Valve: Pirates Are Just Underserved Customers

At the Game Business Law summit, Valve talked about Steam, digital distribution and the PC market. Interestingly, Valve sees pirates as "tons of undiscovered customers."

Valve: Pirates Are Just Underserved Customers

Dallas, Texas — At the Game Business Law summit at SMU's law school today, Valve's Jason Holtman addressed the business models behind the company's popular Steam service.

Holtman, who serves as director of business development and legal affairs, says that Valve has sales in excess of 30 million units in their ten-year history. Steam launched in 2004. He remarks, "We're more than just a game company -- we're a platform holder, distributor, publisher..."

Running through the numbers behind console sales, Holtman points out that there are more PCs in the market than all the consoles combined. In fact, in 2007 alone, over 255 million new PCs were purchased. "That's a huge install base."

"Everyone's got a PC, they're connected," he says. "If you think about gaming just in terms of what analysts show tend to think about the consoles." Each console company, says Hotlman, has a minimum of 50 people devoted to talking to magazines, appearing in USA today, etc.

Holtman goes on to say that there's a current meme making the rounds: 'Online sales are replacing retail sales.' "It's not a cannibalization," defends Holtman, "It's not a replacement. It's all boats rising with the tide." Retail sales are rising, just not as quickly. And he says, people are just now starting to get data from online sales.

Steam currently has 15 million connected gamers, with 1.6 million peak concurrent users. It's available worldwide in 21 languages. "From the outset, we knew we had customers worldwide," says Holtman.

"And we're a distribution channel, so we've got lots of other people's titles as well." Some three hundred plus games, in fact. "We have a great long tail, by the way...if you want to explore long tail economics."

"We're not just a way of selling game," reiterates Holtman. "What we are, actually, is a platform." As such, users have to be able to do more than just buy games, the reason Steam has achievements, and lets users talk to friends.

Holtman returns to this false idea that "Digital sales cannibalize retail," and this time he has proof. "Since Steam is actually a connected platform," he says, Valve can track activation for both retail and digital sales.


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