So You Want To Compete With Steam

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I get a lot of pitches for "Steam competitors" in my inbox. 99% of them are doomed to failure, but the worst part is the vast majority are doomed before they even start. It continually amazes me how many people are able to invest so much time, effort, and money into a serious business venture without first surveying the impossible task before them.

So let's begin. Here's how you can build a successful business that competes directly with Steam:

Don't!

You've probably heard of Blue Ocean Strategy -- Nintendo famously did it with the Wii, and by all accounts are repeating the exercise with the Switch. Instead of joining a giant feeding frenzy of sharks where you have to fight for your life just to grab a tiny piece (a "Red Ocean"), you swim out to some pristine fishing grounds the other sharks haven't found yet and feast all by yourself.

This is not to say that in principle I think nobody should ever try to compete with Steam. The marketplace definitely needs the competition, and I'm very open to hearing ideas about how to make things better for everyone.

I'm just saying that if I was an investor considering your pitch, I'd run.

Being Better Isn't Good Enough

For whatever reason, you've decided not to take my advice and you're still going to take on Steam, either head-on, or trying to mix it up with some neat gimmick.

Unfortunately, you can't just build a better mousetrap, because you'll be absolutely murdered by Steam's impenetrable network effects. Even if every aspect of your service is better than Steam's in every possible way, you're still up against the massive inertia of everybody already having huge libraries full of games on Steam. Their credit cards are registered on Steam, their friends all play on Steam, and most importantly, all the developers, and therefore all the games, are on Steam.

Furthermore, despite all of the constant (and justified!) complaints everyone has about Steam's services, you're kidding yourself if you think you, as a startup, are going to do a better job on every single one. For one, there's no way in hell you're going to be able to manage the amount of traffic and server load they do. Second, you don't have the institutional memory and processes built up over years and years to deal with all the crazy edge cases, hacking, and general abuse of your system.

But okay, you're going to start small so you don't need to deal with all that stuff just yet. And let's grant that somehow, miraculously, you're going to start with a service that is every bit as good as Steam's. Okay, here's what you have to do to not get shot in the face before you even arrive at the starting line.

Minimum Requirements to Not Fail Right Away

If you've set yourself on this task, and you haven't read Joel Spolsky's Strategy Letter II: Chicken or Egg Problems, go read it now. Re-read it every morning. This is the heart of your problem and all your challenges flow from this. Memorize it.

You need customers. You can't get those customers without a lot of big, popular, games. You can't get developers to upload those games without customers. You can't get customers without games.

So your path to not fail before you even start looks something like this:

  1. Straight up bribe developers to post their games
  2. Posting games must be zero-friction
  3. Straight up bribe players to use your system
  4. Playing/buying games must be zero-friction

You have to do all four of these things, and nail every single one, just to begin. Do that and your chances of success rise from a flat 0% to an impressive ~1%, rounded up.

Bribe developers

Steam competitors are slowly starting to realize this. I used to get pitches that offered the familiar 70/30 revenue split, but they would "Solve Discovery", or would "give us lots of attention". Translation: "You'll have all four of our customers all to yourselves because nobody else wants to be on our store, and we'll give you some sweet shout-outs on Twitter!"

Yeah no thanks.

Look, if you're offering a 70/30 split in this day and age you're delusional. You have to earn that 30% cut, and the way you earn it is by having a big audience and a lot of hungry customers. Personally speaking, a store with the market size of GOG is my cutoff point for 30%. If you're not even as big as GOG, asking for 30% is laughable.

What about 80%?

Not good enough.

How bout 90%?

Nope.

Umm... 95%?

Look sweetie, here's the thing. There's already a store out there that offers 100% revenue share. It's called Itch.io. Big name developers aren't exactly crawling over each other to post their games there, but if the only thing I'm considering is revenue share, Itch has already got you beat. AND, Itch probably already has you beat on a bunch other metrics too.

But I have to ask for something!

I totally sympathize. But look here -- Itch, that loveable small-time Indie boutique, is run by two guys as a lifestyle business. They don't have investors. They don't really care if they ever beat Steam. They make enough to keep on going, and they'd rather build something cool than try to grow big fast (which is honestly a super refreshing approach these days).

You, on the other hand, probably do have investors. And God help you if they're VC, because they want to see a 10X return. If you merely do kinda well, they'll consider it a failure, so your only path to victory is a blowout success. You need growth. You need to get developers on board, now.

So just give developers money already. You've got money, right? Truckloads of it? Great -- that's the cost of entry for this business.

Go find the developers with the shiniest games and straight up pay them to put their games on your system. And no, developers don't want coupons or vouchers or Bitcoin, they want cash money $USD.

