IGN: Steam's 30% Cut Is Actually the Industry Standard

[fiendcode]

You do realize Valve has developed and released hardware of their own right?

Or does that just not count for you because Valve?

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Valve's hardware R&D doesn't follow the razor/blades pricing model virtually all consoles do. Like if Nintendo only made $80 joycons, $70 pro controllers and a $50-100 Cardboard VR package to supplement their PC or Android eShop then maybe Valve would be more comparable. That's why any hardware production at all isn't relevant, only subsidized hardware production like we see with the base consoles themselves.

 

[eonden]

Steam finances way more people as consultant than their "employee" count shows. Heck they are investing similarly in VR R&D-wise than FB.

 

[Plum]

First, learn to read financial statements. $11Bn? No, it says $1.4Bn. Second, Adobe has 21,000 employees. Third, ~$300m of that is relating to vesting of their stock options (because Adobe share price changed in value). Fourth, R&D costs for software is largely made up of employee costs.

Annualize that to $1.5Bn. 10,000 employees in R&D and you are back to $150k per head in development costs that I used in my assumptions.

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Yeah, I got a number mixed up there. My bad, however I can't see where you received the $300m from. Even then I seriously don't see how your claim that Valve's R&D accounts for only $30m of their total operating costs adds up. As I said it's impossible to know but you're claiming that Valve can stomach a 12% cut based purely on assumptions that are themselves based purely on reported employees numbers and the wrongful notion that Valve only invests in relatively cheap software R&D.

 

[Nostremitus]

I'm pretty sure we all knew this already. Just because something is "how we've always done it" doesn't mean it's good or justified.

 

[Arthands]

IGN seems to not get the concept of setting the standard.

Why do you think everyone is 30%? It's because Steam is the proof of concept for digital reselling pc games, and the profit machine formula everyone follows. I mean, dear lord. What a troll article.

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Steam isn't the one who comes up with the 30% standard.

 

[eonden]

Yeah, I got a number mixed up there. My bad, however I can't see where you received the $300m from. Even then I seriously don't see how your claim that Valve's R&D accounts for only $30m of their total operating costs adds up. As I said it's impossible to know but you're claiming that Valve can stomach a 12% cut based purely on assumptions that are themselves based purely on reported employees numbers and the wrongful notion that Valve only invests in relatively cheap software R&D.

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Steam themselves said that only 12.5% of the purchases in Asia used standard payment methods (which they consider payment methods below 10%). Most of the Asia population uses more expensive methods that would make it nearly impossible to be profitable in that region.

 

[Arthands]

I'm pretty sure we all knew this already. Just because something is "how we've always done it" doesn't mean it's good or justified.

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Not true. Head to any Epic/Steam thread and you will see countless people clueless about this. There is a reason why these people only point to Steam for 30% and not every other companies.

 

[thebishop]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality. EGS isn't even a competitor. The idea that Tim Sweeney has players arguing about whether 12% or 30% of somewhere in between is "fair" is so depressing.

 

[Tuco Benedicto Pacifico]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality.

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Uh, no, it wouldn't? Not even close.
But it would surely surpass their current Windows offering, that's for sure.

 

[Deleted member 401]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality.

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You're gonna have to back this one up, chief.

 

[Dog of Bork]

Strange how console gamers are suddenly such experts on the PC experience.

 

[thebishop]

Uh, no, it wouldn't? Not even close.
But it would surely surpass their current Windows offering, that's for sure.

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I'm not trying to drag Steam (it's synonymous with PC imo, or should be), but I think Xbox (and PS4) eclipse Big Picture mode on multiplayer party system, integrated voice chat, music streaming, multimedia, friend's activities, and a lot more. Steam has way better gamepad mapping support, but that's about it imo.

 

[Deleted member 3196]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality. EGS isn't even a competitor. The idea that Tim Sweeney has players arguing about whether 12% or 30% of somewhere in between is "fair" is so depressing.

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I think the fact that people are discussing it and calling Tim out over this (in very many cases) unsustainable cut is only right. Before now, people have just been using a better developer cut as a stick to beat Steam with when, in reality, their offering is better than most and the cut they take goes right back into making the PC platform better for developers and customers.

