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Valve's Jason Holtman on Steam Having Many Zombies, But Not Cannibalizing Sales

by: J. F. Amprimoz ; edited by: Simon Hill ; updated: 4/17/2012 • Leave a comment

Valve's Director of Business Development talks about Steam, PC games, digital distribution, and yes, Left 4 Dead 2 in our interview.

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    Digital distribution is a buzz word that has been hard to miss even in mainstream press ever since iTunes changed the way people buy music. For gamers, in particular the hard-core player and savy consumer types, the appeal has been undeniable. The selection, prices, and convenience of direct distribution sites like Gamer’s Gate and Steam, amongst others, should be relegating the practice of dragging one’s self to a store and having physical media to scratch to the realm of the quaint and archaic. But, as this article on the penetration of digital distribution of games explains, that isn’t the case.

    You think this would worry Jason Holtman, Valve’s Director of Business Development, who obviously thinks a lot about how to make Steam grow. But, as he puts it: “All boats really rise with the tide.” I sat down with Jason at the Montreal International Games Summit, outside no less, as it was unusually warm for a Montreal day in November. In addition to the weather, we talked about the longevity of games created by ongoing free updates, the relationship between physical and digital distribution, Steam’s relations with small developers, and I even got him to talk about Left 4 Dead 2.

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    Steam Has Zombies, but Doesn’t Cannibalize

    Steam: Zombies Yes, Sales Cannibalization No Jason explains that instead of taking existing retail market share, Steam actually grows the market. “When we started with Steam a lot of people thought that it’s always a zero-sum game. There’s only a thousand copies of anything you are going to sell: if I sell two hundred, somebody else is going to sell eight hundred… that’s not what we’ve seen.

    “It’s not just about the distribution part… it’s about services. Things like having auto-updating, and matchmaking, and your friends, and the ability to chat; anti-cheat technology – all of those things are actually driving more copies of games to be consumed overall… there’s no cannibalization.

    “When we do things like add content, to Team Fortress 2 or something, we see our retail sales go up… When we sell something at a very low price on Steam like Team Fortress 2 for $2.50, it’s not just that people hear about it later and go buy it at a store, it’s that we’ve increased the number of players. There’s other people watching their friends play, and then they’ll go out and buy it.”

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    Gimme Steam!

    Why aren’t more PC gamers shouting this Peter Gabriel gem at the top of their lungs? Admittedly that wasn’t my exact question (you can hear the interview in its entirety here), but Jason continues: “Another aspect of why I don’t think there is this cannibalistic tipping point in retail versus online is people like to shop, and people have cash in their pockets… I like to shop: I have a credit card; I am fully web enabled, and I find myself in Barnes & Noble.

    “A pure economist would look at me in a Barnes & Noble bookseller stack and say: ‘Well, you’re crazy: that book costs more here than it costs on Amazon, and it’s probably not exactly [the best one], you could have got a different edition or something.’ And it’s like: I like to shop.”

    That explains why people would still use a retail store from time to time, but what about those people who just won’t use Steam? Some of them might just be buying into a very common misconception about having to be online to play Steam games.

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    Steam’s Offline Mode and the DRM Question

    Steam Offline Mode or Not, Sometimes Solo Is a Bad Idea Actually, that misconception is so common that I held it as well. Jason handled my misstep graciously and explains: “Steam has an offline mode. We made it very easy to use. If you turn your computer on and there is no internet connection: Steam works; your games are there. The thing that’s missing are maybe some of the online services. It doesn’t cripple your game, you obviously can’t play multiplayer. But we found this idea of making sure you’re connected all the time for everything, is not always a good idea…

    There wasn't room for everything here, the recording of the complete interview about Steam and L4D2 is here.

    “The reason you haven’t noticed is because most people stay online. Early on people were looking at things like Steam, and there was this myth of ‘Well I can’t have my game attached to something and use authentication because what about that guy who doesn’t have the internet connection.’ And we kinda go ‘Well if they’ve got the video card capable of playing the game we’re selling, they probably have an internet connection. And most people, like yourself, they never notice we have a great offline mode because they’re always online.”

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    Indie Game Distribution via Steam

    Digital Distribution of games makes things a lot easier on independent game developers, as Chris Jones of Big Finish Games told us in this interview, or Jakub Dvorsky of Amanita Design in one I will post soon. Physical media and distribution thereof aren’t cheap, and digital distribution, in relative terms, is. While there are advantages to selling the game on your own website, like having fewer fingers in your pie and getting buyer’s email info so you can ask them if they want to go on the mailing list, getting on a platform like Steam has a lot of advantages as well.

    Auto-updating, a friends list that spans multiple games, and other services are valuable, but the major advantage is probably visibility. Steam has a knack for making things go viral, or at least turning up hidden gems, with user darlings that might otherwise go unnoticed getting a lot of attention. Anyone can try to get their game on Steam, but this ain’t the AppStore. Getting on Steam requires their approval, but what becomes a hit is usually up to the users.

    “The way we go about looking for games on Steam is: there’s obvious things that have a pedigree that we’re gonna say ‘Ok, that makes sense. Modern Warfare 2 sure.’ You could have told me that last year and I would have said that we’ll have that on Steam, because we know customers are going to want it. In terms of the indies and the smaller games, the challenge is harder because there’s a lot of people making a lot of games. So usually what we ask people is to at least be at alpha stage...”

