Primarily and in the finance textbooks, you can raise huge amounts of money to expand by selling shares to the public on stock markets
Secondarily, it can greatly enrich the founders/owners of the company
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Can someone explain Valve's business model to me?
- Thread starter Mama Robotnik
- Start date
Primarily and in the finance textbooks, you can raise huge amounts of money to expand by selling shares to the public on stock markets
Secondarily, it can greatly enrich the founders/owners of the company
PjotrStroganov
Member
With the Steam Gift Pile this year, does any money change hands between Valve and devs to get those games and coupons on there? On the one hand I could see developers and publishers pay Valve money to get into this huge advertising machine. On the other hand, codes and discounts cost money so I could also see money coming from Valve. Or is the sum of all that in the end just 0? Devs have made a ton of money and Valve has reinforced their platform once more.
Generally? Short termism.
Starwolf_UK
Member
As for Humble Bundles etc. Bandwidth is of little cost compared to becoming dependent on Steam. As much as "why would I want them any other place" etc they are not perfect. Ever have your Internet go down? Before you bark offline mode I always get the error I can't set it due to not having an Internet connection making it a backup power supply that will only turn on if you can power it.
*-Ever bought a game for an achievement? There are enough people doing that to fund such a thing. Remember with gambling, the house always win.
Hard to tell (as Valve won't talk about it and any developers who do will probably be shot) but the gifts available are not the whole Steam library we can conclude that there was some sort of agreement reached. I'd like to think it was valve paying for free games* but coupons coming out of the developers pocket (we think most of them won't be used as we lament their every obtaining so the actual cost is low).
*-Ever bought a game for an achievement? There are enough people doing that to fund such a thing. Remember with gambling, the house always win.
OnimaruXLR
Member
Valve's shenannigans are enough to get a life-long console gamer to consider the PC as a primary (or at least secondary) gaming platform for the first time in his life. That's good work.
I have to wonder if the console side will ever respond to this. Maybe if brick and mortar retail is closer to dying? If I understand how it works correctly, at a certain point after a game launches selling it at below it's MSRP is a lot more effective at making money. Especially since digital distro costs so much less than sending stuff out to folks in trucks and shit.
Then again maybe we're already getting close. The amount of time it takes certain games to show up on-demand on XBL for like twenty bucks is getting increasingly fast. Nowhere near Holiday Release>Sold on Steam for like fifteen bucks fast, but faster than it was last year.
I have to wonder if the console side will ever respond to this. Maybe if brick and mortar retail is closer to dying? If I understand how it works correctly, at a certain point after a game launches selling it at below it's MSRP is a lot more effective at making money. Especially since digital distro costs so much less than sending stuff out to folks in trucks and shit.
Then again maybe we're already getting close. The amount of time it takes certain games to show up on-demand on XBL for like twenty bucks is getting increasingly fast. Nowhere near Holiday Release>Sold on Steam for like fifteen bucks fast, but faster than it was last year.
SouthernDragon
Member
I think we're talking about two different things here.
I agree with you, to start with; they are making smart decisions where both customers and shareholders benefit. It's the best of both.
The difference is that their priority isn't shareholders, it's the customer. They treat the customer right, the company flourishes, and shareholders will benefit as a result. It's usually the other way around with publicly traded companies:
Prioritize shareholders
Profit
???
Customers benefit
Because they gain access to vast amounts of capital and make the owners of the company wealthy beyond belief.
But the trade off is that they are extremely restricted by the market. Can't take risks or make sensible moves if it'll scare "teh market" oh no!
I'd be surprised if you see a coherent reply. He tends to vanish from these threads when taken to task.
Edit: Well, WW replied, at least.
angular graphics
Banned
water_wendi
Water is not wet!
Alright, i just got home. Let me try to break it down as best as i can. Years ago when the internet was just taking off there were some developers that sold directly to the customer. Although selling games this way gets the developer the maximum amount of money for their effort there are downsides. The largest is lack of visibility.
i had hoped that developers would come together for mutual benefit to increase the customer traffic and views of their games. Think along the lines of a virtual shopping mall. Each developer buys in and becomes part owner of this content delivery system and with their collective weight would help each other out with generating visibility and therefore potential sales.
