We’re surrounded by monopolies. They’re everywhere. Every industry has its own monopolistic corporation. From the food we eat and the tv shows we watch, to the gas we pump into the cars we drive. They might be beneficial, but if a monopoly gets too big, it can slow down the whole industry by dictating its own arbitrary rules, which are almost always made to multiply its own wealth and not to improve the conditions for all participants.
But we are here to discuss the worst. Those monopolies that don't even create any additional value, they merely serve as an intermediary, or a middleman, between companies and consumers. We’re going to talk about Google, Apple, and Steam, and how their imposed rules became a huge drawback for many gaming developers. We'll also give a short review of alternative stores, such as the blockchain-based Ultra platform or The Abyss to see whether they can help us escape from the monopoly power.
How it all began
For those of us who were born in the 80s or 90s, most likely remember the good old days of PC and console gaming. To play a game it was enough to buy a CD or a cartridge, or to simply rent it from your local Blockbuster. There were no DLCs, no microtransactions; just buy and play.
Anyway, this method of game distribution is an expensive one: these CDs and cartridges have to be manufactured and loaded with game copies, then they had to be distributed to game stores, and all of this required developers to make significant investments before making a profit. To sell his game, every game developer had to find a game publisher company and persuade them that their game has commercial potential.
This expensive approach, however, did have its benefits, as it filtered out low-quality games. Nowadays a lot of things can be fixed with patches after a buggy launch, but back in those days it was impossible to do anything after the game was on the shelves, so it was obligatory to test everything before releasing it.
The widespread adoption of broadband Internet in the 2000s reshaped the industry, making physical media obsolete. Many digital stores were opened and closed since then. It's worth mentioning that the services of digital distribution of games existed long before the 00s. There were specialized services in the 80s, such as GameLine for Atari 2600 users, and in the 90s there was Sega Channel, but they were far too ahead of their time.
The real game changer came in 2004 when Valve launched one of the most popular PC gaming platforms, Steam. Then, in 2008 Apple launched the App Store and that same year Google launched Android Market, which became Google Play in 2012. These three companies became the monopolies that control the majority of the gaming industry. How did that happen?
The roots of Monopolies
Currently, Steam’s domination in the digital distribution of PC games can’t be argued. It has over 1 billion registered accounts and 90 million active users. Its sales revenue for 2017 was $4.3 billion, or 14% of all gaming industry revenue if we exclude mobile games. Since then, the gaming industry grew even more - in 2018 it was worth $134.9 billion, almost half of it is mobile gaming. But more concrete, Valve became a leader in digital distribution for one simple reason – its service was launched at the right time, and it already had a huge user base thanks to the success of Valve’s own games, such as Counter-Strike, one of the most popular first-person shooter games ever.
At first, there were many versions of Counter-Strike and, as a result, the player base was fragmented and Valve’s servers were overloaded after every update. To fix this, Valve invested in their infrastructure in order to unify and provide timely updates for the community. When Half-Life 2 came out in 2004, Valve already had a working distribution service to offer for everyone. In 2005 it allowed other developers to use Steam to distribute their games too, taking a 30% cut from all transactions. Currently it offers a lot of functionality, including in-game rewards, network play, and the largest game catalogue. But it all started only because Valve made the decision to invest in their server infrastructure.
The stories of the App Store and Google Play are very similar to Steam’s success story. Apple and Google own the most popular mobile operating systems, they became the leaders at the right time, and they had the power to impose their rules to all of the users within their ecosystems. It was only logical that users would download applications for their mobile platforms in the special stores provided by these platforms. But at the same time, both platforms rake in a 30% fee from every transaction inside of their stores.
More Restrictions, less Money
Nowadays, more and more developers talk about the bad influence of Steam, the App Store, and Google Play. Is it fair to pay 30% for a simple distribution without any promotion, after doing all the hard work of developing the game?
- In addition to taking fees, Apple also requires paying for a developer account, and it costs $99 per year.
- Google sells accounts for developers for $25 (one-time payment).
