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[Mama Robotnik]

I've been a tremendous fan of Valve for a considerable while now.

I imagine its impossible not to be. They've made some of the greatest games of all time, have given exposure to some magnificent independent works for incredible prices, and are eclipsing their competitors to become the de facto face of PC gaming. I'm really trying (and failing) not to sound like a sycophant here, but they really seem to be running while so many companies stumble.

This week, they gave me two free games for clicking on links in their "Great Gift Pile" campaign. They were Dota 2 and HOARD. I was more than grateful.

And yet, I don't understand why. It made me think that I don't understand a lot of what this mad company does.

The Steam Sale was guaranteed to earn my money. Portal 2's DLC was guaranteed to earn my money. Dota 2 was very likely to have earned my money.

And yet, the Steam Sale (and "Great Gift Pile") is giving away hundreds of thousands (if not millions) of free games, Portal 2's DLC is completely free, Dota 2 is completely free, and they're supporting the Humble Indie Bundles with Steam Keys, and consequently losing out on their share of profits that these games would have made when told traditionally.

It can't be that they are just nice, can it? There's got to be a complexity that I'm not seeing here. I'm not trying to allude to conspiracy or suggest there are sinister motivations behind their benevolent choices, because that doesn't appear to be the case, I'm just trying to work out the reasoning (and long term goals, if any) behind their fun choices.

Some questions:

(1) In the recent past, was Half-Life 2 and Steam's development entirely funded by sales of Half-Life 1? Did that single game provide enough profit to fuel such colossal development?

(2) What do we think Valve's reasoning is for the "Great Gift Pile", giving away hundreds of thousands of games for achievements? Is it to encourage the fanbase to actually play their games, or to set up a model of Steam achievements establishing rewards of substance? Something else entirely, perhaps?

(3) Can someone explain to me how on earth the Team Fortress hats translate into a profit, I've read interviews but still feel none-the-wiser.

(4) Is this understanding of the situation accurate or a misconception: Valve take a portion of the cash spent on every game on Steam. This constant supply flow of cash gives them a stability and freedom that other developers lack, and all of their free games and sales and DLC and such are simply the consequence of passionate game developers that don't need to chase traditional profits and audiences - is this accurate or am I being naive?

I know this may be a very rambled OP, but if anything it expresses my befuddlement at Valve's entire approach to games. Like I said earlier, they gave me two free games, and I'm left with no idea why.

If anyone has any insight, or links, or anything to help convey some understanding of their madness, I'd appreciate it muchly.

 

[Feep]

 

[TheExodu5]

Volume.

 

[The Technomancer]

With regards to 1, don't forget that Gabe was very rich before he even founded Valve.

 

[CarbonatedFalcon]

Good will from consumers in the long run is better than short-term profits.

Also - Steam is a money madhouse as the premier PC (and Mac!) digital distribution platform. And it's not a publicly traded company. They can pretty much do whatever the fuck they want without being beholden to shareholders. You could even say they have a soul because of this.

 

[Chanser]

F2P!

 

[Ferrio]

First post wins.

 

[randomwab]

Wait, did I miss something? How did you get DotA2? I swear, everyone has access to that game except me.

 

[Feep]

First post wins.

As a person with an in-depth knowledge of the internal workings of Steam, that's actually how it works.

 

[ShockingAlberto]

This week, they gave me two free games for clicking on links in their "Great Gift Pile" campaign. They were Dota 2 and HOARD. I was more than grateful.

And yet, I don't understand why.

I've been a tremendous fan of Valve for a considerable while now.

Seems kind of clear that doing good business means you build more fans.

Portal 2 wasn't free at release and it likely encourages you to stick with Steam over, say, Origin if you believe Valve is great and EA is terrible (which is true but beside the point).

 

[StuBurns]

Well Dota 2 is going to be free for everyone at some point. So giving it you early fuels your desire to make a Valve PR thread which is good for them.

 

[iNvid02]

people are buying games because they're priced well, and by playing em they have the chance to win even more games, and a chance to win ALL the games.

 

[PairOfFilthySocks]

Valve's model is simple;

Step 1: don't treat the customer like a brain-dead, fuck-face, wanker shit-head.

