought it at that point.

  21. l1ddl3monkey says:

    Y DUZ GAB NOT LIEK PS3??? PS3 IS TEH AWSOMIST GAME MACHENE WAT HAS BIN MADE EVAR. GABE IS A FAG. LOL 1111!!!!!ONEELEVEN!!!!111 HURRRRRRRRRR.

    This is what is wrong with the PS3.

  22. Nighthood says:

    Half Life isn’t third party afaik.

  23. Max says:

    @Muzman
    I think that Steam deals with royalties on a case-by-case basis depending on what the developer wants out of the service.

    For example, I know that Garry (of GMod fame) agreed to getting 50% of the profit in return for full access to the HL2 source code.

  24. Tworak says:

    Gabe Newell is awesome. The fact that he hates 33% of the consoles makes him even awesome-r.

  25. shon says:

    I bought TF2 after the Heavy Update. The free weekend hooked me but I was willing to pay for it just because I was impressed by how they kept updating it. Outside of MMO’s, I don’t know of a company that keeps trying to make their game fun.

  26. Arnulf says:

    If they find a way to implement an age verification system, or label some game as imports for customers, I’d be very happy!

    I bought Bioshock and The Orange Box recently over Steam and got treated to the cut/censored versions. I was very annoyed over the changes they made to HL2:Ep2. Especially since Ep1 wasn’t cut at all.

    Verdammt nochmal!

  27. The_B says:

    Mentioning Killzone 2 – The Internet’s new DRM.

  28. Rich_P says:

    What an awesome sales pitch: Steam is the future. Your retail model is old and clunky. Join us.

    Valve’s essentially built a gaming platform for nothing. Sony and Microsoft spend billions of dollars designing and producing consoles, hoping that royalties from new game sales make the endeavor profitable. (Steam essentially gets a royalty for every game sold.)

    So in terms of return-on-investment, Steam (and WoW for that matter) make the consoles look like a joke.

    What’s to stop Valve from selling movies, TV shows, apps, and other services? That’s Bill Gates’ dream for the Xbox: an all-in-one entertainment platform where Microsoft gets a cut of every transaction.

    Once Steam reaches critical mass, publishers could be rendered obsolete. Have a good game? Just send it to Valve and negotiate distribution fees, no publisher required.

  29. Wazzle says:

    Oh ho ho, that comment thread on G4 is a laugh and one half. Make sure to read “taarec10″‘s comments, those are especially tummy-tickling.

    Or depressing.

  30. Mike says:

    My money goes on Mount and Blade for the “Mystery 36000% game”. Either that or possibly Red Orchestra. Interesting that the L4D sale led to a high increase of new Steam accounts. My guess is converted 360 owners with too few people to play with? No idea.

  31. unclelou says:

    If they find a way to implement an age verification system, or label some game as imports for customers, I’d be very happy!

    I bought Bioshock and The Orange Box recently over Steam and got treated to the cut/censored versions. I was very annoyed over the changes they made to HL2:Ep2. Especially since Ep1 wasn’t cut at all.

    Verdammt nochmal!

    This – it’s really, really annoying. It’s perfectly legal for any German over 18 to buy import versions (or even “banned” games), but Steam won’t let me unless I import a boxed copy or let someone from the UK make me a gift. :-/

    As much as I like Steam, the amount of control they have over what you can play and what not is a bit tterrifying for someone from a country with stricter age rating laws.

  32. Premium User Badge

    Fatbubba says:

    I’m not surprised about the holiday and weekend sales numbers. I usually instantly buy a weekend deal if I don’t already have it and the Christmas sale was great again this year. Plenty of people who instantly buy the weekend deals

  33. subedii says:

    Now now, you leave those PS3 fanboys alone. They’ve been treated harshly by the internet, as evidenced by the lack of universal 10’s on Killzone 2.

    @ Nighthood: You’re right. My next guess would be maybe Mount and Blade.

  34. Heliocentric says:

    You know 36000% of not very much, remains not very much. 1 sale to 361 sales. For example. Probably a sign the game was overpriced in the first place.

  35. ascagnel says:

    @Retro:

    Could also be STALKER SoC. BioShock was more popular on 360 than PC (not sayin, but just sayin), while STALKER got a good amount of word-of-mouth that more than justified a $2US or so purchase that it was on sale for one weekend.

    And yes, it was for a weekend sale.

  36. jalf says:

    Cue comment about ridiculous Euro prices… Of course that’s one way to make your weekend deal sales look impressive. Price the game 50% above everyone else the rest of the time, and the percentage increase in sales on a weekend deal will look pretty damn good.

    Oh well, thank god for Play.com :)

  37. James G says:

    @unclelou

    The most recent client update claimed: “Added ability to specify content download region (in Settings->downloads)”

    I’m assuming that will let you download the international versions.

