Some interesting industry news for you here. Epic Games have announced a change to the revenue model of the Epic Games Store, as they try to pull in more developers and more gamers to actually purchase things.
30% has been industry standard across any digital storefront until Epic found out they couldn’t beat steam by just paying for exclusivity deals. Then they decided to go down this race to the bottom strategy.
Steam is good because of that 30%.
Firstly, data transfer and storage isn’t free and is an ongoing cost for Steam even after purchase. How many times can you think that you installed a game, then deleted it and ultimately downloaded it again—Steam doesn’t get any more money, but that costs them. They could have done all the limited number of downloads or transfer speed limiting shit that used to be more common.
The profit they make on top goes straight back into Valve. They are a private company without shareholders to please and pay dividends to. This has allowed them to keep reinvesting into Steam and making it the best experience for the consumer they can—they’ve been rewarded with a load of goodwill and market share following that. You can guarantee that we wouldn’t have proton or the steam deck without the money valve made from steam sales.
Epic doing this is just another attempt to try and tempt developers to choose their store and not list on Steam. They have no interest in actually improving their offering, their only strategy is to try and find ways to put Steam users at a disadvantage and hope that people go “well I guess I’ll go for it on epic if I have to”. They don’t have any problem getting companies to list their games on Epic, this is 100% about manipulating developers to not list on Steam.
GoG is the alternative to Steam, and offers something that benefits consumers to compete with Steam in DRM free games.
Friends don’t let friends reward Epic for anti-consumer business practices.
Didn’t Steam essentially create the “standard” for 30% price point for digital distribution in the first place? While a 30% margin makes sense for physical retail, it’s never made sense for digital distribution.
If they created the problem in the first place, then isn’t that actually an issue?
I’d argue it makes more sense for digital distribution, once the sale has been made in a physical store, there’s no ongoing cost for them.
A digital storefront has the ongoing cost of downloads and updates, as well as the distributed storage costs (Steam has many copies of games all over the world to mean downloads are quick)
Data transfer costs back in the mid 00s mean that every install of a game like HL2 cost them a dollar or so (A quick Google suggests they might have paid a couple of cents a gigabyte, but they may have had a better deal given the volume of data). If a user ever uninstalled and reinstalled more than a couple of times (a lot more common back then with the limited storage everyone had), and couple that with ongoing update transfer costs then most of the profit from a full price sale could easily be gone, let alone if the game was bought with a discount as is very common. If they never made any profit from the sales, Steam never makes it past its awkward years.
Data transfer is definitely cheaper these days, but then games are bigger and they probably spend a lot more on datacenter space than back in the day
A physical storefront has to deal with asset depreciation however. A product can sit on the shelf and reduce in value as it ages, there is no such thing with digital distribution.
Based on estimates, and various reports, leaks etc. since they aren’t a public company… Steam makde an estimated $10.8 Billion in 2024. They made $780,000 per employee as of 2018 based on an internal report, more than nearly every other company on the planet. They’re not spending anywhere near that on operations.
Surely the sales are an equivalent there? Both ultimately mean the total price goes down and the store’s cut goes down accordingly.
Don’t get me wrong, they’re definitely profiting these days. $11bn is a massive amount of revenue* for a company with the number of staff they do. But Steam are going to have disproportionately high datacenter costs compared to most other companies. As a rough comparison: Watching an hour of netflix at HD quality is about 1GB of transfer or so, Call of Duty is something like a quarter of a terabyte. Someone who downloads call of duty once would have to watch 250h of netflix to cost them the same—and Netflix is funded by subscription.
Then remember they’re likely paying their staff very well, I would not be surprised at all if well over half of their revenue just goes to operational costs before any reinvestment.
The sheer data transfer happening is insanely costly and is not something people think about. Valve could certainly tweak their cut for small developers in sone way, but they arent just pocketing 30%.
Valve actively increase their cut for small developers and their entire business model is to keep staff to a minimum and costs aggressively low.
They are absolutely just pocketing 30%.
What they are doing with the 30% is anybody’s guess, because they are a private company, so I don’t know how much of it becomes new boats and knifes for Gabe and how much goes to VR HMDs and handhelds, but they are a VERY lean company that sure seems to like being cash-rich.
They apparently transfer approximately 50 exabytes a year.
Some napkin maths has that as costing around $5bn to do from a provider like AWS. Which is half their annual turnover not profit.
