Steam allegedly threatened to remove games if devs sold them cheaper someplace else

Gaming
#1

I’ll reproduce the whole post from Wolfire here, so there is a copy here in case it ever gets taken down.

Wolfire is alleging that all competition to Steam failed because of Valve’s anti-competitive practices.

According to the complaint, Valve threatens developers with the removal of their titles from Steam if they try to charge lower prices on competing platforms, even if those competing platforms charge a lower commission.

Some context: Wolfire founded Humble Bundle, spun it off into a separate company when it was successful, then sold it to Ziff Davis.

http://blog.wolfire.com/2021/05/Regarding-the-Valve-class-action

Dear gamers and game developers,

I would like to explain why Wolfire Games is seeking to represent game developers in a class action suit against Valve Corporation. I felt that I had no choice, because I believe gamers and game developers are being harmed by Valve’s conduct. While I am taking on significant personal risk, I am not doing this for personal gain. If there’s any monetary recovery, it will be distributed to all developers and gamers in the class.

I did not set out with the goal of suing Valve, but I have personally experienced the conduct described in the complaint. When new video game stores were opening that charged much lower commissions than Valve, I decided that I would provide my game “Overgrowth” at a lower price to take advantage of the lower commission rates. I intended to write a blog post about the results.

But when I asked Valve about this plan, they replied that they would remove Overgrowth from Steam if I allowed it to be sold at a lower price anywhere, even from my own website without Steam keys and without Steam’s DRM. This would make it impossible for me, or any game developer, to determine whether or not Steam is earning their commission. I believe that other developers who charged lower prices on other stores have been contacted by Valve, telling them that their games will be removed from Steam if they did not raise their prices on competing stores.

While talking to other developers about problems that they were having with Steam, they kept referring to it as a “monopoly,” and saying that there was nothing that we could do. I wondered, has anyone actually checked if Valve is obeying antitrust law? So I consulted with legal experts, which eventually culminated in the complaint.

As the dominant platform, when developers list their games on multiple PC stores, the majority of their sales will come through Steam. I believe this makes most developers afraid that if they don’t sell on Steam, they will lose the majority of their revenue. To those developers, avoiding Steam would add unacceptable risk to the already high risk of game development in general. I believe that most developers have little or no choice but to sell on Steam and do as they’re told by Valve.

I believe that businesses are free to do whatever they want within the law. However, once a company reaches a certain level of power over an entire market, the antitrust laws forbid those companies from distorting competition. I believe that Valve is taking away gamers’ freedom to choose how much extra they are willing to pay to use their platform. I believe they are taking away competing stores’ freedom to compete by taking advantage of their lower commission rates. I believe they are taking away developers’ freedom to use different pricing models.

In my opinion, this is part of why all competing stores have failed. This suit insists that Valve stop interfering with pricing on other stores, and allow gamers and developers to make their own decisions. That’s why I joined the lawsuit.

Sincerely,
David Rosen

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#2

That’s very interesting, thanks for bringing to our attention!

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#3

I get that business is business, but it sounds like bully mentality to me…

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#4

Oh man, I remember watching David Rosen’s update videos on Overgrowth regularly. He was doing some amazing things at the time that I’ve never seen in a game before. Unfortunately the development dragged on way too long and the game ended up being utter shit.

I’ve not made up my mind how I feel about this story though. I think I’m leaning more toward Valve being in the right. ANY store will find it unfair if another store is allowed to sell something for cheaper than they are when it’s not on sale.

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#5

This is an interesting argument and it got me thinking about how Steam compared to oldskool physical stores. Like… is it possible to use physical stores as an analogue for how digital sales should work?

Because if an old brick-and-mortar store saw that a competitor was selling products for cheaper, they could then choose to cut their own prices.

But app stores like Steam can’t do that because of they way they’ve built their model.

Physical stores have to pay a wholesale price for an item and then try and resell it for a profit. They get to set their gross margin, and reset it on the fly to compete if they need.

However, Steam (and other app stores) broke away from that model. They set their effective wholesale price as a constant percentage of the retail price, and gave control of the retail price to the developers.

To me this seems like they want their bread buttered on both sides. They want to charge a fixed percentage commission and they want to set the terms for the developers’ pricing strategy.

…

Perhaps a way to compare it to the old physical store model is that the devs changing their prices for different stores is almost like a publisher changing their wholesale prices to specific retailers.

This happens all the time! Retailers frequently get preferential wholesale rates based on volumes.

In South Africa, games used to be sold for cheaper at wholesale than retailers in the U.S. or Europe could get them for because of the relative purchasing power of the rand.

But I digress… Using the physical retail analogue: What Steam seems to be doing here is essentially insisting on buying titles for a set wholesale price, then insisting that devs sell that same title at a higher wholesale price to another store.

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#6

So brick and mortar shops are the analogue version of digital sales?

Sorry. :sweat_smile:

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