Step 2: profit

 

[Kinyou]

It's the only logical conclusion

 

[Ferrio]

As a person with an in-depth knowledge of the internal workings of Steam, that's actually how it works.

You'll also notice that the contest is to win every *game*, not hats. That'd bite into their real profit maker.

 

[water_wendi]

1) Instead of having a neutral consortium of game developers using the internet to sell their games, Valve takes 30% of the money from other peoples creations like the pimps of old (EA, Activision, etc) but without the monetary risk.

2) Repackage and resell what the modding community makes.

3) DLC.

 

[Slamtastic]

 

[Red]

Valve's model is simple;

Step 1: don't treat the customer like a brain-dead, fuck-face, wanker shit-head.

Step 2: profit

Yes. Mindshare is a huge part of why Valve is such a successful company. You treat your customers right, and they will keep coming back.

 

[Demigod Mac]

1. Showing tremendous respect for, and communicating with their customers

2. Selling products that are more enjoyable when you don't pirate them.

3. Being able to adjust their business model to developing trends rather than stubbornly refuse to adapt like most game companies do

 

[Electivirus]

I'm not too big on Valve's games, but I sure do respect their business practices.

 

[Stumpokapow]

This week, they gave me two free games for clicking on links in their "Great Gift Pile" campaign. They were Dota 2 and HOARD. I was more than grateful.

One of those isn't a game, it's a free beta client for a game they're about to make tens of millions of dollars with. The other isn't a Valve game, it's a third party game, and that third party almost certainly opted in to providing their game gratis in order to generate more word of mouth.

(3) Can someone explain to me how on earth the Team Fortress hats translate into a profit, I've read interviews but still feel none-the-wiser.

People pay money to get keys to unlock crates to get stuff in the game. People actually buy certain items for cash.

If anyone has any insight, or links, or anything to help convey some understanding of their madness, I'd appreciate it muchly.

Not publicly traded

 

[Ferrio]

Yes. Mindshare is a huge part of why Valve is such a successful company. You treat your customers right, and they will keep coming back.

I bought Batman: Arkham City during the sale. My key that was given was invalid for Windows Live. They fixed the problem *on* christmas morning. What other company would do that?

 

[TouchMyBox]

(1) In the recent past, was Half-Life 2 and Steam's development entirely funded by sales of Half-Life 1? Did that single game provide enough profit to fuel such colossal development?

(2) What do we think Valve's reasoning is for the "Great Gift Pile", giving away hundreds of thousands of games for achievements? Is it to encourage the fanbase to actually play their games, or to set up a model of Steam achievements establishing rewards of substance? Something else entirely, perhaps?

(3) Can someone explain to me how on earth the Team Fortress hats translate into a profit, I've read interviews but still feel none-the-wiser.

(4) Is this understanding of the situation accurate or a misconception: Valve take a portion of the cash spent on every game on Steam. This constant supply flow of cash gives them a stability and freedom that other developers lack, and all of their free games and sales and DLC and such are simply the consequence of passionate game developers that don't need to chase traditional profits and audiences - is this accurate or am I being naive?

1. Yes
2. For the Lulz
3. People pay money for hats, it's a pretty direct business model
4. Yes

 

[Sinatar]

A lot of it is just trying to get people on steam. Give stuff away, folks sign up, folks spend money in the future.

 

[ShockingAlberto]

As a person with an in-depth knowledge of the internal workings of Steam, that's actually how it works.

Out of curiosity, do you guys get results from the daily deals immediately or do you have to wait until next week to find out?

 

[Grayman]

(1) In the recent past, was Half-Life 2 and Steam's development entirely funded by sales of Half-Life 1? Did that single game provide enough profit to fuel such colossal development?
I am not a Valve historian but this is very possible. 3DR, Epic, and iD got crazy money from PC gaming and were financially independent of their "publishers". Half Life 1 was in stores forever and sold a zillion copies.

(2) What do we think Valve's reasoning is for the "Great Gift Pile", giving away hundreds of thousands of games for achievements? Is it to encourage the fanbase to actually play their games, or to set up a model of Steam achievements establishing rewards of substance? Something else entirely, perhaps?