Now sure, they will not be spending that much on just data transfer, everyone in the industry knows you get bespoke deals with the cloud providers before the bill gets close to that—but they’ll not get anything close to half price.
Then they need to pay for the actual storage costs
And the compute needed for running all of steam’s API and web servers
And staff, which if they only have 80 of them, will be paid some of the best salaries in the industry.
If you think they’re taking even half of that 30% as profit, I think you need to give this another look.
They don’t need to take that 30% as profit for it to be high. They cost less to run than any other first party. We know this from their recent lawsuits. And no, they do not pay 5 billion for their traffic, but whatever they pay isn’t higher than Sony or Nintendo, or at least not so much higher that it entirely drains their revenue.
And even if they paid your back of the napkin figure, best guess is they pulled ten billion in revenue last year. They don’t tell anybody that, though, so it’s all estimates, and considering the have the biggest distribution platform, the biggest game on that platform and a separate hardware business I’m going to say Valve is not about to buckle under the pressure of bandwidth costs anytime soon, even if they spread the cash around a bit.
Meanwhile, the developers using Valve’s platform do have to pay salaries with a fraction of that revenue, sometimes to staff larger than Valve’s. And for a number of them they also have to deal with server costs and general running costs on the back end.
I don’t know Valve’s operating costs. Nobody does. I know Gabe Newell is very rich. I know the few people working at Valve are very well paid. I know they run that ship as quiet and cheap as possible. And I know they take in just as much (or more) than other platforms with the same or higher costs and a similar or lower take.
they do not pay 5 billion for their traffic, but whatever they pay isn’t higher than Sony or Nintendo, or at least not so much higher that it entirely drains their revenue.
No I know, I addressed that they don’t actually pay that, but it will 100% be a figure in that magnitude. Remember Sony and Nintendo both charge subscription fees for their online services to offset these costs. Valve doesn’t—they have to pay for it all out of that cut.
I’m also at no point insinuating they’re struggling at all, I’m just trying to point out that their operational costs are definitely going to be a big chunk of that 30%, there’s absolutely no way they’re not.
Meanwhile, the developers using Valve’s platform do have to pay salaries with a fraction of that revenue, sometimes to staff larger than Valve’s. And for a number of them they also have to deal with server costs and general running costs on the back end.
I’m not saying the third party devs have it lucky or anything like that. Of course it would be great if they got a bigger cut, at the end of the day it’s the product, but to pretend steam is adding zero value for the 30% taken is absurd.
Also remember regarding third party server costs, Valve provides a lot of the backend services as part of Steamworks for many games on the platform—it’s another big draw for developers to the platform because they don’t need to come up with a friend system, achievements or matchmaking if they don’t want to.
I’m not pretending they’re adding zero value, but they are taking zero risk and tying down everybody else to their ecosystem. If they are adding 30% of value, and I’m not saying they aren’t, it is due to controlling 80% of the market. That’s anticompetitive any way you slice it.
Steamworks is actually a great example of that MO. Is it good value to have it available as a dev? Sure! It is a console-style series of back-end services, which goes far more in-depth than any competitor and makes PC development more standardized and accessible, with a lower barrier to entry to platform-level functionality.
Is it also a way to make it more costly to be elsewhere? Yup. And with no hardware tie-in reason for that, it is crunching down the PC ecosystem to Steam plus friends, as opposed to a competitive, open landscape.
That, on my book, is not good on the aggregate. It would be just as bad if Xbox’s much inferior attempt at the same thing Windows-wide was in that same position of power (like the Apple ecosystem is on Macs), but at least there you could argue that it’s at the OS level and not tied in to your payment services and distribution platform.
I don’t think this is true. 20% was the standard, as I recall, not 30%. I think it has moved that way over time, though. And even that only made some sense while retailers were too powerful to compete with them on price. Storage and bandwidth are much cheaper than bricks and real estate and salaries.
This is a good thing, Steam’s cut is too big, especially for a company with next to no staff that runs on a heavily Uber-ified model and produces very little and I an very tired of the fanboyism.
I agree that people should default to GoG when possible, though.
Steam makes a shit load of money. The server fees are basically a joke and they have 80 employees in the steam division.
The only things that is being invested in is Gabens fleet of mega yatchs, worth an estimated 1 billion, and costing between 75 and 100 million annually to maintain.
