- Steam is a digital, video game distribution service created by American video game developer and publisher Valve Corporation in 2003. The platform started as a patch distributor with a clunky interface but steadily grew into a popular game services platform enjoyed by millions of users every day.
- Steam makes most of its money via the commissions it charges on all game sales, with the exact commission based on total net sales volume.
- Steam charges a small “deposit fee” for new game developers who wish to list on the platform for distribution. There is also a flat transaction fee to protect against fraud and support new features in the Steam economy.
| Business Model Element | Analysis | Implications | Examples |
|---|---|---|---|
| Value Proposition | Steam’s value proposition includes: – Extensive Game Library: Offering a vast and diverse catalog of video games across various genres. – Digital Distribution: Providing a convenient platform for users to purchase, download, and play games digitally. – Social Features: Enabling social interactions, including friends, chat, and community forums. – Regular Sales and Discounts: Offering regular discounts and sales events to entice users. Steam appeals to gamers by offering a wide range of games, convenience, social engagement, and cost savings. | Attracts gamers seeking access to a vast game library. Engages users with the convenience of digital game distribution. Fosters a sense of community through social features. Encourages game purchases with frequent sales and discounts. Provides a comprehensive value proposition in the gaming industry. | – Extensive catalog of video games across genres. – Platform for digital distribution and gameplay. – Social features for community engagement. – Regular sales events and discounts on games. |
| Customer Segments | Steam serves the following customer segments: 1. Gamers: Individuals who enjoy playing video games across various genres. 2. Game Developers: Creators and publishers of video games who distribute their titles through the platform. 3. Modders and Workshop Contributors: Users who create and share game modifications (mods) and content through Steam Workshop. Steam caters to gamers, game developers, and modders, creating a vibrant gaming ecosystem. | Attracts gamers looking for a diverse selection of games. Provides game developers with a distribution platform and access to a large user base. Supports modders and content creators by offering a platform for sharing their creations. Builds a thriving ecosystem connecting gamers, developers, and creators. | – Gamers seeking a wide variety of gaming experiences. – Game developers looking to distribute and sell their titles. – Modders and content creators sharing their work through Steam Workshop. |
| Distribution Strategy | Steam’s distribution strategy includes: – Desktop Application: Offering a desktop application (Steam client) for purchasing, downloading, and managing games. – Steam Store: Operating an online store where users can browse, search, and purchase games and other digital content. – Steam Workshop: Providing a platform for users to create, share, and download user-generated game mods and content. – Steam Community: Offering social features like chat, friends, and discussion forums within the Steam client. Steam ensures accessibility, a user-friendly store, modding capabilities, and community engagement to grow its user base. | Provides accessibility through a dedicated desktop application. Offers a user-friendly online store for game purchases. Supports user-generated content and mods through Steam Workshop. Fosters a sense of community and social interaction within the platform. Implements a multi-channel distribution strategy for widespread availability. | – Desktop application for game management and gameplay. – Online store for purchasing games and digital content. – Platform for sharing user-generated game mods and content. – Social features such as chat, friends, and discussion forums. |
| Revenue Streams | Steam generates revenue through the following streams: 1. Game Sales: Earnings from selling video games and digital content through the Steam Store. 2. Valve Index Sales: Revenue from the sale of Valve’s virtual reality (VR) headset, the Valve Index. 3. Steam Workshop: Collecting a percentage of revenue from user-generated content sold on Steam Workshop. 4. Steam Community Market: Earnings from fees on transactions involving in-game items and virtual goods. Game sales are the primary source of revenue. | Earns income from the sale of video games and digital content. Generates revenue from the sale of Valve Index VR hardware. Collects a portion of revenue from user-generated content sold on Steam Workshop. Earns fees from transactions involving in-game items and virtual goods. Diversifies revenue sources within the gaming and digital content ecosystem. Ensures financial sustainability through multiple income streams. | – Earnings from the sale of video games and digital content. – Revenue from the sale of Valve Index virtual reality hardware. – Percentage of revenue from user-generated content on Steam Workshop. – Fees collected from transactions involving in-game items and virtual goods. |