If Epic could run a platform that is as globally accessible and feature rich as Steam on a 12% cut, I'd support them in having that 12% cut, but we all know that they just want to have a downloader and friends list, while begrudgingly enabling a few (broken) features like cloud saves to keep the largest group of players content to the point that they can call it "another icon", all the while ignoring people in poorer countries (where retail top-up cards are the preferred method to pay) and those who even slightly deviate from the desk-based Keyboard/Mouse/Xbox controller setup.

Steam makes PC gaming more accessible, which is only right as the PC is a flexible platform. EGS is an inflexible client on a flexible platform, and no 88/12 mantra repeated over and over by its supporters is going to change that fact.

 

[Arthands]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality. EGS isn't even a competitor. The idea that Tim Sweeney has players arguing about whether 12% or 30% of somewhere in between is "fair" is so depressing.

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😂😂 hilarious

 

[Tuco Benedicto Pacifico]

I'm not trying to drag Steam (it's synonymous with PC imo, or should be), but I think Xbox (and PS4) eclipse Big Picture mode on multiplayer party system, integrated voice chat, music streaming, multimedia, friend's activities, and a lot more. Steam has way better gamepad mapping support, but that's about it imo.

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Yeah, aside for the fact that Big Pciture is ONE side of the Steam UI, we fundamentally disagree on this one.
Frankly when I got my PS4 Pro one year ago I couldn't believe how bad it was compared to what I was used on PC.

 

[Alexandros]

You don't need to be "qualified" to see that R&D spend <1% of revenues is ridiculously low.

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Source please?

 

[bobnowhere]

One funny thing about all this is that Microsoft could do a straight port of the Xbox One menu system to Windows and it would surpass Steam in terms of functionality. EGS isn't even a competitor. The idea that Tim Sweeney has players arguing about whether 12% or 30% of somewhere in between is "fair" is so depressing.

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That's a bold call seeing as the XBOX menu system is beyond terrible and well below steam and even the PS4's and that one has issues as well.

 

[BurritoBushido]

Status quo is so cool you guys

 

[Dolorean]

Yeah, I got a number mixed up there. My bad, however I can't see where you received the $300m from. Even then I seriously don't see how your claim that Valve's R&D accounts for only $30m of their total operating costs adds up. As I said it's impossible to know but you're claiming that Valve can stomach a 12% cut based purely on assumptions that are themselves based purely on reported employees numbers and the wrongful notion that Valve only invests in relatively cheap software R&D.

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p.34, restricted stock units and performance share awards of $245m (vesting due to share price movements) and $28m in grants. I rounded up to nearest $100m as we were talking billions.

Okay - please tell me how you estimate their R&D then? What are the assumptions that you use and what are they based on? Come up with a better estimate.
Relatively cheap software R&D? I had $150k per head, which is high.

 

[thebishop]

Yeah, aside for the fact that Big Pciture is ONE side of the Steam UI, we fundamentally disagree on this one.
Frankly when I got my PS4 Pro one year ago I couldn't believe how bad it was compared to what I was used on PC.

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Yea, we do disagree, but I think Valve's ability to maintain two Steam user experiences for desktop and gamepad/TV players is commendable. It's a major reason why Epic's efforts are such a joke.

 

[ShadowSoldier89]

I'm not trying to drag Steam (it's synonymous with PC imo, or should be), but I think Xbox (and PS4) eclipse Big Picture mode on multiplayer party system, integrated voice chat, music streaming, multimedia, friend's activities, and a lot more. Steam has way better gamepad mapping support, but that's about it imo.

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big picture is a far better controller UI than the xbox one, its not as good as PS4 though agreed. Steam actually has great group and voice chat, but no one uses it thanks to discord being ubiquitous. The xbox doesnt even have built in music streaming and multimedia, you have to download apps for them all, and they still arent great. Better than the PS4s though.

 

[thebishop]

That's a bold call seeing as the XBOX menu system is beyond terrible and well below steam and even the PS4's and that one has issues as well.

