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Opinion: Why is Steam Issuing Tax Breaks for the Rich?

Developers and publishers potentially getting more money on Steam is a great thing. Isn't it?

  • Text: Bengt Lemne

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There's something of a riot brewing among indie developers as Valve has decided to give bigger games lower fees on the digital Steam platform. Previously, at least from what we know, the fee Valve has taken off the top of all revenue earned via the Steam platform has been a flat 30 per cent. It's comparable to the fee that Microsoft, Sony, and Nintendo charge on their platforms and most digital outlets offer a similar revenue share between the shop and the publisher.

The new model on Steam (as announced by Valve) will see that percentage drop to 25 percent once a game has earned $10 million (USD) on the platform and when it goes beyond $50 million (USD), which is a rare feat it should be said, they'll only take 20 per cent. The move is likely a direct result of several high-profile publishers opting to forego a release on Steam with their major products with Activision recently launching Call of Duty: Black Ops 4 exclusively on Battle.net and Bethesda launching Fallout 76 on Bethesda.net. The difference of launching on those platforms is that all the revenue would stay at Activision Blizzard and Bethesda respectively. Or at least this could be seen as an attempt to convince the likes of Ubisoft not to shift exclusively to Uplay and follow in the footsteps of EA, Activision, and Bethesda. Other big publishers are likely eyeing similar moves, say if Red Dead Redemption 2 comes to PC (which is highly likely) would Take-Two want to give Valve 30 per cent? With this model at least there might be motivation to stick around on Steam with your major releases.

If Red Dead Redemption 2 would sell a million copies on Steam at $50 it would qualify for the 20% bracket, a likely scenario if Arthur is heading to Valve's platform.

But the truth is that it's not just the big publishers who fail to see the value they get from giving Steam 30 per cent of their revenue. Indies have been complaining about the 30 per cent for a long time, and now that they see "tax breaks" for the wealthy they're not taking it lying down. Vlambeer's Rami Ismail is one of the more vocal members of the indie community and he took to Twitter to voice his thoughts:

"Have things really gotten so bad for Valve in the ever-more competitive storefront scene that they now have to subsidize big studios? Are they that undesirable for large titles now that the large titles tend to be able to launch their own store?"

Arguments could be made for both sides, but it is only natural that Steam looks to entice the big players a bit more than what is the case at the moment. And to be honest they're probably looking for ways to weed out the smallest fish in the Steam pond. After growing, growing, and growing for years, Steam is facing its biggest challenge at the moment, and while the loyalty of their player base is a major strength, it is a fact that they've brought the AAA exodus upon themselves. They could have taken these measures earlier and they could have stepped in with games of their own making to fill the gaps and provide exclusive content to draw new players in. But as a game developer they're not making the sort of blockbuster big features they were once known for (Half-Life, Portal, Left 4 Dead), exactly the sort of games they've been losing to publisher-owned platforms in recent years.

Do Steam need these games then? Call of Duty. Fallout. Battlefield. You could argue Steam doesn't, in some respects it is bigger than it ever was with those franchises onboard. It's hard to see why any publisher would go back to Steam when they share none of their revenue on their own launcher, even if their game is big enough that it will eventually reach the 20 per cent plateau. If you want to launch something on PC without a major brand you still need to be on Steam. That's why the next PUBG will most likely launch here, but once you're a success (like Fortnite) maybe you'll want to get away from Steam as soon as you can.

Fallout 76 may not have enjoyed the best launch, but realistically Valve lost out on millions of dollars as it launched exclusively on Bethesda.net.

Steam is also under pressure from another development, the subscription model. In many ways, Steam represents the opposite of that as one of the biggest things Steam has got going for it is that people buy more than they play, be it a result of their massive sales events, humble bundles, or just the addictive nature of adding games to your library and the integrated marketplace (which gives you the illusion that you can make money back, for some it may not be an illusion, but the house always wins, that's a fact). Could Steam introduce some kind of subscription model in the future? Anything is possible, but that would likely cause a great deal of upheaval.

The marketplace is changing and Steam needs to adapt. Content is always going to be king, and it's not without reason that Valve wants to incentivise major titles to stay with the service. The way the system works also benefits companies who employ longterm DLC strategies as that counts towards the product's overall revenue. A one-off complete experience without add-ons is not as viable with this model. With services like Xbox Game Pass, EA Access, and rivals likely to make a move to secure exclusive content in the future (Discord could potentially be a major challenger in the future), Steam needs to make sure they're not stuck with certain niches, old games, and a truckload of cheap shovelware, particularly as they don't seem intent to provide that sort of content themselves.

We don't think giving "tax breaks" for the big earners is going to get anyone back who has already transitioned over to their own platform. Instead, what Valve has succeeded in doing is to create more unrest among indies. The platform is already under fire from indies as discoverability is a very real problem for many smaller serious game developers. The good news here is that the once non-negotiable 30 per cent wall has been breached, and we expect many other platforms to loosen this too, and perhaps the changes will trickle down to the indies in the end, but regardless the market is opening up and there will be more choice moving forward. That's the good news, the bad news is that as a consumer it's probably going to be even more confusing with launchers and storefronts coming to PC than there are today.

Cuphead is a highly successful indie title that has sold somewhere in the range of 1-2 million copies (according to SteamSpy) at a list price of $19.99 (the average price with various discounts should be lower) and would not reach the upper bracket with the new model. It definitely reached the middle bracket though.