It is just a promotion expense to keep heavy gamers looking at and using steam.

(3) Can someone explain to me how on earth the Team Fortress hats translate into a profit, I've read interviews but still feel none-the-wiser.
Producing the hats is fairly cheap, bandwidth for updates is cheap (also funded by their cut of new game sales), the breakeven point on a hat is relatively low compared to the size of the playerbase. The marginal cost of a hat is zero, once it is made the hat is free money each time it sells.

(4) Is this understanding of the situation accurate or a misconception: Valve take a portion of the cash spent on every game on Steam. This constant supply flow of cash gives them a stability and freedom that other developers lack, and all of their free games and sales and DLC and such are simply the consequence of passionate game developers that don't need to chase traditional profits and audiences - is this accurate or am I being naive?
The company has a very free corporate culture but you are being Naive. All the sales make money and they think the way they treat customers pays off financially.

Giving away free games in contest is the only time they lose money. On sales the publisher agrees to make less off that game for the time being, valve is not eating a loss on a sale.

 

[Neiteio]

I love Steam. A gaming PC might cost a pretty penny, but all your savings on Steam sales (hell, TF2 is FREE) more than make up for that initial cost. Now if only Steam could sell free time to help clear out backlogs, lol. Also, I secretly desire a scenario where Nintendo puts its games on Steam and makes its controllers officially compatible with PCs, but yeah, not going to happen.

 

[legend166]

It's not a great mystery. Valve run a store front. Getting customers engaged and wanting to come back to said store front means they are more likely to spend money.

This is just the modern, online equivalent of a lucky door prize.

 

[PairOfFilthySocks]

2) Repackage and resell what the modding community makes.

Yep, it's a real shame Valve takes promising, unique work, employs the very talented people who made it, and gives them the resources to make what they really want to. A damn shame.

Of all the criticisms levelled at Valve, this one always has been, and may always be, the most ridiculous.

 

[Broder Salsa]

Valve's model is simple;

Step 1: don't treat the customer like a brain-dead, fuck-face, wanker shit-head.

Step 2: profit

Steam support is only a bit below ocean marketing when it comes to service.

Spoiler

ok, obviously hyperbole, but it's bad

.

 

[dLMN8R]

Every other game company on earth is trying to exploit customers with overpriced games and shitty DLC as much as possible and mostly failing while they do so.

Valve has constantly built customer loyalty around incredibly high-quality games that are supported for years, for free.

Every other game company is trying to prevent piracy using anti-consumer tactics, driving away their legitimate customers while doing jack shit to stop piracy.

Valve built an innovative and literally industry-changing digital distribution platform that is entirely customer loyalty-driven. They treat customers like gods, and customers reward them for it in the end.



Valve is successful because Valve is taking "risks" by endlessly rewarding the customers who made them successful in the first place. It's an endless cycle of success, and millions more every year are discovering it.

 

[Grayman]

I bought Batman: Arkham City during the sale. My key that was given was invalid for Windows Live. They fixed the problem *on* christmas morning. What other company would do that?

The same company that locked my account over a weekend because I told them someone sent me 3 password reset requests and asked if they could check into if it was something being done in bulk or from overseas.

 

[Feep]

Out of curiosity, do you guys get results from the daily deals immediately or do you have to wait until next week to find out?

Steam's data tracking and sales reporting is nothing short of a technological goddamn miracle.

 

[Durante]

The business side of the whole gift pile campaign seems pretty obvious to me: the idea is to make people buy new games (to complete objectives) in exchange for getting (mostly) old games for free. Or coupons that will be used to buy even more games.

It's basic marketing.

1) Instead of having a neutral consortium of game developers using the internet to sell their games, Valve takes 30% of the money from other peoples creations like the pimps of old (EA, Activision, etc) but without the monetary risk.

Also this.

 

[SteveWinwood]

Steam's data tracking and sales reporting is nothing short of a technological goddamn miracle.

I want to make a game now just to experience it.

 

[WanderingWind]

1) Gabe started out quite wealthy, and Half-Life 1/2 were massive successes. Steam was a gamble that paid off for them financially. It was just as likely to sink the company as to create the behemoth they are today. They now getting money hand over fist for every sale they're making on Steam.