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I prefer PS4 above all of them to be honest, but I still think Xbox One has a very rich feature set. I said Xbox because it might actually be in the realm of possibility for MS to bring it to Windows. I see no such possibility for PS's menu system.

 

[Dolorean]

Source please?

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Actually, I take my statement back. I believe they spend far less than $30m.

They actually enlist all of their employees on their website and enlist them by team: https://www.valvesoftware.com/en/people

I count 72 in R&D (non-game developers, because we are talking about the platform) related employees. How much do they make? $150k? You may now better than me how much engineers in software make. What is your estimate?

72 x $150k ($200k if I'm being generous) = $14m compared to ~$5bn in revenues or so.

 

[DarkFlame92]

The cut being lowered will also lower features on the consumer side and then sales. An higher margin on Steam for developers will also increase the amount of game released on the platform and the issue would stay the same.

Because at the end of the day, this cut debate grew because more games were being released and the average revenue from being on Steam lowered (since more games means that consumer will buy even more different things). If the cut is being lowered to say 20% just because devs feels like 30% is too much, in a couple of years we'll see the same arguments and now devs would want a 10% cut and so on.

What's needs to be done is to find the equilibrium for a sustainable cut which allows devs to more easily break even while allowing Steam to invest in their platform and in maintenance. Because rest assured that a barebone client (especially if it's curated like EGS) will never reach the userbase Steam currently has.

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That's not true,this is like saying if you lower a 20% tax to 10%,people will ask for it to be 5% in the following years etc... it's just a faulty argument. There's always a golden number and every industry should always strive to bring the balance in favor of the primary sector. This way more people/companies have the motives to invest to create a product rather than be the middleman who sells it.

As far as Steam goes, there's profit for shareholders that doesn't necessary translate into investing in the company,so it's not necessary that lower Steam income will translate into equilevant downgrade in features.

I'm not pro or anti EGS,but I'm sure that their client will evolve over time,as Steam's client did over the years. I'm sure it won't be just a barebones service that just has a low cut. They just wanna hit a big revenue in terms of money,that's what they are aiming for,but since the game industry has grown substantially over the years,they can get A LOT of money with half the percentage of Steam and still offer a great service.

Bottom line is that EGS is not the saviour that has come to save us ,but I'm sure the industry,especially the digital retailers, can be super viable with a lower cut than 30%. If you look at the financial reports of Valve,you'll understand that as great service as Steam is,there's no way it needs THAT much money to be sustained. It's just shareholders enjoying their good profit,but the amount of profit can always change and still be profitable

 

[Deleted member 15440]

so is the argument that valve makes too much profit off of steam? if so what's an acceptable margin? how much profit is too much and how do you decide that?

i feel like so many gamers come so close to the realization that all platform owner rent seeking is bad but shy away at the last minute because they have some emotional attachment to one of the faceless megacorps that run their preferred system and/or because capitalist propaganda is too deeply ingrained, so they just decide that whichever company they want to criticize is bad because they do the same shit everyone else does but moreso.

 

[GhostTrick]

Actually, I take my statement back. I believe they spend far less than $30m.

They actually enlist all of their employees on their website and enlist them by team: https://www.valvesoftware.com/en/people

I count 72 in R&D (non-game developers, because we are talking about the platform) related employees. How much do they make? $150k? You may now better than me how much engineers in software make. What is your estimate?

72 x $150k ($200k if I'm being generous) = $14m compared to ~$5bn in revenues or so.

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I didn't knew R&D was just paying salaries.
Then, I'll take your moronic logic at play here. Let's say there are 1000 employees at Sony working in RD for PlayStation (And I'm being OVERLY generous here). 1000 * 200k (because I'm also generous ). That's 200 millions. For a platform they sell for a profit. Where are the BILLIONS of R&D then ? Maybe, in fact, R&D cost isn't employees only ?

 

[Rosenkrantz]

I count 72 in R&D (non-game developers, because we are talking about the platform) related employees. How much do they make? $150k? You may now better than me how much engineers in software make. What is your estimate?

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You think there's a correlation between the average salary of the employee and the entire cost of R&D? That's a stretch if I ever saw one.

