Valve: Online Sales to Overtake Retail Soon

By Aaron Linde, Jun 03, 2008 1:06pm PDT Speaking at Valve's PC gaming market conference attended by Shacknews at its offices in Bellevue, Washington, company co-founder and president Gabe Newell said that online PC sales revenue has seen massive growth rates and will soon pass over retail revenue.

"Within the next three months we see sub-10% growth rates in our traditional core packaged goods retail business," said Newell. "But right now we're seeing close to 200% growth in the development of these alternative ways of connecting with customers."

Newell added that the company expects online distribution sales from its Steam platform to pass over its retail business. A graph was also shown illustrating that the company anticipates online revenue to dwarf retail by 2012.

"There have been a bunch of stories written recently, both by the gaming press and the industry business press that PC gaming is dead. There's a perception problem. A lot of the stories written recently aren't what's actually happening."

The company cited the PC's massive install base—260 million PC owners online, playing games, with 255 million PCs being produced every year—and lack of subscription and online sales data reflected by game sales trackers as impetus for a change in thinking about the health of the PC platform.

Moreover, Valve business development director Jason Holtman noted that data collected from its recent Day of Defeat free weekend, which allowed Steam users to play the game free of charge for two days, revealed that online sales do not detract from traditional retail channels.

"People would say 'you just stole a bunch of sales from stores,' but actually the exact opposite happened. What's most interesting about this is that you can see there were spikes in both types of sales," stated Holtman. "Everyone who participated and had fun with Day of Defeat, a lot of people took us up on the digital offer, a lot of other... went to Wal Mart, Best Buy, GameStop, and bought the game."

Holtman continued, "[The free weekend] didn't reach a bunch of online customers or digital customers, it reached a bunch of customers. Not only was there no cannibalization--we actually sold 28% more in retail."

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19 Threads | 62 Comments

  • I love Steam. If there's a game that I want and it's on Steam, I will buy it. Also I'm not sure why some are complaining the releases on Steam don't coincide with store releases. Sure, they aren't released at midnight but if you're that anal there's no helping you. Since I work, buying the game when I come home, pre-loaded and all, just makes more sense Last I checked, the Steam releases are still the same day (ahem, BioShock). Besides, most of the time there are great 10% pre-order deals and you can't beat a lot of the packs.

    Sure, I am disappointed when a game isn't on Steam but 70% of the time it's for 360 too and I can just rent it off GameFly or download it via XBLA. The new Penny Arcade game was on 360, but since mine was for repair I just bought it online. It's still digital distribution because you download the game and then just unlock it, works very well.

    In my mind, retail won't go away because for some releases for console especially I like to get it right away (Super Smash Bros Brawl, for example) and GameFly doesn't ship a lot of new releases right away. One exception was Assassin's Creed which they sent on release, I was impressed. However, I think online sales will surpass retail sales, especially digital distribution. There are no inventory costs with digital distribution, just server and storage, so it costs less and they can offer lower prices. Plus, developers get more money from digital distribution. It's win-win. I don't have to leave my home to get a game and when I live in a dorm that's a huge plus. Now we've got

    That's my $0.02. And shame on the user who said they hated Steam, there's no reason to.

  • Hmm I dunno.

    I can see a 2% increase and crossover from gamers ages 22-32, those who have been around for a while, I think the 8% is going to come from new gamers adopting to the online distribution method from the start. I didn't read the article so I don't know how their projected increase is broken down.

    I know for myself that I do enjoy having a physical media in my hand, case and manual, etc. I can also see a definite increase in online casual games, but I think this would have more due to the library steam could offer as most are already distributed online.

    I think a good deal of publishers will pay for their title to be distributed and maintained online as a way to avoid piracy, but I don't see many doing this. I dunno we'll see, I'm not sold on it yet.