Why Steam’s 70/30 revenue split is necessary
By: Jeff Fowler
Tags: Game Development, Steam, Gaming, Competition, Epic Games

When Epic Games announced their acquisition of Psyonix, the studio behind Rocket League, players of the game responded with negative review bombs on the game’s Steam page, in fear of future releases becoming exclusive to the Epic Games Store some time in the future. The same has been done for Metro Exodus, when the publisher, Deep Silver, announced that the game would become an Epic Games Store exclusive.

Epic’s reason for making these titles exclusive to their store was to push Valve (the developer of Steam) to allow developers to keep more of their revenue; for Steam to change their revenue sharing system to at least an 88/12 revenue split mirroring that of the Epic Games Store. However, such a revenue split will play a part in hindering not just the growth of Steam, but also their ability to provide their famous seasonal sales that make games more accessible to low-income gamers.

As platforms grow, so do their costs

A redesign of Steam’s library, unsure if official

Steam started out as a platform for Valve to provide automatic updates to their games. During their beta period, their servers were not able to handle high amounts of traffic when beta testers used the platform to play Counter-Strike version 1.6. And upon the release of Half-Life 2, Steam became mandatory for players of the latter. At that time, their servers were still sub-par in terms of capacity, but over time they were able to make their platform more reliable.

Today, they partner with Akamai, a company that owns approximately 240,000 servers around the world. This allows them to provide stable connections to gamers virtually anywhere. Thus, it’s no surprise that Steam’s network capacity is far beyond that of when they officially launched. However, the increased capacity would definitely come with costs associated with maintenance (facility rental, electricity costs, etc) and server rental, which Akamai can use to invest in more servers. Valve covers a portion of Akamai’s operating costs through the partnership. What is uncertain is whether their costs could be reduced by building their own server network.

It’s not just about servers. Today, Steam is more than just a game store: it is a platform for indie developers to gain feedback about their betas; it is a platform for game modders to share their creations to make games better; it is a way for gamers to meet and interact with people; and more. Steam would not be able to develop these features, implement them, and maintain them as quickly without the investment from developers via their current game revenue sharing agreement, let alone hire new creative talent to come up with ideas for new Steam features. It could possibly be a reason why the Epic Games Store still hasn’t implemented the function to review games yet.

In fact, look at Discord’s foray into the game distribution market. They have a revenue sharing agreement of 90/10 and their store still isn’t as ambitious as that of Epic Games’. Yet their store is, in my opinion, better developed, with access to a game’s verified Discord server, a sidebar that shows the game’s features, and, at the very least, a Metacritic review score. The game’s gallery is also better organized. This could be because the store’s development utilizes Discord’s internal development team (responsible for the chat app’s features) as opposed to, presumably, a selection of developers that only focus on developing the Epic store. Steam is also planning on implementing a redesign of their home, store, and library pages, as well as their mobile app, which has the chance to be implemented faster than any of Epic’s planned features.

Basically, Valve has more developers, and these developers are sustained by Valve’s share of game revenue. Reducing that share will hinder the development of Steam.

Excess revenue contributes to expanding a game’s player base

A meme depicting Gabe Newell (CEO of Valve) as the bringer of low game prices

And there’s the famous Summer Sale. The few days of summer where games become so cheap that large amounts of players buy them. In fact, it’s a contributing factor to Steam’s large number of users. Yet not many people think of how Steam can reduce the price of games by 60, 75, or even 90 percent.

I am currently unsure if the decision to reduce game prices comes from Steam or the game publishers, so my theory is that what doesn’t go to the developers goes to the games themselves — in other words, what’s left of Steam’s revenue goes to funding the games on Steam. This makes games more affordable and gets more people onto not just Steam, but also the game’s player base. Now, I have no idea if 30% of the discounted price would go back to Valve, but that revenue would likely go towards funding their next sales.

With Epic choosing a revenue split that does not bring as much money back to the platform, they may not be able to provide the same amount of discounts as Steam, but it could result in perpetually lower prices for games, albeit not to the extent to that of Steam’s seasonal sales. Thus, while this makes games more accessible to a decent amount of gamers, it will not make games as accessible to gamers that are still unable to afford the slightly lower retail price. It’s a small price to pay for a large player base.

To sum up, what doesn’t go to Steam’s operating costs probably goes to the games, making them more accessible to poorer gamers. Despite Epic’s revenue share allowing developers to set lower prices, game prices will likely not be as low as Summer Sale prices.

One more thing:

Ultimately, developers get to choose which platform to distribute their game on. I have no idea who made this meme, so please let me know and I will credit the original creator.

Even with competition between digital distribution platforms, developers will always be the people making the decisions. However, the best decision for them would be to diversify because making a game exclusive to one platform won’t make a game perform as well as it should, even if the exclusivity is timed.

And owners of these platforms will always be finding ways to make their platforms more popular. Valve took the good route by making games cheaper, and Epic took the not-so-good route by making games exclusive to their store, including going as far as to buy studios that make reputable games. It’s up to them to decide what method of gathering new players they would support.

DISCLAIMER: I am a college student who holds no position in any game development company. I game as a hobby and support making games affordable. Also, I am not the Jeff Fowler that is involved with the Sonic movie; he is much older than I am.