| Marketing Strategy | Steam’s marketing strategy involves: – Seasonal Sales: Hosting seasonal sales events, such as the Steam Summer Sale and Steam Winter Sale, to attract users with discounted games. – Email Marketing: Sending personalized email recommendations and notifications to users based on their gaming preferences. – Social Media: Leveraging social media platforms to engage with the gaming community and promote game releases. – User Reviews and Ratings: Encouraging user reviews and ratings to influence purchase decisions. Steam focuses on attracting users through enticing sales events, personalized recommendations, and community engagement. | Attracts users with highly anticipated seasonal sales events. Engages users with personalized email recommendations and notifications. Utilizes social media to connect with the gaming community and promote games. Encourages user-generated content through reviews and ratings. Implements a comprehensive marketing strategy to drive user acquisition and game sales. | – Seasonal sales events like the Steam Summer Sale. – Personalized email recommendations and notifications. – Social media engagement with the gaming community. – User-generated content in the form of reviews and ratings. |
| Organization Structure | Steam’s organizational structure includes: – Valve Corporation: The parent company overseeing the development and operation of Steam. – Development Teams: Dedicated teams responsible for the design and development of the Steam client and related software. – Customer Support: Providing customer support services to address user inquiries and issues. – Steam Workshop Moderators: Overseeing user-generated content and ensuring adherence to guidelines. Valve Corporation leads the operation and development of Steam, supported by teams focused on software, customer support, and content moderation. | Led by Valve Corporation, the parent company responsible for Steam. Employs development teams for software design and user experience. Offers customer support services to address user inquiries and concerns. Enlists Steam Workshop moderators to oversee user-generated content. Maintains an organized structure for efficient platform operation and user support. | – Valve Corporation leading Steam’s development and operation. – Development teams responsible for software and user experience. – Customer support services addressing user inquiries and concerns. – Steam Workshop moderators overseeing user-generated content. |
| Competitive Advantage | Steam’s competitive advantage stems from: – Extensive Game Library: Maintaining a vast and diverse library of games, making it a go-to platform for gamers. – Digital Distribution Pioneers: Being early adopters of digital game distribution, establishing trust with users. – Community and Social Features: Fostering a strong sense of community and offering social features that enhance the gaming experience. – Sales and Discounts: Hosting popular and highly anticipated sales events that drive user engagement and purchases. Steam’s strengths in its game library, digital distribution, community, and sales events solidify its position as a leading digital gaming platform. | Distinguishes itself with an extensive game library catering to diverse gaming tastes. Pioneered digital game distribution, establishing trust and user loyalty. Fosters a vibrant gaming community with social features. Drives user engagement and sales through highly anticipated sales events. Enjoys a competitive edge as a prominent digital gaming platform. | – Vast and diverse library of games across genres. – Pioneering digital game distribution, establishing trust. – Strong sense of community with social features. – Highly anticipated sales events that drive user engagement. – Leading position as a digital gaming platform. |
Table of Contents
Origin story
Steam is a digital, video game distribution service created by American video game developer and publisher Valve Corporation in 2003.
Steam started as a way for Valve to control the patching process for games like Counter-Strike.
The platform was also used to prevent cheating and provide easier access to content produced by the game developer.
However, Steam required a constant internet connection at a time when only 20% of American households had access to broadband internet.
What’s more, the interface was clunky and players were often locked out of the games they purchased as the platform’s authentication servers struggled to cope with demand.
Nevertheless, the 2004 release of Half-Life 2 – which could only be played with a Steam account – increased the popularity of the platform with three prominent packages emblazoned across the Steam storefront.
The following year, Valve made a decision that would essentially make the platform what is today.
They decided that Steam would move away from being a humble patch distributor and allow third-party developers to host and sell their own games.
Steam continued to grow in the following years, adding a competitive eSport scene and features more common to social media sites such as friend community groups and integration with review service Metacritic.
The Steam Workshop was released in 2011 after a major user interface overhaul, enabling gamers to create and upload content directly to the platform.
Many such contributions were used in Counter-Strike Global Offensive and Team Fortress 2, with Valve’s introduction of skins to CSGO saving the game from ruin.
The Steam Marketplace was released in 2012, allowing in-game items to be bought and sold using funds from digital wallets.
Two years later, Steam transitioned from a gaming platform to one providing game services.
Users could transform their laptops and tablets into wireless monitors to stream games or broadcast their sessions live to family and friends.
