Technology
Full Steam Ahead
By By Randy Woods September 22, 2009
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For the first few decades of the video game industrys history, the Silicon Valley region reigned as the industrys nerve center in the United States. In recent years, however, the Bay Area has faced a serious challenge from the Puget Sound area as the true seat of power.
While the pull of giants such as Microsoft and Nintendo of America has been responsible for much of this shift in brain trust, part of the reason for Seattles ascendance has come from the strength of its gaming innovations. Firms such as Bellevue-based Valve Software, which has created a whole new way for games to be distributed via its Steam platform, are helping to lead the way.
Launched in 2004, Steam is a portal that enables users to download game titles an unlimited number of times to PCs instead of by the traditional method of purchasing games on a DVD at a retail store for a standalone console. What makes Steam different is that it is used to distribute not only Valves popular game titles (Counter-Strike, Half-Life 2 and Left 4 Dead, to name a few), but also other games created by more than 100 different studios, many of them independent.
Just as the music industry has been upended by sites like iTunes, Steam is creating a stir in the gaming world. Our local industry is innovative and has a history of creating disruptive technologies, says Kristina Hudson, business development manager of enterpriseSeattle. Valve created Steam distribution, which gives the independent developers the ability to get their game to the consumer without having to be signed by a publisher.
Steam did not invent the concept of downloadable games, but it has added significant value by including a suite of services to game downloads, such as anti-piracy features, automatic game updates, instant re-downloads to other PCs (so once the game is paid for, you can put it on other machines as well) and an ability to save games in cyberspace via its Steamcloud feature. Steam also has an online social network for gamers and a matchmaking system to pair up players in multiplayer games.
Were kind of a hybrid, says Doug Lombardi, vice president of marketing for Valve. To some people, we look like a publisher. To others, we look more like developers. We just came up with a list of things we wanted to see in the industry. Steam came about because nobody else was doing it.
Much like the popular software-as-a-service model, Steam can be considered entertainment as a service, says Jason Holtman, Valves director of business development. We wanted to make it not just a place where you get game downloads, he says. Its also a community. The whole is greater than any of the parts on their own.
At first, Steam was a way to distribute Valves own game titles online. But the company ran into trouble with its former publisher, Vivendi Universal, which claimed that Steam was undercutting its retail sales. In what Lombardi calls a nasty litigation battle from 2002 to 2005, Valve settled with Vivendi and retained the rights to its intellectual property, marketing and distribution, including retail sales. After clearing that legal hurdle, Valves foundersformer Microsofties Gabe Newell and Mike Harringtonwere free to set up distribution agreements with other developers on the Steam platform as well.
Today, Steam has become the worlds largest independent games network, distributing games worldwide in 21 languages and serving 21 million active accounts. Valve does not disclose its financial information, but Lombardi says the company has been profitable every quarter since Q4 04. Were in a weird industry that tends to do well in a recession, he says.
This spring, Valves Left 4 Dead was the number-one new title on the Xbox 360. The next big push for Valve will be the release of Left 4 Dead 2 this fall. As of mid-July, Lombardi says, November pre-orders for L4D2 were double what they had been for the games first release.
Lombardi attributes part of his firms success to being in the right place at the right time. Ten years ago, Seattle was about a quarter the size of the Bay Area in terms of gaming market share, Lombardi says. Now Seattle is at least neck-and-neck with the Bay Area and has almost become a center of the gaming world. In recent years, the only news from down in the Bay Area has been about closures. Theres not a lot thats new.
The numbers appear to back up Lombardis claims. According to a study sponsored by enterpriseSeattle, the Puget Sound region has the largest concentration of game developers in the country and was home to at least 150 gaming companies in 2006, employing more than 15,000 people. A recent update of that study by Seattle-based research firm Community Attributes found that 75 established Puget Sound-area gaming businessesrepresenting about a third of local gaming industry jobsgrew by 15 percent from 2006 to 2008, the equivalent of a compound annual growth rate of 7.2 percent. During that same period, total regional employment grew by only 2.8 percent annually.
Though some have said the advent of sites like Steam will mean the death of traditional console games, Holtman says there will always be room for several kinds of game interfaces. First-person shooter play is very different on a PC keyboard than it is with handheld controllers, so console games will still be around for some time, he explains.
Still the greatest growth potential is in the PC market, Holtman says. Twenty-one million accounts is huge for console games, he adds, but its only a small portion of the total number of PC users that play games.