 

[eonden]

Paging Krejlooc to stop this BS part about R&D.

 

[Pixieking]

You think there's a correlation between the average salary of the employee and the entire cost of R&D? That's a stretch if I ever saw one.

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Y'know, I don't think the person who randomly assigns a salary to a group of people and says "That's Valve's R&D cost" is entirely on the level.

 

[hrœrekr]

It does not make sense comparing to console and mobile stores.They have to build the whole hardware and software infrastructure from scratch, and attract a consumers base for you to sell your game there, while they are taking all the risk. It is reasonable to cut 30% for them.

While a PC store is just using other people's work on creating the open PC platform we have today and Microsoft's work on its operating system over decades without giving them a dime.

 

[Pixieking]

It does not make sense comparing to console and mobile stores.They have to build the whole hardware and software infrastructure from scratch, and attract a consumers base for you to sell your game there, while they are taking all the risk. It is reasonable to cut 30% for them.

While a PC store is just using other people's work on creating the open PC platform we have today and Microsoft's work on its operating system over decades without giving them a dime.

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https://www.gamesindustry.biz/articles/2019-07-01-10-years-ago-this-month

It may be easy to forget these days, but in July 2009 the industry was still hesitant to embrace digital distribution. Microsoft had just announced the month before that it would start selling full retail Xbox 360 games digitally, and even then it would begin with a selection of older titles. Sony's director of PlayStation Network operations Eric Lempel responded in July by confirming it had no immediate plans to offer PlayStation 3 retail games digitally, citing the size of Blu-ray discs (this in an interview where he was saying that Sony had caught up to Microsoft's online efforts).

Even on the PC, Realtime Worlds head Dave Jones said he wasn't comfortable relying on digital distribution for the company's anticipated massively multiplayer PC game APB, because "it's still a traditional game in that this is a five or six gig game. It has to ship on a DVD."

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But, hey, no Valve did nothing but sit around.

Like, Valve literally created the digital distro PC market, when all that used to exist before was Digital-bloody-River.

 

[Rosenkrantz]

While a PC store is just using other people's work on creating the open PC platform we have today and Microsoft's work on its operating system over decades without giving them a dime.

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That's a new take on Valve and laurels. Too bad good guy Microsoft didn't succeed with their beautiful GFWL initiative.

 

[Dolorean]

You think there's a correlation between the average salary of the employee and the entire cost of R&D? That's a stretch if I ever saw one.

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R&D = # of Employees x Salary costs. This is the major cost bucket, I'm saying $150k-200k to cover other costs as well, as salaries probably lower. For hardware it is different, many more components.

Tell me please - what other development costs are there for software?

 

[Rosenkrantz]

Tell me please - what other development costs are there for software?

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Probably the money they pay for an actual R&D and not only salaries of their employees?

 

[Plum]

p.34, restricted stock units and performance share awards of $245m (vesting due to share price movements) and $28m in grants. I rounded up to nearest $100m as we were talking billions.

Okay - please tell me how you estimate their R&D then? What are the assumptions that you use and what are they based on? Come up with a better estimate.
Relatively cheap software R&D? I had $150k per head, which is high.

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I'm not estimating their R&D, I'm just assuming that your estimation is wrong as it's based purely on employee numbers * salaries whilst barely taking other expenses into account.

 

[Dolorean]

I didn't knew R&D was just paying salaries.
Then, I'll take your moronic logic at play here. Let's say there are 1000 employees at Sony working in RD for PlayStation (And I'm being OVERLY generous here). 1000 * 200k (because I'm also generous ). That's 200 millions. For a platform they sell for a profit. Where are the BILLIONS of R&D then ? Maybe, in fact, R&D cost isn't employees only ?

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You are an idiot (like most others here), I will soon stop wasting my time. Talking to brick walls in the thread here.

Sony is a publicly listed company and report R&D costs for their gaming business, which has been more than $1Bn per year for the past 10 years. Most of this is relating to hardware. The typical hardware console cycle is 5-6 years. They start development on the new one right after they have finished the past one.