Steam now features almost 30,000 games from major publisher releases to independent titles and everything in between.
There are an estimated 120 million monthly active users who logged a combined total of 31.3 billion hours of playtime in 2020.
Steam revenue generation
Steam utilizes the online marketplace model where it connects buyers with sellers.
The company collects various fees and commissions for providing services, facilitating transactions, and giving game developers exposure to a vast audience.
With that in mind, here is a more detailed look at how the company makes money.
Commissions
Most company revenue comes from the commissions Steam charges on the sale of a game.
The exact commission depends on the game’s net sales volume:
- Net sales volume of under $10 million – 30% commission.
- Net sales volume between $10-50 million – 25% commission.
- Net sales volume over $50 million – 20% commission.
Steam Direct fee
Steam Direct is a submission path designed to provide a streamlined, transparent, and affordable route for new game developers to submit games to the Steam platform.
For each new submission, the developer is required to pay an app deposit fee of $100. The deposit fee is recoupable from the payment made if the app reaches $1,000 in gross adjusted revenue.
Transaction fees
Steam collects a transaction fee of 5% to protect against fraudulent incidents and also to cover the cost of future Steam economy features.
The minimum transaction fee is $0.01 and is charged to the buyer based on the total item cost.
Key Highlights
- Foundation and Evolution:
- Created by Valve Corporation in 2003.
- Evolved from a patch distributor to a leading digital game distribution platform.
- Significant growth marked by the release of Half-Life 2 in 2004.
- Value Proposition:
- Extensive game library across various genres.
- Convenient digital distribution of games.
- Integrated social features and community forums.
- Frequent sales and discounts on games.
- Customer Segments:
- Gamers seeking a wide range of video games.
- Game developers looking for a distribution platform.
- Modders and workshop contributors sharing game mods and content.
- Distribution Strategy:
- Desktop application for game management.
- Steam Store for browsing and purchasing games.
- Steam Workshop for user-generated content.
- Community features for social interaction.
- Revenue Streams:
- Commissions from game sales.
- Sales of Valve’s VR headset, the Valve Index.
- Revenue from user-generated content on Steam Workshop.
- Transaction fees from the Steam Community Market.
- Marketing Strategy:
- Seasonal sales events like Steam Summer Sale.
- Personalized email recommendations.
- Social media engagement.
- User reviews and ratings to influence purchases.
- Organization Structure:
- Valve Corporation oversees development and operation.
- Dedicated teams for software development and customer support.
- Moderators for Steam Workshop content.
- Competitive Advantage:
- Extensive and diverse game library.
- Pioneer in digital game distribution.
- Strong community and social features.
- Popular sales and discount events.
- Origin Story Highlights:
- Initial focus on patch distribution and anti-cheat measures.
- Steam’s growth catalyzed by Half-Life 2’s Steam-exclusive launch.
- Expansion to host third-party games in 2005.
- Introduction of the Steam Workshop and Marketplace for user-generated content and in-game item transactions.
- Revenue Generation Details:
- Commission-based model with rates sliding from 30% to 20% based on sales volume.
- Steam Direct fee for new game submissions.
- Transaction fees on the Steam Community Market to support platform features and combat fraud.
Connected Case Studies
Gaming Business Models
Free-to-play Business Model
Epic Games Business Model
Play-to Earn Business Model
Axie Infinity Business Model
Read Also: How Much Money Has Fortnite Made, Epic Games Business Model, Free-To-Play Business Model, Gaming Industry, EA Sports Business Model, Discord Business Model.
Main Free Guides:
- Business Models
- Business Competition
- Business Strategy
- Business Development
- Digital Business Models
- Distribution Channels
- Marketing Strategy
- Platform Business Models
- Revenue Models
- Tech Business Models
- Blockchain Business Models Framework
Related
More Resources
- How Do Podcasts Make Money? How To Make Money From A Podcast
- How Does Shopee Make Money? The Shopee Business…
- How Does Toast Make Money? Toast Business Model In A…
- How Does M1 Finance Make Money? The M1 Finance…
- How Does Revolut Make Money? The Revolut Business…
- How Does OnlyFans Make Money? The OnlyFans Business…
- How Does WeChat Make Money? The WeChat Business…
- How Does Medium Make Money? Medium Business Model In…
