The centre of the gaming universe: A primer on the global gravitas of Steam

It has fewer users than the Epic Games Store but holds the power to make or break both AAA and indie games.

In nine months of writing about the games industry — but over two decades of playing them — never have I heard so much about one platform that I knew so little about.

Steam came up in most interviews, panels and events, often framed as the centre of the gaming universe. Yet, I've only used it once to download the enhanced version of Baldur's Gate 2, which was on sale.

Being a console gamer, I rarely needed to interact with Steam. But, if your main gaming device is a PC, chances are you can't avoid it.

From what I learned, game developers essentially plan their entire launch and marketing campaign around the whims of this one platform. Getting onto the front page of Steam can be the difference between a title succeeding in terms of sales or fading into obscurity.

With the Steam Deck landing in Australia this week, and it inevitably pulling more gamers into the Steam ecosystem, I’m penning the article I wish I'd read nine months ago. I’ll be answering some burning questions about the history of this platform and why it continues to dominate the gaming sector.

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What is Steam? And why was it created?

Valve launched Steam in 2003 as a digital distribution service for its flagship title Half-Life 2. However, the company’s founder Gabe Newell had a broader vision for the platform as both a store and community hub, aiming to disrupting the standard physical sale of games.

The latest data — published in 2022 — says the platform has around 123 million users, which is around total population of Japan. Engagement on the platform is also fairly high, with 69 million daily users. It also generates estimated revenue of $8.58 billion.

These figures are likely wrong by today's standards as Valve keeps both the total size and traffic of Steam close to its chest. It is, however, transparent about the cut it takes from game distribution. Steam takes a 30% cut out of all sales under $50 million, with its slice reducing to 20% for all sales after hitting this milestone.

How does it work?

Like any other digital storefront. In fact, given it was one of the first of its kind — launching around the same time as the iTunes Store — it's arguable many other online digital distribution stores based their design off Steam.

You create an account and purchase games through the platform. The key difference is that Steam also works as a launcher for the game — much like how iTunes functions as a player for songs you purchase on its platform. That essentially means that if you want to play whatever you've bought off the Steam store, even if the data is physically stored on the computer, you need to have an active connection to the service to boot the game up. This incidentally drives traffic to the Steam Store, which in turn cross-promotes other games.

That's Steam at a basic level. But the platform also hosts forums on gaming topics, trailer videos and also its own algorithm which surfaces titles to its homepage. That's on top of other events that it holds to help surface new and exciting games from smaller developers.

As I'll go into, Steam is essentially its own ecosystem. Not only does it distribute games, but due to its scale, it feeds the release, hype and coverage of them too.

Why is prime placement on the Steam store so important to game developers?

Steam can make or break the sale of a game, and it all comes down to whether a game is surfaced on its homepage. Joe Gibbs, solo developer for upcoming indie game Fall of an Empire, says the amount of captive, engaged user traffic Steam receives from gamers makes landing prime placement crucial.

"Steam users also tend to use Steam a lot. They have it running in the background whenever they're playing a game, they have to open it to see their list of games, they have a Friends list where they can chat to people they know and invite them to games," he explains.

"All of this helps to keep them within the Steam platform, so they're kind of a captive audience who are more valuable than someone who has simply heard of the game from Instagram or Reddit."

How do Steam Wishlists work? And why do they matter?

After creating a Steam account, you can keep track of games you are interested in by adding them to your "wishlist". This allows you to receive notifications around their sale and release via Steam. However, the number of wishlists it receives during its marketing campaign is a key indicator for a game's success at launch.

"On average, around 20% of wishlists will convert to sales in the first week, and 60% within the first year of sales," Gibbs says. "The more wishlists that a game receives before release, the more Steam will push it at release."

How do streamers and influencers interact with Steam?

It's not just game developers who leverage Steam. Kate Hall, co-founder of PlayIndies and a former game streamer, says influencers use the platform to plan out content. "They actively participate in demo-centric events like Steam Next Fest and genre-specific showcases, which allow them to explore new games for free, providing fresh content for their audiences," she says.

"Influencers monitor Steam's trending and popular games lists to identify titles likely to attract higher viewership. They also use wishlists to receive notifications about sales, enabling them to purchase games at discounted rates. Steam's beta access and key generation systems make it a trusted and convenient platform for developers to provide influencers with early access, ensuring a reliable source of content."

What are Steam's biggest rivals and are they noteworthy in the industry?

Steam's biggest rival is the Epic Games Store. Epic are the creators and publishers of another really well-known game, Fortnite. Epic only takes a 12% cut of each game sold and purports to have more users, announcing it has 270 million active PC users at the start of 2024 — 147 million more than Steam. Yet, anecdotally, Steam is broadly considered within the video games industry as the larger and more influential store.

Hold on, so the Epic Games Store is actually bigger than Steam? Why is everyone obsessed with Steam then?

Well, for starters we don't know for sure if one store is bigger than the other — that's only a guess with the public information we have on hand.