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    Audiosurf and the Steam Effect

    Games are playtested and promising products are examined in consultation with the dev as far as planning marketing, price points, and other business elements. “Once the game gets going I think this is where, to your point, it really is customers that drive it.”

    Talking about Dylan Fedder’s Audiosurf as the quintessential example of a game which’s success was dictated by the community: “It got consumed like wild fire… Could we have predicted that? Could you and I have sat on a green-lighting couch and said ‘Yeah that one not the other one?’ Instead you’ve got this nice open platform where you can watch customers making choices and have reinforcing effects.”

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    Major Releases like L4D2 and MW2, Digital Distribution Style

    I asked if Steam underwent extra preparations for a major release like L4D2 in a way analogous to a retail store getting extra staff and opening at midnight for a game release. “It’s not reLeft 4 Dead 2 Zombie ready to pour through Steam ally centered around a single game: a good example this year of the ones that I can talk about that are announced: Modern Warfare 2 and Left for Dead 2 are both Steamworks games. So those are all being serviced through Steam, they’re being activated through Steam. And obviously planning was happening way back in the summer so we make sure we have the right load and capacity and we’re paying attention to those games.

    “But as we’re paying attention to those games, we’re really paying attention to the system… It’s really about the robustness. The nice thing is sometimes the big games are sort of the leading charge. A good example is ‘Oh, maybe we actually need that extra server in Malaysia now… The first of August, let’s put that extra server in Malaysia.’ What’s nice is when we do that, all of the games get better. We’ve got over 200 content servers all over the world… We’ve got a content server, even now in Greenland.”

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    When Will the Sales for Left 4 Dead 2 Peak?

    Since Valve is the developer, publisher, and distributor of L4D2, they have about as much and as real-time sales data as you can get your hands on. This struck me as a good chance to find out about when people actually buy a big game.

    “There’s three major peaks. There’s an opening of a pre-sale peak. Depending on when you put it in pre-sale you’ll get a fair number of people in those first two or three days of pre sales. Cause there’re great fans, especially the big sequels, big games, they’ll drive a peak. The other peak is right now, today (Nov 16th). We’re gonna launch the game in, oh, nine hours. In nine hours from now there’s going to be a peak that gets driven in retail and online. People are going to consume the game, they’re going to want to play, they’re going to see their friends play. There’s obviously another peak right around the holiday season.” What happens is people will be buying it retail all throughout the coming month, and then they’ll go and they’ll activate, or also buy it with their Christmas money.”

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    Left 4 Dead 2: A Game as a Service

    Something Jason emphasized in his presentation at MIGS as central to Steam’s way of thinking about selling games is that a game is more a service than a product. He mentioned this in our interview as it relates to Left 4 Dead 2:

    “A traditional peak of a game would usually go three-four months and then fall off and you’re kind of done. Left 4 Dead 2 should perform like Left 4 Dead or like Team Fortress 2. We think of those games going on for years.”

    Another facet of a game as a service is that you are looking after the multiplayer community in a tightly integrated (some Modern Warfare 2 fans that miss dedicated servers would say too tightly integrated) manner. There are however advantages to this, like smooth co-op play:

    “Speaking about the game [Left 4 Dead 2] in particular, Steam taught us a lot about multi-player and co-op and the things we’ve learned, kind of connected platform to make the games better… [It’s] a type of game, that people really like now, that’s actually enabled by platforms having moved forward a fair amount.”

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    Selling Left 4 Dead 2

    L4D2: The Guy in the hat kinda looks like the guy from Clutch While hard-core gamers would have found out about L4D2 even if it had been left under a rock in the woods for it’s launch party, hard-core by definition, does not make up most of the market. That is where a $25 million marketing budget comes in. Earlier in the day, Jesse Divnich, Director of Analytical Services for Electronic Entertainment Design and Research, a firm providing market and other information to the video game industry, gave a lecture on the importance of correctly marketing video games. He said that game ad campaigns are best run by people who understand games, and this usually means going with in-house personnel instead of retaining an ad firm. I asked Jason if they used an agency or stayed in-house.

    “Not my exact forte, but a lot of that we do internally, a lot of it we work with EA, and then for the placement and the work of getting it out, getting the billboards made, yes we use an agency.”

    One reason I was after information about L4D2 marketing was my long-term love of Clutch, a band whose music was licensed for one of the commercials. “The television commercial that you saw, that’s in-house: that was made by Valve people.” Is there licensed music in game?

    “There is music in the game. There is some licensed music – you’ll have to find it. There is a specific scene inside the game that has to do with music where you are fighting in a concert arena that I think people respond to a lot. There’s a lot of loud music during that scene.”

    Sounds good to me: the constant discharge of firearms tends to drown out laid back tunes any way.

    The audio of the complete interview about Steam and Left 4 Dead 2 can be heard here. It contains a lot of explanation we didn't have room for in this article.

    Hope you enjoyed reading! Please post your thoughts below, or let me know on Twitter (@gameandpc)

    All images from official Left 4 Dead 2 website.