Even prior to Steams arrival there were sites out there that did things along the lines of real world publishers and storefronts and just applied this to the digital space. Big Fish Games is one example. The problem with this publisher/storefront method is that it does not play well to the strengths of the internet. In the real world there are logistical considerations to be made. Shipping games, making boxes, hiring employees to work the store. With the internet however, there is no reason why there needs to be a middle-man to collect a cut.
i see posts with people demanding specifics but ill be honest, i dont have a business plan drawn up and worked out for this. Its just something ive been thinking about off and on for a while.
King of the Potato People
Member
They give away free stuff, to make up for not releasing Episode 3? Everyone has to live with them self.
A "lapse of judgment"? How many free achievements were there? 7 or 8? If she made 100 accounts, then she essentially stole 700 lottery tickets. How the fuck is that a "lapse of judgment"?
charlequin
Banned
It's not that they don't benefit the shareholders, it's that they are made with the goal of benefiting the business -- which means long-term benefits to the shareholders.
This is basically the entire problem with publicly-traded companies as they currently exist: they consider "shareholder value" as their sole driving goal, which in practice means short-term value and thereby disincentivizes long-term thinking and infrastructural development (both areas that Valve has excelled in.)
I don't understand why everyone assumes it's working that way. That Valve are putting the community first and just happen to be more profitable per staffer than any other game publisher. I think it's just as likely, if not more so, that they are intending to make lots of money, are doing so effectively.
I want to be clear though, I'm not saying that's a bad thing at all, I love Valve, but I think there are lot of very naive people online in regards to their view of Valve. They are a company that is making obscene amounts of money, it's not a by-product of being 'nice', being viewed by the community as they are is part of how they maintain their monstrous turnover.
It's like the Dota 2 situation, when they revealed the game and did those interviews there were lots of people on GAF praising how cool it was that they didn't have a business model and just emailed the guy and all this very PR friendly narrative. IceFrog was pitching lots of people Dota 2, the Dota name, along with IceFrog's is incredibly valuable. Valve might not have had a specific business model in mind when they decided to make the game, but they knew it wouldn't cost that much, and even if they gave it away completely free it'd greatly impact Steam penetration in the Asian market.
They don't do anything for the consumer irregardless of it's impact on the value of Valve, nor should they.
Essentially, you want Steam's basic infrastructure (delivery and advertising) but for the whole kiboodle to be owned by, let's call them a developer's collective, where most of the money goes directly to the developer whose games are bought, and then additional profits are poured back into the collective distribution/advertising system?
On a side point, don't third parties own a shopping mall that the retailers pay rent and upkeep to? Not a great metaphor.
The Technomancer
card-carrying scientician
Because if you need a shit-ton of money to jump start a large scale endeavor one of the fastest ways to raise the money is to go public.
Gabe is rich, doesn't have to answer to anyone and likes games and just so happens to be good at facilitating the making of them.
He isn't a dick and the company isn't publicly traded so he can do whatever he wants.
Result: Not dicking anyone over, a good service, lots of experimentation, lots of delays.
He isn't a dick and the company isn't publicly traded so he can do whatever he wants.
Result: Not dicking anyone over, a good service, lots of experimentation, lots of delays.
The Technomancer
card-carrying scientician
I want to say they've done something similar for the last two sales. I know the Summer sale also did special achievements, and I'm pretty sure the 2010 Winter Sale had...something
My stance on it is fairly simple: Many companies take actions to try to ensure they make money now. Valve takes actions to try to ensure it *continues* to make money in the future.
Part of this is due to the privilege of their position. A company on the knife-edge of profitability may need to maximise short term-revenue just to survive, and Valve doesn't really need that; they can *afford* to be 'generous', as you put it, and in doing so create mindshare, goodwill and habits which will benefit them in the long term.