- Steam takes $100 for adding the game to its store.
In 2018, Steam changed its fee policy. Now it takes 30% only from the first $10 million in sales. For all sales between $10 million and $50 million, the split goes to 25%. And for every sale after the initial $50 million, Steam will take just a 20 percent cut. However, this cut only benefits the large developers. Small developers with small sales numbers are put at a gross disadvantage with this new policy. It seems rather silly to pay that much when there are some platforms that take a smaller fee. For example, Ultra takes only a 15% fee while providing all the aforementioned functionality, plus even more.
Don't forget that players also suffer from restrictions - back in the days of CD games, the copy that you paid for was all yours; you could give it away to your friend, or sell it after you were done with the game. In most stores nowadays the purchased games are linked to your account forever, as you only purchase the right to use it. But you can be revoked of that right as well. This is simply becoming too much, especially when Ultra allows its users to resell their games on a blockchain-based second-hand market where developers also get their share of the revenue from every resold game.
Is there any choice?
The main problem for all developers is that they become basically non-existent if they choose to not publish their games on the large platforms. Mobile developers have no choice at all - there are some alternative stores for Android, iOS has no alternative stores that would work without jailbreaking your phone, and Steam faces some competition from Epic Games store and GOG but they are not even close to its current user base. With the majority of players using Steam, most developers and publishers choose it simply because it’s popular.
To represent a serious alternative, the project that would compete with Steam should not only copy its features and lower the fees, but it should completely rewrite the current way in which games are being distributed today. Gamers need to get real ownership of their games and game developers need to receive fair compensation for their work. Blockchain can tilt the balance in this case. Some of the game distribution platforms are already using its technology. The Abyss as a distribution platform for MMO games. Robot Cache for reselling used games, which is a pretty niche goal. But neither of them doesn't aim to dethrone Steam as a global distribution platform.
Currently only one project, Ultra, can be regarded as a viable alternative to Steam, not only because it offers some unique features but because it has a very experienced team of industry veterans working on it. It has its own blockchain protocol, based on the EOS network, and it provides the solutions for many current problems facing both developers and players.
First unique feature is the SDK for porting games from Steam, PlayStation Store, or Xbox Live with minimal effort. Various flavors of the SDK will be provided for all popular development environments and 3D engines, such as Unity, Unreal Engine, Lumberyard, HTML5, C#, C++, Frostbite, and more. Ultra is the first platform to offer such unique capability, and it would make the migration of games very easy, being a strong selling point of the platform.
Then, as Ultra is based on blockchain technology, everything becomes more transparent, sales reports are now impossible to tamper with, and the deals between developers and publishers can be signed by using Ultra’s trustless features. Ultra takes only 15% of the revenue and there is a very fast payout. Instead of waiting between 30 to 60 days, developers can receive their payout instantly. Only 10% of the revenue is reserved for refunds, but this money also gets released after two months. This also allows developers to drive sales momentum at launch by reinvesting in marketing campaigns directly from sales – all in real time. That’s something that Steam doesn’t offer.
As for the gamers side, the in-game system of referral bonuses, digital goods, rewards programs, is built around the Ultra Coins, the native token of the platform. There are a lot of ways to earn Ultra Coins: from viewing ads to writing reviews and participating in beta testing. But it’s very important that all digital content can be bought not only with Ultra Coins, but also with the traditional methods of payment, such as credit cards or PayPal. Many blockchain platforms lose a lot of their potential because they are restricted only to their tokenomy. Ultra doesn’t have this weakness, as it targets the mass market so it can be used by everyone.
The gaming industry is very competitive. Until now it was competitive only for developers and publishers. The stores were pretty much untouched and unrivaled, and that made them lose their common sense. As it always happens in business, any inefficiency should be wiped out from the market by more efficient competitors. How long can the current dominating stores retain their status quo? Blockchain-based platforms have all the chances to get a share of the existing gaming market. Maybe it’s time for the monopolies to revise their models?