Valve is currently entangled in a US antitrust lawsuit filed by Wolfire, a developer alleging that the Steam platform holder exploits its dominance to unfairly stifle competition and manipulate game prices.
Wolfire seeks to elevate the suit to a class action claim, reiterating its primary arguments about pricing. Interestingly, it indirectly criticizes the Epic Games Store, suggesting limited incentives for both publishers and consumers.
While the lawsuit’s coherence regarding Valve’s practices may be questionable, its revelations shed light on the dynamics during the launch of Epic’s Steam competitor: Valve executives were amused behind closed doors.
Valve’s Steam store has undeniably transformed into a colossal monopoly in the gaming industry. However, it’s crucial to acknowledge that this dominance is partly due to Steam’s unparalleled “convenience” and innovative features as a DRM storefront for PC gaming.
Despite Valve’s attempt to have the suit dismissed, the court ruled in May 2022 that it could proceed with some modifications and advance to the discovery phase. This phase is particularly significant in the legal process as it involves the disclosure of internal communications from the involved companies, providing insight into the case.
In these documents, there are some intriguing exchanges between Epic CEO Tim Sweeney and key figures at Valve, including CEO Gabe Newell, COO Scott Lynch, and project manager Erik Johnson.
The discussions primarily revolve around store pricing, particularly Valve’s commission rate for game sales made on Steam, a topic of significant interest to Sweeney who looks to establish his own competitive monopolistic PC storefront by buying exclusivity rights to game releases tied to his woeful and inadequate Epic Game Store.
The first conversation, dating back to 2017, was prompted by a leaked comment from Valve’s Sean Jenkins in the developer forum. Jenkins had mistakenly mentioned the possibility of Steam imposing restrictions on the keys provided to developers.
A significant aspect that remains unaddressed is Valve’s exploitation of its monopoly on the Steam store to lure Japanese game developers into releasing their titles on the platform, only to later reject or ban many of these games.
Despite this discriminatory behavior, the majority of consumers seem unfazed, and Valve continues to be regarded as the go-to platform, despite its evident disrespect towards Japanese games with alleged “child-like” character depictions.
While alternatives like GOG exist, and some users resort to alternative methods, Valve retains a level of respect even among those who opt for the latter.
Tim Sweeney has expressed disdain for Japanese eroge games, claiming that his Epic Game Store platform maintains “higher standards” compared to Valve’s Steam store.
However, Epic Games has been criticized for actively promoting numerous shovelware NFT/Crypto games, targeting young and impressionable individuals to spend money on these titles.
When you add to this the unethical practice of securing timed exclusive releases of PC games on the Epic Game Store, it’s no wonder that the gaming community universally lauds Valve, despite its anti-consumer nature, while viewing Epic Games, backed by Tencent, as attempting to establish its own monopoly akin to Steam.
https://newsletter.gamediscover.co/p/revealed-tim-sweeneys-epic-rant-to
Returning to the matter at hand, on August 12, 2017, Gabe Newell sends an email to Tim Sweeney asking, “Anything we doing to annoy you? We’re guessing Sean Jenkins’ public dumbness might be part of it.”
In response to Newell and Valve’s Erik Johnson, Sweeney states that he’s not bothered and humorously adds, “and I’ve never heard of Sean Jenkins”. Then, Sweeney gears up to address one of his pet peeves: the 30% platform fee on Steam.
He acknowledges that there may have been a valid case for such fees in the early days, but argues that with the current scale and reduced operating costs, the rapid influx of new game releases renders the brief marketing or user acquisition value provided by the storefront disproportionate to the fee.
Sweeney argues that if you were to exclude the top 25 selling games on Steam, Valve likely earns more profit from most of the next 1000 games than the developers themselves.
He breaks down the math, attributing 30% to Valve, another 30% to marketing, and 15% to cover servers and engine costs. This leaves only 25% for the actual game development, which Sweeney deems worse than the retail distribution economics of the 1990s.
It’s highly likely that Valve’s exorbitant platform fees significantly impact game developers. Moreover, their proprietary titles like Dota 2, Team Fortress 2, and Counter-Strike add to their revenue streams through in-game item sales on the Steam community market. Games like Counter-Strike also feature unlockable cases and tournament events that rake in tens of millions of dollars monthly. This setup ensures Valve a steady stream of passive income beyond their platform fees.
There’s no record of a response from Valve employees to Sweeney’s email. However, by December 2018, Sweeney appears even more agitated. Valve had implemented a royalty change that seemed tailor-made to provoke him: it reduced Valve’s cut on the most successful games to as low as 20%.
This move didn’t sit well with Sweeney, who was already championing smaller developers. Moreover, he was gearing up for the launch of the Epic Games Store and the ensuing antitrust battle between Epic and Apple.
In the emails exchanged between Sweeney, Gabe Newell, and Scott Lynch, Sweeney starts by discussing his issues with Apple. He then proceeds to inform them about the upcoming launch of the Epic Games Store, a direct competitor to Steam.
Notably, Epic decided to launch with a flat 12% platform fee, which aligns with Sweeney’s stance on reducing platform fees. Sweeney urges Valve to respond to this move, seeing it as an opportunity to bolster Epic’s position in their battle against Apple. However, his approach lacks finesse, demonstrating that he may not be well-versed in the art of persuasion.
“Right now, you assholes are telling the world that the strong and powerful get special terms, while 30% is for the little people.”
“We’re all in for a prolonged battle if Apple tries to keep their monopoly and 30% by cutting backroom deals with big publishers to keep them quiet. Why not give ALL developers a better deal? What better way is there to convince Apple quickly that their model is now totally untenable?”
The following day, Valve’s Scott Lynch sends a succinct email to both Gabe Newell and Erik Johnson, accompanied by a single-line commentary: “You mad bro?”
Tim Sweeney likely felt quite incensed. However, it’s important to acknowledge that while Lynch’s response might seem casual, it was presumably intended for internal Valve communication only. Meanwhile, Sweeney had just emailed two high-ranking Valve executives, informed them about his upcoming launch of a competing platform, criticized Valve’s store operations, vented frustrations about Apple, and even threw in an “assholes” for good measure.
Gabe Newell isn’t just an asshole, as seen from Valve’s hypocritical standards for which games are permitted for release on the Steam store it’s quite evident that the man himself is rather fascinated by little boys, given how Steam has continually banned games for depictions of underage female characters whereas Steam is home to countless games featuring the same trope but with the opposite sex instead.
The Wolfire lawsuit extends far beyond these emails, prompting curiosity about who is financing the smaller company’s legal battle against Valve. Litigation of this magnitude requires substantial financial resources, and while Valve is well-funded, the source of Wolfire’s funding remains unclear.
