Why Valve is a software company who gets it.

Anyone who spends even an iota of time gaming on the PC knows Valve. The house that Gabe Newell built has become the standard in digital content distribution. Offering some the best titles (either developed in house or by another studio), Valves online game store Steam has served millions of gamers and the fan based is an active an passionate community who dedicate massive chunks of time and energy into creating mods, hosting servers and forming clans in support of their favorite titles. Valve has created a business model that serves the gamer first. Whether it’s offering the tools needed for anyone to create a mod or an extra for a variety of their titles.

The latest evidence of the Valve strategy can be found by recent statements made by Jason Holtman, Valves director of business development and legal affairs. On a panel at the Game Business Law summit at SMU’s law school Holtman made some very interesting and profound statements about Valve and the video game industry as a whole.

Hit the jump for the story

Taken from gamedaily

Retail vs Online Sales

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.

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. One weekend, Valve, offered Day of Defeat for free trial. At the end of that weekend, a good offer was made to customers. As expected, this increased digital downloads of the game. But surprisingly, Holtman reveals, there were “28% more units bought at retail than sold through Steam.”

“What we learned from having a connected platform, is it’s not about channel vs. channel,” says Holtman. “You can’t predict where people will shop.”

Very interesting insight into the discussion of online vs retail sales. Typically I purchase the Valves large titles “The Orange Box” and “Left 4 Dead” at retail (the discs install faster than downloading from Valve directly) but I buy the smaller or older titles online (Audiosurf, Bioshock, or the weekend deals). Since, as Holtman stated Valve is wholly connected to the retail and online sales (the retail games still use Steam to connect to Valve for updates and achievements) Valve probably has the most unique and complete insight into the software sales market.

Free add-on content

“Holtman also talks about giving away a character class for Team Fortress 2. Traditional thinking says: “You monetize investments by charging for them.” But, he reveals, when Valve gives away it’s content, sales spike for several products, both at retail and through Steam.”

This, I feel is the single best feature Valve offers. They allow any user to edit modify or create new content for a variety of their games. On top of that the tools they give are intuitive and have an excellent community to offer help when needed. This has allowed anyone with the drive and passion to create some amazing additions to Valve games. From zombie titles to machinama software if you can dream it you can do it, or it’s already been done. Holtman’s remarks were specifically about offering  a new charecter class for their critically acclaimed and one of my personal  favorite titles “Team Fortress 2″ at no cost to the player. As he states by offering free content it typically generates in other titles as well as garnering new fans. Any weekend Valve offers new content for a title, they offer a free weekend or the ability to give a demo to a friend, this commonly results in the game becoming a top seller for the week following.

Piracy

“There’s a big business feeling that there’s piracy,” he says. But the truth is: “Pirates are underserved customers.”

“When you think about it that way, you think, ‘Oh my gosh, I can do some interesting things and make some interesting money off of it.’”

“We take all of our games day-and-date to Russia,” Holtman says of Valve. “The reason people pirated things in Russia,” he explains, “is because Russians are reading magazines and watching television — they say ‘Man, I want to play that game so bad,’ but the publishers respond ‘you can play that game in six months…maybe.’ “

“We found that our piracy rates dropped off significantly,”

This is a very important topic and one that I have always thought was so simple. It has always bothered me when other countries have access to video game titles months before another. Valve’s distribution model makes this completely possible. I would imagine that it increases development time in the short term, however it also allows production to end on a definite date as opposed to dedicating resources to porting the title for other countries after the U.S. launch. However, by offering the game globally all at once there is no need to pirate the title just to be in on the initial user spike where all the servers have players, and everyone is kind of at a level playing field because they are trying to learn how to play and memorize the maps.

Well from the sounds of the article Valve is one game publisher who completely gets it. From their award winning and highly innovative games, easy to use interface, highly robust distribution network and limitless commitment to the gamers, Gabe Newell and company are definitely on the cutting edge of the modern software retailers.

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