Didn't see this before. Good.
bigtroyjon
Member
Not even remotely close to being true. Almost every major public company is owned by big mutual funds/banks,employees and other long term investors. The number #1 goal is always the future and any company that focuses on manipulating stock prices will be out of business quickly.
Want proof? Go look at the average daily trading volumes compared to the overall shares. Traders get a lot of attention because get rich quick schemes are popular in this country but they are only a tiny part of the overall investing market. It's mostly made up of the guy next door and his retirement accounts.
Puppet Shadow
Member
This was sort of tried with Gathering of Developers. Not a happy ending.
I don't condone what she did, but that's a little messed up unless there's more to the story. Valve shouldn't cut off access to games she purchased. Being disqualified from the competition as well as future ones + all gifts taken away would be punishment enough...
There are a few perks of being in the stock market.
- You can quickly raise capital as a new company.
- You can become filthy rich.
- You can use your stock in order to gain advantage over your competitors by promising stock options for new employes.
Puppet Shadow
Member
Well, you're not really cut off, you could just launch the games with a No CD crack. Or do they call them No DVD cracks now?
I don't see why. It's like any other cheating. And lol at more to the story. She was using one hundred accounts. Clearly just a momentary lapse in judgement.
Pureauthor
Member
Other cheating bans prevent you from playing online (which, to be fair, would render a game like TF2 or Dota 2 pretty much worthless), not take away my games. It should be that I buy games from Steam, not rent them and can have them removed from me on a whim.
Although on the flip side what that friend did was just plain stupid.
Valve is giving away free games, coupons etc. in a lottery type fashion. By cheating yourself into receiving more "lottery tickets", you affect Valve and/or other publishers financially. This goes way beyond cheating in a game, and I don't see why that's so hard to understand.
Seraphinianus
Banned
valve's business model--
--make a consumer friendly DD service
--give away stuff for free or heavily discounted to ensure customer loyalty into the distant future
--consumer loyalty gets consumers to tell other consumers to use steam and gets great press
--Release a good game every once in a while to drive even more people to your service
--use all kinds of positive reinforcement tricks to keep people with your service, attract developers to your service, and attract new customers
please don't frame it as "oh, they just love us so much that they don't care about profits!" that's probably part of it, but first and foremost, they're just taking a chance on using many positive reinforcement psychological techniques in marketing, which people aren't used to, so they interpret it as some kind of love, but which also drives tons of sales and word of mouth marketing.
and aside from all the sales, you can bet they're selling lots of stuff full or near full price too. the hardcores sit there and watch sales, most people don't care to do that. Or a game is discounted after it has already been profitable, so every sale is icing on the cake.
--make a consumer friendly DD service
--give away stuff for free or heavily discounted to ensure customer loyalty into the distant future
--consumer loyalty gets consumers to tell other consumers to use steam and gets great press
--Release a good game every once in a while to drive even more people to your service
--use all kinds of positive reinforcement tricks to keep people with your service, attract developers to your service, and attract new customers
please don't frame it as "oh, they just love us so much that they don't care about profits!" that's probably part of it, but first and foremost, they're just taking a chance on using many positive reinforcement psychological techniques in marketing, which people aren't used to, so they interpret it as some kind of love, but which also drives tons of sales and word of mouth marketing.
and aside from all the sales, you can bet they're selling lots of stuff full or near full price too. the hardcores sit there and watch sales, most people don't care to do that. Or a game is discounted after it has already been profitable, so every sale is icing on the cake.
In a non-profit cooperative or consortium decisions would be bogged down by beaurocracy, swift development and improvement of the service on the level that Valve provides would be impossible, organizationally it would be a nightmare, large developers would hold far more power than small ones, and the removal of profit as a motivator would disincentivize R&D and almost certainly decrease the overall level of quality of the service.
charlequin
Banned
You're making this into a meaningless tautology when it really isn't one, though. This is kind of like the "argument" people make that nobody in the world ever does anything to be nice, because on an underlying level all actions are motivated by some form of self-interest. That's true on a very superficial, deconstructionist level, but it also makes discussion of the topic irrelevant.