So to look at the total investment for a hardware cycle you easily get into multi-billions just on R&D.

 

[hrœrekr]

That's a new take on Valve and laurels. Too bad good guy Microsoft didn't succeed with their beautiful GFWL initiative.

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At the end of the day consumers will decide. But don't make flawed comparisons to justify 30%.
They charge 30% because they want, and they can (till competition kicks in).

Let Valve create their own hardware, their operating system, and build their user base with all the risks. Then they can make this sort fo comparison.

 

[Dolorean]

Probably the money they pay for an actual R&D and not only salaries of their employees?

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What is R&D then?

Tell me what R&D other expenses are then and how you would estimate it. Some software licenses sure and offices. Labor is majority I can guarantee you.

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[eonden]

Valve basically created the entire VR hardware / software modern distro AND GAVE MOST OF IT FOR FREE TO OCULUS. That alone is a major R&D investment (as well as you know, they do make VR hardware)
Valve itself basically has a ton of consultants doing R&D, as well as subsidizing many open source programs that would otherwise not made possible. Just taking a small amount of the Valve employees (which do not include consultants) and multiplying by the salary does not consider where most of the R&D expenses of Valve come from. Linux has made great step forwards in the last 10 years because someone with money decided it was time to actually have a modern open source OS.

 

[GhostTrick]

You are an idiot (like most others here), I will soon stop wasting my time. Talking to brick walls in the thread here.

Sony is a publicly listed company and report R&D costs for their gaming business, which has been more than $1Bn per year for the past 10 years. Most of this is relating to hardware. The typical hardware console cycle is 5-6 years. They start development on the new one right after they have finished the past one.

So to look at the total investment for a hardware cycle you easily get into multi-billions just on R&D.

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Thanks for insulting me. That means you lost here. You can get out now, you and your lack of arguments.

 

[Dolorean]

Thanks for insulting me. That means you lost here. You can get out now, you and your lack of arguments.

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You told me I had moronic logic. I have provided PLENTY of arguments.

 

[GhostTrick]

You told me I had moronic logic. I have provided PLENTY of arguments.

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Yes, your logic. Not you. There's a difference between saying "your logic is dumb" and '"you're dumb". You provided litterally moot arguments and faulty logic. R&D isn't only the pay of engineers. Otherwise, what should we say about "billions of RD in the Xbox One controller" ? Does it mean Microsoft had 5000 hardware engineers work on a controller ? That makes no sense.

 

[Dolorean]

Valve basically created the entire VR hardware / software modern distro AND GAVE MOST OF IT FOR FREE TO OCULUS. That alone is a major R&D investment (as well as you know, they do make VR hardware)
Valve itself basically has a ton of consultants doing R&D, as well as subsidizing many open source programs that would otherwise not made possible. Just taking a small amount of the Valve employees (which do not include consultants) and multiplying by the salary does not consider where most of the R&D expenses of Valve come from. Linux has made great step forwards in the last 10 years because someone with money decided it was time to actually have a modern open source OS.

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How does VR R&D have anything to do with this? The thread has revolved around "Steam provides so valuable R&D/features that they have to get high take rates"

 

[Deleted member 1849]

Along with their VR R&D, which cost them an unbelievable amount of money and the software they wrote for it they provide for free. I just want to point out that using employees to estimate R&D costs is inaccurate, because Valve spend a lot of money bankrolling partners (FOSS developers, Codeweavers, etc) who wouldn't be listed as full time Valve employees.

I don't know the percentages, but all I'm saying is that it's really not that simple.

 

[thirtypercent]

People still trying to argue that selling consoles (the hardware inside comes from AMD, Nvidia & Co anyway) is such a burden on Sony, Nintendo and MS instead of being another revenue stream from which they profit tenfold over the span of a generation, paid online included, haha.

 

[Dolorean]

Yes, your logic. Not you. There's a difference between saying "your logic is dumb" and '"you're dumb". You provided litterally moot arguments and faulty logic. R&D isn't only the pay of engineers. Otherwise, what should we say about "billions of RD in the Xbox One controller" ? Does it mean Microsoft had 5000 hardware engineers work on a controller ? That makes no sense.