But as both Gibbs and Hall say, Steam is more than just a marketplace. The ecosystem elements of the platform ensure that its users are there for one reason: to engage with games.

Hall explains: "Even with Epic's larger user base overall, Steam's user base is much more engaged and active. Steam has had many more years than Epic to implement features and systems that users like to engage with and use, setting a high standard for competitors."

"Steam has a much larger game library than Epic, largely due to how long Steam has been around. Between the community features and regular sales and discount events, Steam is better at retaining users.

"In comparison, Epic is mostly known for its rotating selection of free games, which has likely been one of the main contributors to the size of its user base. Who doesn't like free games? I know many people, myself included, who only open the Epic launcher to grab the free games. Then go back to Steam.

"Epic is better at user acquisition, and Steam is better at user retention. Because of this, Steam is the better platform to launch a game on in terms of visibility and chance for success—even with the hefty 30% cut Steam takes," Hall says.

So, the Steam Deck is out in Australia this week. What does that have to do with any of this?

The Steam Deck is Valve's latest foray into hardware that capitalises on its dominance in the software market. This isn't the first time the company has tried this approach.

Back in 2012, Valve hinted at plans for the Steam Machine, a dedicated gaming console designed to capitalise off the Steam platform. It had plans for its own internally created device to hit the market but settled on launching a model in 2015 in partnership with gaming PC maker Alienware. The device failed, largely due to the fact that there weren't enough big-ticket games available via Linux to justify its existence. At the time it was competing with other major game releases only available on established consoles (Playstation and Xbox) such as Grand Theft Auto V and Elder Scrolls: Skyrim, that were not available on its platform.

The Steam Deck's success to date is largely due to timing. It launched at the tail-end of the pandemic, when gaming spend and participation was at an all-time high. A vibrant global indie scene — where many excellent games are only available on PC and via Steam — has greatly buoyed the amount of games on offer on the platform, making it a more appealing proposition for all gamers. As Infinite Lives detailed earlier, its also bridging the gap between console and PC gaming, ultimately helping port more gamers onto the Steam platform.

The next question on everyone's lips is whether Steam will revisit its Steam Machine plans, creating a stationary but more powerful version of its successful Steam Deck.

Are there any other trends or challenges for Steam on the horizon?

Plenty of companies are clamouring to steal some of Steam's thunder. Perhaps the biggest challenge to its model though is the rise of game subscription services. Each major player has a rendition of this, but Microsoft is perhaps the most all-in approach on this strategy.

Steam survives on a transactional basis, taking a fixed amount per game sold. Subscription services, like the Xbox Game Pass, offer access to all games for a fixed fee per month.

It's a fundamental subversion of the Steam model, and moreover, Microsoft competitors by placing Game Pass on as many non-gaming devices as possible.

However, at least developers know they are paying 30% of their sales to Steam with each transaction. The economics of services like Game Pass and how they pay game developers is still opaque.

Did you learn anything new about Steam from this? (I sure did). What do you think about the platform's future and its place in the global games industry? Let me know in the comments below.

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What I'm playing: Nintendo Music

Nintendo once joked that “everything is coming to Switch”. Let’s hope that’s actually true for Nintendo Music.

Fun fact: Did you know the Grammys has a video game music award? It was only launched in 2022 but has recognised a number of tracks from games such as Assassin's Creed Valhalla and Star Wars Jedi: Survivor.

Need more proof of the musical ingenuity of games? US podcaster Kirk Hamilton runs a globally critically acclaimed music podcast called Strong Songs — he's been flown out to Australia and appeared on TV here to talk about it. Several episodes contain breakdowns of famous riffs from games such as Zelda and Mario. Makes sense that he's also a former Kotaku US reporter and current gaming industry podcaster.

This is all to say that Nintendo's new music streaming service, aptly named Nintendo Music, is well overdue. There’s plenty of people out there who love Nintendo for its musical prowess.

I've been playing around with the service over the past few weeks, writing this newsletter to tracks from Donkey Kong Country, Super Mario Galaxy, Zelda and Mario Kart. My favourite tracks are from Donkey Kong Country 2 and Super Mario World 2: Yoshi's Island. The latter is full of so many smile-inducing tracks.

It would have been a slam dunk if they included all of the 1,068 tracks from Smash Bros Ultimate. That game is arguably still the best collection of Nintendo tunes to date. Some of the remasters absolutely outshine their originals. Nintendo Music is also a much more elegant solution for listening to these tracks on the go than what the makers of Smash Bros originally proposed: carrying around your Switch.

For the record, Nintendo has announced plans to add to the service, so this could be coming.

Nintendo Music is a fantastic value add if you already have a Nintendo Online membership. But it's worth noting there are some excellent covers of Nintendo originals already out there on the web for free if you are so inclined. They are just a Google away.

Worth trying if you like: Music from mainline Nintendo games.

Available on: iOS, Android — but only if you have a Nintendo Online membership.

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