After battling Microsoft in video games for years, Valve’s Steam is on a collision course with Apple

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COMMENTARY: If you play games on your PC at all, you likely have a somewhat complex relationship with the Bellevue-based Valve Software’s online storefront Steam. Released in 2003 as a patch client for Valve’s lineup of games (specifically, Counter-Strike), Steam has risen to dominate the digital distribution market. Through easy consumer access, frequent sales, and providing a worldwide platform for both mainstream and independent developers, Steam has built a base of more than 150 million users worldwide. In 2017, 7,600 games were released via Steam, leading to $4.3 billion in sales.

Steam’s ubiquity, ease of use, and market penetration all go a long way, but it’s a mixed blessing for anyone besides, arguably, Valve itself. Independent developers often run into problems with the service’s frequent flash sales, where a 25-75% discount can slash into what can already be a slim profit margin.

Steam is also a “games-as-service” model, where you’re paying for indefinite rental of a digital asset, rather than a physical object that you possess. That’s great if you’re low on space, and a boon to the greater games industry (you can’t trade in your digital games to GameStop, which will then resell them for pure profit at no net gain to the games’ actual publishers), but it does mean that your games library is effectively not in your direct control.

There have also been arguments in circulation for years, which seem to ebb and flow like the tides, that Steam, like any other digital storefront, is simply overcrowded; it’s a playground for trolls due to being insufficiently moderated; and the ease with which it can be accessed as a market means that there’s a lot of truly tasteless dreck being offered through the service. Steam is indisputably one of the major games-industry success stories of the last twenty years, but especially in recent months, cracks are beginning to show.

Valve co-founder Gabe Newell welcomes the crowd at last year’s The International, an eSports gaming tournament sponsored by Valve. (GeekWire Photo / Kevin Lisota)

In the last couple of years, Valve has made several different moves to leverage Steam’s market share in order to shape the games industry as a whole. As we discussed last month, Valve’s Steam Machines were the highly visible part of a larger attempt to popularize their Linux-based SteamOS as a viable gaming platform.

Even as Valve’s output as a game development studio has notoriously stalled, the company has become quietly evangelical over Linux’s viability, primarily due to Gabe Newell’s notorious dissatisfaction with Windows as a platform. Newell was speaking specifically about Windows 8 at the time, but to this day, many of Valve’s moves can still be readily interpreted as shots across Windows’s bow.

Microsoft has been making its own big moves, with initiatives such as Xbox Play Anywhere, which allows full cross-play compatibility between the Xbox One and Windows 10. A game with Play Anywhere functionality can work on either platform, which allows a player to move between the office and living room as their situation dictates. This turns the built-in Windows Store into a potentially lucrative, near-omnipresent digital storefront, giving Microsoft a captive audience for its library of software, and not coincidentally acts as a challenge to Steam’s market dominance.

Phil Spencer, head of Xbox, announcing features for Windows 10. (GeekWire File Photo)

However, the same initiative also means that there are effectively no real exclusives for the Xbox One. Success or failure in the console market often relies upon a system’s library of unique games, and almost all of the Xbox One’s lineup is also available on Windows 10. (The handful of exceptions to that rule include Halo 5, Sunset Overdrive, and blink-and-you-missed-it rail shooter Crimson Dragon.) Microsoft is cannibalizing its own console sales, forcing the Xbox One to compete against not just the PlayStation 4 and Switch, but its own parent company’s operating system, the one that’s currently running on 42% of all PCs worldwide, in order to muscle in on Steam’s territory. It’s the kind of cut-off-your-nose-to-spite-your-face move that you’d only get from Microsoft.

This week, we saw a third front open up when Apple unexpectedly blocked the Steam Link app on the Apple Store, citing “business conflicts.” The Steam Link is another part of Valve’s attempts, much like the Steam Machine, to get Steam out of consumers’ computer rooms and home offices and into the living room, where most entertainment is typically consumed.

By blocking the Steam Link’s release on iOS, Apple has denied Valve access to its app store, one of the few digital storefronts in the world that is bigger than Steam. Apple marketing chief Phil Schiller’s assurances notwithstanding, it’s easy to see why Apple would consider Steam a threat to its market share.

The good news for consumers, then, is that competition is escalating. Steam is up against much bigger companies which are willing to take a hit to gain an advantage, but Steam’s got name recognition, market penetration, and years of lead time. Apple does much larger numbers, but it’s naturally limited to its own ecosystems, whereas Steam runs on pretty much every OS there is at this point. Valve’s also taking the interesting tactic of trying to undercut Windows not by direct competition, but by introducing viable alternatives.

The question is, considering what happened the last time a major software company did something to annoy Newell, what’s he going to do now that Apple is low-key antagonizing Valve?

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