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Tell me what other costs there are then for software R&D.

I gave you factual numbers, when you pulled $200m out of your ass. Sony is a public company and reports R&D by division, I gave you the numbers from their annual report to back up my claim and logic.

R&D is MOSTLY related to personnel when it comes to software, for hardware of course there are other expenses.

 

[JoJoBae]

How does VR R&D have anything to do with this? The thread has revolved around "Steam provides so valuable R&D/features that they have to get high take rates"

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Why is VR R&D irrelevant when that's a service they provide? OH right, because that would even vaguely refute your point.

I've decided that console R&D isn't important because I don't care about it so stop bringing it up. Like come on dude

I gave you factual numbers, when you pulled $200m out of your ass.

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You armchaired some numbers on your calculator. So factual.

 

[eonden]

How does VR R&D have anything to do with this? The thread has revolved around "Steam provides so valuable R&D/features that they have to get high take rates"

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They basically helped (or basically bankrolled) the kickstart of the current VR boom and provide the basis for the most complete Open Source VR API. Those are major R&D features (both for the store and for free users around the world) that you can also consider in the R&D for Sony (through PSVR).

Valve idea is that a rising sea level helps all the boats (including theirs), so their focus is on making as many things as possible in their R&D support open source. Just because their R&D is not tied to having to use the Steam platform it doesnt mean it does not exist.
Microsoft also spends a ton on open source and that is included in their R&D expenses.

 

[Mass_Pincup]

That's not true,this is like saying if you lower a 20% tax to 10%,people will ask for it to be 5% in the following years etc... it's just a faulty argument. There's always a golden number and every industry should always strive to bring the balance in favor of the primary sector.

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That's the thing, the golden number isn't what devs are looking for here. I just see people saying that the cut should be lower but not by how much and how they found that number. It feels more like a principle thing and not a rational thing. If you show me the numbers in which you based your arguments then sure I'm with you. It's been close to a year and I never saw it.

This way more people/companies have the motives to invest to create a product rather than be the middleman who sells it.

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The entire reason this debate is becoming important is precisely because more people/companies have the motives to create a product. Beforehand, you didn't hear much about Valve's cut because the indies devs being in the platform were few and far between and then made bank since options were scarce. At that point the complaints were that Valve were basically picking what games would find success and they eventually let everyone in. Now that the amount of games greatly outpaced the money spent in the platforms, people are not making as much money and want to make more.

Increasing the output of games again will just be harmful to indie devs and will make walled garden platform way more appealing.

I'm not pro or anti EGS,but I'm sure that their client will evolve over time,as Steam's client did over the years. I'm sure it won't be just a barebones service that just has a low cut. They just wanna hit a big revenue in terms of money,that's what they are aiming for,but since the game industry has grown substantially over the years,they can get A LOT of money with half the percentage of Steam and still offer a great service.

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They're strategy for acquiring user is entirely based on securing exclusive games. Why would they improve their store when they reach a sufficient amount of users? Especially with them removing their roadmap for features recently?

Bottom line is that EGS is not the saviour that has come to save us ,but I'm sure the industry,especially the digital retailers, can be super viable with a lower cut than 30%. If you look at the financial reports of Valve,you'll understand that as great service as Steam is,there's no way it needs THAT much money to be sustained. It's just shareholders enjoying their good profit,but the amount of profit can always change and still be profitable

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Again like I said above, that's rooted in sentiment, not facts or figures. How do you even judge what Valve needs to sustain itself?

 

[Dolorean]

Along with their VR R&D, which cost them an unbelievable amount of money and the software they wrote for it they provide for free. I just want to point out that using employees to estimate R&D costs is inaccurate, because Valve spend a lot of money bankrolling partners (FOSS developers, Codeweavers, etc) who wouldn't be listed as full time Valve employees.

I don't know the percentages, but all I'm saying is that it's really not that simple.

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Double the employee count then. It dwarves in comparison to revenues - that is the entire point. Use whatever assumptions you want. It will still be an extremely small portion of revenues. So yes - they CAN stomach a take rate reduction.