  38. clive dunn says:

    I wonder how many people have purchased a game in one of the sales and never played it. I know i have.

  39. Okami says:

    Why did you have to tell us to look at the comments under the g4tv article? I did and now I’m incredibly sad. Humans suck.

  40. Alex says:

    James, that just tells your client which content servers to use, not what content you actually get.

    Like in ye olden times, before Steame, when one would have to scoure a list of mirrores to get the latest Half-Life patch.

  41. shon says:

    As I do not own a PS3 or have any idea what Killzone 2 is, I really wish there was a FAQ to explain why Killzone 2 is funny/horrific to mention.

  42. DERP says:

    on L4D:
    “There are other ways to excite customers with things like commentaries and comics that take less effort than new maps.”

    NO
    BAD GABE
    BAD

  43. Wedge says:

    I do love how they always speak of things in percentages when talking about Steam. While you know damn well it’s because the numbers wouldn’t look impressive compared to retail console games, it’s also probably not a big deal with how much more revenue you generate selling games this way. And then when you realize how small a company Valve is relative to larger publishing/development entities their income over operating costs must be doing pretty well.

  44. unclelou says:

    Cheers, James G, though I am afraid Okami is right.

    BioShock was more popular on 360 than PC (not sayin, but just sayin)

    I thought Bioshock was the rare exception where the PC version sold better than the 360 one? I could be wrong though.

    When I read the article, I immediately thought “Bioshock” as well. Iirc, it was offered for a ridiculously low price (€ 3 or something?)

  45. Markoff Chaney says:

    Information like this really makes me want to ask that we have to reconsider the concept of Value and Volume in a commerce where the actual product is one that can be perfectly replicated and distributed for pennies. It’s an arrangement of 0s and 1s, rather complex and ever increasing in size, but just that and it can be delivered on media that’s physical, whether it’s copper via downloading it or on a disc that spins around in a drive while a laser scans across it.

    I guess what I’m trying to say is that we have an entire concept of Value in our mind which is based on production of physical, tangible goods (food, clothing, desks, mice, etc) where a significant cost of the product is based in the materials used to produce the good. In this, there are also significant recurring logistical concerns such as transportation of said good, continual payment of laborers to put widget a into woggle c and so forth.

    In a new paradigm where infinite, flawless, copies of a string of 0s and 1s can be downloaded and can, quite literally, be produced for only the cost of bandwidth and server storage space we have to understand that the name of this game will be one of volume and consistent quality. Valve gets this. This data shows just how well they do get it.

    Some of the statistics, I’m sure, are much like Heliocentric said. Take an older, low seller that’s way over priced considering it’s age, and reduce the price. You will sell significantly more and the cost of “creation” of your good is pennies. Sensationalist numbers, but the overlying trend is consistently improving for Valve and the distribution method is significantly better (for them, due to cost) than printing code on discs of plastic and putting them in a plastic sleeve with a manual and sometimes another box with more artwork around that.

    Providing a good game and having a 0 day tax where it costs more upon release for those of us that MUST have it as soon as it’s commercially available mixed with a reduction of price, while actually offering an increased value with added content and updates all while distributing the content for pennies is a sure way to fully maximize profits. It’s any distributor/publisher’s wet dream. Amazing work, Gabe.

  46. Dain says:

    All this is very lovely, but we can also provide economic statistics on how things like say sustainable development get you more money and more karma in the long run. It doesn’t matter, people will keep on doing whatever gets them the most money fastest.

  47. Oak says:

    I wonder how many people have purchased a game in one of the sales and never played it. I know i have.

    I can understand doing this with boxed games, but something about the you-have-it-forever quality of Steam games and the public nature of the games list makes me far more careful in my choices. I know this isn’t wholly rational.

  48. Rudolfo says:

    it’s not a wet dream, it’s reality

    gonna be reading those comments now :)

  49. sbs says:

    Arnulf: I feel your pain. I wish there was a reliable way to get the uncut versions via steam, as a german. If anyone knows one, feel free to tell me.

    As far as I know, the episode 2 thing was because they tried to get a 16 rating, which they didn’t, and since it costs money to get it rated they wouldn’t bother to give them the uncensored version to rate it again, so they released the cut anyway.
    Luckily, there are bloodpatches for both episode 2 and bioshock(the latter one weighing about 2 GB, oh what a pain in the ass that was…).

  50. caesarbear says:

    I’m going to side with Mount and Blade as the “36000%” game. It’s more recent than Bioshock. It changed from being the same price as a digital download from Taleworlds to being a measly $8. Plus it’s indie, so 10 sales at most X 36000% = 3,600 sales.