Similarly, yes, self-evidently Valve is run to make a profit; that's what being a for-profit business entails. The key difference, and within the US business landscape this is a huge difference, is that Valve is a customer-oriented business and regularly takes actions that have no obvious short-term upside under the assumption that customer satisfaction will have far larger long-term payouts.
That is not what the comment I replied to said. You can choose to say you interpreted it in that way, which is fine, but I did not.
If you're refering to the developper side of Valve, it's been a long time the company isn't a developper anymore (as in its business model). They have Steam and make a shit ton money with it. Simple.
To put it in a usual category and as Gaben perfectly describes it Valve is now a Service oriented company. Games are part of the package which as a whole is a gaming service with community, gaming, security, trade, etc... It's like XBL or PSN just more evolved.
To put it in a usual category and as Gaben perfectly describes it Valve is now a Service oriented company. Games are part of the package which as a whole is a gaming service with community, gaming, security, trade, etc... It's like XBL or PSN just more evolved.
charlequin
Banned
Like eight other people all replied upthread and explained the exact same thing that I did because it was pretty straightforward what the talk about shareholder vs. customer orientation means and how it applies to Valve. You asked why people were talking about shareholder value; the reason I just gave is the reason why people were bringing it up. It's a meaningful distinction and one that's core to the business model and success of Valve.
I think I figured out Valve's business policy.
Valve holds a sale. You give Gabe your wallet. You say "Thank you, Gabe." He smiles back with a twinkle in his eye. He then pops an umbrella and flies back up the chimney in a cloud of pixie dust.
You're left $5-$10 poorer but richer in spirit.
Valve holds a sale. You give Gabe your wallet. You say "Thank you, Gabe." He smiles back with a twinkle in his eye. He then pops an umbrella and flies back up the chimney in a cloud of pixie dust.
You're left $5-$10 poorer but richer in spirit.
Fine, if that's what he meant, and I'm not saying it is, then I just think it's very poorly written.
And then even more of that once you're public, because dividends. And then you better keep growing geometrically, or you're a failure.
they're great.
- they somehow persuaded everyone that not owning being able to trade in your own games is fine, and so now all PC games, even on retail disc, are basically just license keys. You have a big backlog but don't want to play them anymore/are moving away from a gaming PC? Tough.
- they aren't an open storefront (at least I don't think they are). There is an element of choice whether they will 'publish' your game. But from a general consumers PoV they just come across as a normal store.
- They aren't very open to games from other locations/platforms. You can put a link in manually to another game, but their launcher isn't really great unless you only have steam games. I get that they want you to always see their adverts/storefront every time you launch the client, but if they made it easier for me to add other content, I'd practically have steam launch fullscreen on boot up and be happy. But they don't so I don't.
They do make great games. But they aren't perfect by any means. In some ways I wish they weren't so big, as it makes them the defacto standard and stifles competition.
- they somehow persuaded everyone that not owning being able to trade in your own games is fine, and so now all PC games, even on retail disc, are basically just license keys. You have a big backlog but don't want to play them anymore/are moving away from a gaming PC? Tough.
- they aren't an open storefront (at least I don't think they are). There is an element of choice whether they will 'publish' your game. But from a general consumers PoV they just come across as a normal store.
- They aren't very open to games from other locations/platforms. You can put a link in manually to another game, but their launcher isn't really great unless you only have steam games. I get that they want you to always see their adverts/storefront every time you launch the client, but if they made it easier for me to add other content, I'd practically have steam launch fullscreen on boot up and be happy. But they don't so I don't.
They do make great games. But they aren't perfect by any means. In some ways I wish they weren't so big, as it makes them the defacto standard and stifles competition.
What does your third point even mean? You add the game and Steam launches it. What else should it do?
They are just as open as Walmart or Bestbuy, and choice which product they do and do not wish to sell. Only Amazon has them beat in being more open.