Valve has been fined in the EU for anti-consumer practices and received an F from the better business bureau. They are currently in the middle of another lawsuit.
30% is way too high and it’s a joke to see actual consumers defend it.
30% has been industry standard across any digital storefront until Epic found out they couldn’t beat steam by just paying for exclusivity deals. Then they decided to go down this race to the bottom strategy.
Steam is good because of that 30%.
Firstly, data transfer and storage isn’t free and is an ongoing cost for Steam even after purchase. How many times can you think that you installed a game, then deleted it and ultimately downloaded it again—Steam doesn’t get any more money, but that costs them. They could have done all the limited number of downloads or transfer speed limiting shit that used to be more common.
The profit they make on top goes straight back into Valve. They are a private company without shareholders to please and pay dividends to. This has allowed them to keep reinvesting into Steam and making it the best experience for the consumer they can—they’ve been rewarded with a load of goodwill and market share following that. You can guarantee that we wouldn’t have proton or the steam deck without the money valve made from steam sales.
Epic doing this is just another attempt to try and tempt developers to choose their store and not list on Steam. They have no interest in actually improving their offering, their only strategy is to try and find ways to put Steam users at a disadvantage and hope that people go “well I guess I’ll go for it on epic if I have to”. They don’t have any problem getting companies to list their games on Epic, this is 100% about manipulating developers to not list on Steam.
GoG is the alternative to Steam, and offers something that benefits consumers to compete with Steam in DRM free games.
Friends don’t let friends reward Epic for anti-consumer business practices.
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Didn’t Steam essentially create the “standard” for 30% price point for digital distribution in the first place? While a 30% margin makes sense for physical retail, it’s never made sense for digital distribution.
If they created the problem in the first place, then isn’t that actually an issue?
I’d argue it makes more sense for digital distribution, once the sale has been made in a physical store, there’s no ongoing cost for them.
A digital storefront has the ongoing cost of downloads and updates, as well as the distributed storage costs (Steam has many copies of games all over the world to mean downloads are quick)
Data transfer costs back in the mid 00s mean that every install of a game like HL2 cost them a dollar or so (A quick Google suggests they might have paid a couple of cents a gigabyte, but they may have had a better deal given the volume of data). If a user ever uninstalled and reinstalled more than a couple of times (a lot more common back then with the limited storage everyone had), and couple that with ongoing update transfer costs then most of the profit from a full price sale could easily be gone, let alone if the game was bought with a discount as is very common. If they never made any profit from the sales, Steam never makes it past its awkward years.
Data transfer is definitely cheaper these days, but then games are bigger and they probably spend a lot more on datacenter space than back in the day
A physical storefront has to deal with asset depreciation however. A product can sit on the shelf and reduce in value as it ages, there is no such thing with digital distribution.
Based on estimates, and various reports, leaks etc. since they aren’t a public company… Steam makde an estimated $10.8 Billion in 2024. They made $780,000 per employee as of 2018 based on an internal report, more than nearly every other company on the planet. They’re not spending anywhere near that on operations.
Surely the sales are an equivalent there? Both ultimately mean the total price goes down and the store’s cut goes down accordingly.
Don’t get me wrong, they’re definitely profiting these days. $11bn is a massive amount of revenue* for a company with the number of staff they do. But Steam are going to have disproportionately high datacenter costs compared to most other companies. As a rough comparison: Watching an hour of netflix at HD quality is about 1GB of transfer or so, Call of Duty is something like a quarter of a terabyte. Someone who downloads call of duty once would have to watch 250h of netflix to cost them the same—and Netflix is funded by subscription.
Then remember they’re likely paying their staff very well, I would not be surprised at all if well over half of their revenue just goes to operational costs before any reinvestment.
*Checked the figure was revenue and not profit.
The sheer data transfer happening is insanely costly and is not something people think about. Valve could certainly tweak their cut for small developers in sone way, but they arent just pocketing 30%.
Valve actively increase their cut for small developers and their entire business model is to keep staff to a minimum and costs aggressively low.
They are absolutely just pocketing 30%.
What they are doing with the 30% is anybody’s guess, because they are a private company, so I don’t know how much of it becomes new boats and knifes for Gabe and how much goes to VR HMDs and handhelds, but they are a VERY lean company that sure seems to like being cash-rich.
It would be impossible for them to pocket 30%
They apparently transfer approximately 50 exabytes a year.