(2) Every Steam sale is a major event. We've seen the metrics during these times and sales are through the freaking roof. With every sale, they garner more and more lifelong fans of the service that will turn to Steam first when looking to purchase a game. For every game they're giving away (remember, digital distribution costs here are negligible, so they're giving away damn near nothing) they're likely selling 10x the amount.

(3)People are willing to pay money for X-Box Live avatar clothing items that do literally nothing. TF2 is a huge game, and being able to customize your character in any video game is a plus. Whether it's through unlocking from achievements, or selling the hats individually, that's more money in Valve's pocket. They're also generally at the impulse buy price point, so more people tend to buy them.

(4) It's definitely not a misconception. Valve's stability and overwhelming success in a certain segment of the video game market has allowed them to play by a different set of rules. They release games whenever the hell they feel like it. They attempt crazy promotions. They're able to knock 75% off of developer's titles and have the developer write them love letters for doing so. Very few people have an issue with Steam itself (the "dissenters" usually fall into the anti-DD camp or the "well, Steam MAY BECOME EVIL ONE DAY" camp) based largely on their track record of excellent customer service and great deals. Personally,

 

[Broder Salsa]

Every other game company on earth is trying to exploit customers with overpriced games and shitty DLC as much as possible and mostly failing while they do so.

IIRC Poland is on earth. I'm sure I could find other examples of awesome game companies if I thought a bit harder for a moment, but CD Projekt is a decent enough choice.

 

[Grayman]

Steam's data tracking and sales reporting is nothing short of a technological goddamn miracle.

Haha. I recall someone at one of the midsize european publishers telling a retail manager how many of those games no one want just sold during their conversation about no one wanting the games anymore.

 

[water_wendi]

Yep, it's a real shame Valve takes promising, unique work, employs the very talented people who made it, and gives them the resources to make what they really want to. A damn shame.

Of all the criticisms levelled at Valve, this one always has been, and may always be, the most ridiculous.

im sorry but i dont give old record producers much credit for the work of artists either.

 

[alr1ght]

They deal in volume. A cheap sale of something that doesn't really "cost" anything to produce is better than a lower amount of expensive sales. All their promos do is foster community and build loyalty to their service, which in turn turn into sales.

 

[StuBurns]

I wonder why some games aren't on Steam. I just played thru To The Moon today, I can't believe that's not on Steam, it's crazy to me.

 

[dLMN8R]

IIRC Poland is on earth. I'm sure I could find other examples of awesome game companies if I thought a bit harder for a moment, but CD Projekt is a decent enough choice.

Obviously a bit of hyperbole in my post, but on average it's pretty damn accurate.

 

[DarkKyo]

Way to fill the depths of my soul with dark feelings of eternal regret.

http://www.youtube.com/watch?v=ue1-lnHVkpQ

 

[dave is ok]

If Hats were both the X axis and Y axis of a graph, it would be a steady 45 degree climb. That picture bugs me.

 

[WanderingWind]

im sorry but i dont give old record producers much credit for the work of artists either.

No, but you'd be blind, deaf and dumb for not giving them credit for allowing the artist's work to be heard or seen.

 

[teh_pwn]

They don't have that many employees, so selling 5+ million selling titles is more than enough per decade. Ignoring steam entirely.

 

[water_wendi]

No, but you'd be blind, deaf and dumb for not giving them credit for allowing the artist's work to be heard or seen.

i do give them credit. Just not much. Certainly nowhere near whats given to them by most people.

 

[goodfella]

Giving people steam keys from the humble indie bundles gets people to try out steam.

You only have to look to GAF to see how easy it is to get 'locked' into Steam once you have a few games in it.

 

[Sinatar]

Haha. I recall someone at one of the midsize european publishers telling a retail manager how many of those games no one want just sold during their conversation about no one wanting the games anymore.

That was the head of 1C. I wish I could find that interview, the numbers in terms of the money made off a retail sale versus digital was pretty crazy.

Something like $7 profit off a retail sale of a $50 game versus $35 off a steam sale.

 

[Windu]

They are the premeire online pc retailer, not much else to understand.