I dunno. TF2 used to be my favorite game ever, but recent design choices is making me think less of Valve.
Valve has stated before that they want every "game changing" weapon to be easy to get a hold of. This has always been the case with the addition of the drop system, craft system and the trade system. However, recently they decided to add new weapons, but they were only accessible through crates which required keys to open. Keys that costs 2.5 euro a piece. Sure, you can still trade for them, but as the weapons requires keys to obtain, the in game economy has made these weapons extremely expensive to get a hold of.
There are other things too which I do not like. These are constant crashes, the extremely slow updates for glitches and exploits, and finally, the constant drop in aesthetic quality (clipping viewmodels, bad animations).
I wish Valve would rethink TF2. Problem is they are getting too much money still even with this problems.
Valve has stated before that they want every "game changing" weapon to be easy to get a hold of. This has always been the case with the addition of the drop system, craft system and the trade system. However, recently they decided to add new weapons, but they were only accessible through crates which required keys to open. Keys that costs 2.5 euro a piece. Sure, you can still trade for them, but as the weapons requires keys to obtain, the in game economy has made these weapons extremely expensive to get a hold of.
There are other things too which I do not like. These are constant crashes, the extremely slow updates for glitches and exploits, and finally, the constant drop in aesthetic quality (clipping viewmodels, bad animations).
I wish Valve would rethink TF2. Problem is they are getting too much money still even with this problems.
1. It's not a mystery how they "somehow" persuaded people not to trade in stuff. The Steam client and store offer prices and features that offset the value you lose by not being able to trade the game in. It's nothing sinister. EDIT: Also, you have some weird idea that CD keys started with Valve? No, bro.
2. Of course it's not an open storefront. Why should it be? they're fronting all the infrastructure and bandwidth costs, they handle the transactions, of course they, like ANY OTHER RETAIL BUSINESS, get to choose what they sell in their store.
3. I don't even know what your third complaint is talking about. You add a link to your library, you can use the steam client to launch your game, which gives you the overlay and lets your friends know when you're playing something. I'm not sure where you're going with this.
This is not true. Any weapon is craftable or tradable in-game. What you're referring to are "strange" versions of weapons, which HAVE NO GAMEPLAY DIFFERENCE from the stock weapons. The name on the weapon just changes as you get kills with it. That's it. Entirely cosmetic.
Zomba13
Member
The Holiday weapons (and hats) were crate exclusive for a week but you can now craft them and find them in drops.
Nope. The winter weapons (spy-cycle, holiday punch and wrap assassin) were crate-only for the first week. Not only that, but all three, plus the other five weapons introduced during the same patch are only craftable via random craft which is basically playing the lotto.
Anyone who plays spy will tell you that the spy-cicle is a damn good weapon. The other two are more novelties, but that's beside the point. It's the principle of the matter. Anything that affects gameplay should be easy to obtain. You'd think they would have learned that after the fallout of the polycount hats, but apparently not.
No doubt the success of Half Life gave them a war chest to build from, but I'm sure they have had a number of revenue streams to help them fund Steam over the years.
Valve has used achievements in the past to encourage both outright purchase and play of the games in question. Individual developers and publishers have to opt in to the Great Gift Pile, as well as Valve forgoing or reducing their commission. Both benefit from the increased exposure given to their games during the sale as well as from increased sales from discount vouchers where purchasers may not have otherwise picked up the particular titles.
Hats and other item based DLC is very easy and cheap to produce once you have the infrastructure and tools built. While such items in free to play games are typically only purchased by a fraction of the user base, their low cost to produce and "zero" incremental cost of delivery mean that you can make a lot of money if your userbase is large enough.
Valve get a cut of every game sold through Steam, yes. They don't get a cut of games sold at retail or through other means that merely use Steamworks, however they still benefit in that it brings new users into their ecosystem.
As they are "clipping the ticket" on every title on their store, they have a very stable revenue stream despite the success or failure of individual titles they offer (even their own games). Ultimately, as long as their stable of products and number of users for Steam continues to grow, their profits will more or less increase.