Some napkin maths has that as costing around $5bn to do from a provider like AWS. Which is half their annual turnover not profit.
Now sure, they will not be spending that much on just data transfer, everyone in the industry knows you get bespoke deals with the cloud providers before the bill gets close to that—but they’ll not get anything close to half price.
Then they need to pay for the actual storage costs
And the compute needed for running all of steam’s API and web servers
And staff, which if they only have 80 of them, will be paid some of the best salaries in the industry.
If you think they’re taking even half of that 30% as profit, I think you need to give this another look.
They don’t need to take that 30% as profit for it to be high. They cost less to run than any other first party. We know this from their recent lawsuits. And no, they do not pay 5 billion for their traffic, but whatever they pay isn’t higher than Sony or Nintendo, or at least not so much higher that it entirely drains their revenue.
And even if they paid your back of the napkin figure, best guess is they pulled ten billion in revenue last year. They don’t tell anybody that, though, so it’s all estimates, and considering the have the biggest distribution platform, the biggest game on that platform and a separate hardware business I’m going to say Valve is not about to buckle under the pressure of bandwidth costs anytime soon, even if they spread the cash around a bit.
Meanwhile, the developers using Valve’s platform do have to pay salaries with a fraction of that revenue, sometimes to staff larger than Valve’s. And for a number of them they also have to deal with server costs and general running costs on the back end.
I don’t know Valve’s operating costs. Nobody does. I know Gabe Newell is very rich. I know the few people working at Valve are very well paid. I know they run that ship as quiet and cheap as possible. And I know they take in just as much (or more) than other platforms with the same or higher costs and a similar or lower take.
So none of that flies.
No I know, I addressed that they don’t actually pay that, but it will 100% be a figure in that magnitude. Remember Sony and Nintendo both charge subscription fees for their online services to offset these costs. Valve doesn’t—they have to pay for it all out of that cut.
I’m also at no point insinuating they’re struggling at all, I’m just trying to point out that their operational costs are definitely going to be a big chunk of that 30%, there’s absolutely no way they’re not.
I’m not saying the third party devs have it lucky or anything like that. Of course it would be great if they got a bigger cut, at the end of the day it’s the product, but to pretend steam is adding zero value for the 30% taken is absurd.
Also remember regarding third party server costs, Valve provides a lot of the backend services as part of Steamworks for many games on the platform—it’s another big draw for developers to the platform because they don’t need to come up with a friend system, achievements or matchmaking if they don’t want to.
I’m not pretending they’re adding zero value, but they are taking zero risk and tying down everybody else to their ecosystem. If they are adding 30% of value, and I’m not saying they aren’t, it is due to controlling 80% of the market. That’s anticompetitive any way you slice it.
Steamworks is actually a great example of that MO. Is it good value to have it available as a dev? Sure! It is a console-style series of back-end services, which goes far more in-depth than any competitor and makes PC development more standardized and accessible, with a lower barrier to entry to platform-level functionality.
Is it also a way to make it more costly to be elsewhere? Yup. And with no hardware tie-in reason for that, it is crunching down the PC ecosystem to Steam plus friends, as opposed to a competitive, open landscape.
That, on my book, is not good on the aggregate. It would be just as bad if Xbox’s much inferior attempt at the same thing Windows-wide was in that same position of power (like the Apple ecosystem is on Macs), but at least there you could argue that it’s at the OS level and not tied in to your payment services and distribution platform.
I don’t think this is true. 20% was the standard, as I recall, not 30%. I think it has moved that way over time, though. And even that only made some sense while retailers were too powerful to compete with them on price. Storage and bandwidth are much cheaper than bricks and real estate and salaries.
This is a good thing, Steam’s cut is too big, especially for a company with next to no staff that runs on a heavily Uber-ified model and produces very little and I an very tired of the fanboyism.
I agree that people should default to GoG when possible, though.
I do wonder just how much a policy like this would effect Valves bottom line though.
This would be pretty amazing for small studios.
Steam makes a shit load of money. The server fees are basically a joke and they have 80 employees in the steam division.
The only things that is being invested in is Gabens fleet of mega yatchs, worth an estimated 1 billion, and costing between 75 and 100 million annually to maintain.
Valve has been fined in the EU for anti-consumer practices and received an F from the better business bureau. They are currently in the middle of another lawsuit.
30% is way too high and it’s a joke to see actual consumers defend it.