In response to "Steam: A Monopoly in the Making" from The Escapist Forum: Response: This Article Reflects an Extremely Poor Understanding of Monopolies.

First off, you need to look at the competitors. Steam may be a large digital distributor of gaming content but it is in competition not only with digital distributors but with all distributors of content. Steam competes with Wal*Mart, Gamestop, etc. Steam is a tiny tiny tiny spec of nothingness compared to the game sales of Wal*Mart. Not only is it not a monopoly, it's really not even significant in the scheme of game distribution.

But the article posits a fear about the future. In this future Wal*Mart won't exist and most of the gamging content will be delivered through the web. Possibly. So let's look at this future.

For a monopoly to exist it has to be sustainable. Just growing big doesn't work. If a big company's competitor is small but satisfies customers better than he does, the customers will switch to the competitor and then the competitor will grow large. The reason Microsoft is a monopoly is because you can't switch, you have no options. If you want to run the hundreds of thousands of computer programs out there you have to pay the monopolist Microsoft. Why doesn't another company make a better Windows? Well, because there's a barrier to entry. The barrier to entry is that it is virtually impossible to create an OS that can run all the programs that currently run on Windows just as well as Windows. Therefore, no new competitor can emerge. The monopoly is sustainable.

Now let's turn to Steam. Where are the barriers to entry in the digital distribution market? Well, a digital product is pretty easy to create - it's not a terribly complicated program: no barrier there. It's also very easy to distribute, gaming companies are tacking on "extra" software such as DRM in their games already.

So, we see that Steam's position in the market isn't infinately sustainable at all. If Steam starts behaving in such a way that make customers want to leave it, any publisher can create a neo-Steam of their own for little capital, distribute it through their games to easily penetrate the market, and capture the value that Steam has lost.

The only reason Steam is the market leader is because there are very few companies in the market and Steam has satisfied the customer's needs the best so customers choose and stay with Steam.

Not only do I predict that Steam will in no way ever be a monopoly, but I bet we will see the opposite. I bet that the digital distribution market becomes very profitible that every publisher will force their own version of Steam onto consumers and demand they instal Ubisoft-Steam and EA-Steam and run it in the background to make the game play. All the publishers will try to create their own product and force customers to instal it and use it in the hopes of capturing a share of the money for themselves.

If only customers could be so lucky as for Steam to be a monopolist...

- Whispering Death

Considering how few of Steam's games actually use Steamworks right now, that must be 70% of a very small market. Heck, one of my big problems with Steam is that they openly allow third party DRM systems, including the absurdly restrictive ones. On the other hand, it also means I could theoretically move some of my non-Valve games (such as Bioshock) over to a Steam-free machine and still play them. So it's give-and-take.

I like Dizko's comment about Steam as a platform. We're already starting to see the beginnings of this concept -- Steam is going cross-platform, and Games for Windows Live is technically Xbox Live for PC. I could see this being taken to its logical conclusion, with the same game being sold in two versions for the same system: the Steam-free retail version that uses maybe Games for Windows Live for multiplayer and achievements, and the Steam version that uses Steam's multiplayer and achievement system, has no third-party DRM, and is only available from the Steam Store. I sure wish Bioshock 2 had come out that way!

Also, technical error. Half-Life 2 didn't come out in 2003 "alongside" Steam; it came out a year later. I don't know what Steam was used for in the meantime, since I wasn't in the gaming scene back then.

- Steve the Pocket


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