Great, you've greased some palms. Now it's time to grease the wheels.

Zero Friction for Developers

You're gonna have your work cut out for you to have a service that's even as good as a small timer like Itch.

Believe it or not, Itch has some excellent developer tools. Honestly, probably the best in the whole business. Not only do they have a super easy web-based uploader, but their command line tools, Butler and Wharf, are best in class too. They far exceed what I've seen from Steam, Gog, and Humble in terms of ease of use, speed, efficiency, and reliability. There's currently no easier or faster store to upload your game to than Itch.

You're going to need to be at least as fast and easy. Because even though Itch will let me take 100% of revenue, and has amazing tools that I recommend to everyone who will listen, I still find it a pain to go over to Yet Another Storefront and upload Yet Another Build whenever I issue a new patch. This mental friction takes a real cost, especially when I have a Windows, Mac, and Linux build to patch.

You as Yet Another Storefront get this mental friction simply by existing. The deck is already stacked against you. All you can do is add as close to zero as possible to it.

EDIT: Oh, and if you're designing your API? You need a really good reason for it to not look exactly like Steam's. Actually, no, you don't. There is no good reason. It needs to look exactly like Steam's, ideally being a drop-in replacement for the dll (copyright laws allowing). A developer needs to spend as close to zero seconds as possible reconfiguring their game for your system. If they have to recompile a special build just for you it's gonna be tough going.

Bribe Players

Okay, let's say you've spent your war chest on attracting developers with big awesome games that people want to play. You've also made the best, most amazing backend possible for developers so whenever they mumble in their sleep their game is automagically uploaded to your servers, and a rainbow colored slip-and-slide unfurls ready to direct a torrent of cash money dollars into their bank account.

Even with all the awesome best latest newest games on your system, and developers totally on board, you still need to drag players kicking and screaming over to your system. Because all their games, and all their friends, and all their workshop mods, and all their everything is currently on Steam.

So, make it worth their while. But how?

Money works, but that can be tricky -- every other store already offers more discounts than quintuple coupon day at Wal-Mart, and trying to undercut them on retail price won't work either, because it's an industry standard to put price-matching clauses in distribution contracts.

Well, you can just give players money, or coupons, or vouchers, or microtransaction cash, or whatever, but this is tricky too. First of all, opening an offer like this up to a general audience is asking for scammers and bots, and second, you can't undermine your developers. If you want to give games or in-game awards away for free, or let people buy them with vouchers, the developer is going to want that treated as a real sale. Otherwise what's the point? If they want to give stuff away for pennies, they could just go in a Bundle (which are themselves way past their prime).

My point is, you need to offer players a real incentive to switch over to your platform, and whatever that is, it's certainly going to cost you money.

Zero Friction for Players

Okay, you've got your developers, you've made the best backend possible, you're offering great player incentives. Now players need to just actually show up and start spending money.

Great, now you just need to build a game client that's every bit as good as Steam, or Itch, or GOG Galaxy, because by now you've surely realized you're not just competing with Steam, you're competing with everyone. This is going to be super hard, because all of those companies have invested tons and tons of time and effort into their clients, and people still complain about all their problems, and you're a startup that so far has a product with exactly zero hours of being live and tested by the real world.

And here's another problem -- if you went head on against Steam instead of coming up with some cool and zany alternate means of experiencing games, you went and built a download client. I've already got the Steam, Itch, and GOG Galaxy clients installed, and that probably puts me in like 0.1% of the total game playing population. Nobody wants to install things these days. And even if they do, you'd better make sure it's rock solid.

A lot of the most important things about a client are on the backend of it -- things like downloading, applying patches, installing, dealing with overaggressive antivirus, etc. And there's tradeoffs -- you can optimize things for players by insisting on a certain type of game binary package from developers, but that adds friction on the developer side. And if you accept just any old random file (a .zip, a .rar, a .tar.gz, an NSIS Windows installer), if you don't standardize and process all that nonsense then the player has to deal with it. Steam and maybe GOG can get away with more obtuse delivery formats and pipelines because they've got some actual size to them, you can't.

And by the way, Itch is already way ahead of you on accepting any random garbage format, unpacking it and making sense of the contents, and spitting a convenient user experience out the other end. Given that Itch's stuff is all open source, if I get even one hint that you've decided to roll your own entire pipeline from scratch, I'm gonna call up your investors and your parents to tell them you've got a deadly case of Not Invented Here Syndrome and recommend immediate quarantine.

What You Really Need

Okay, you've read all that and you still want to compete with Steam? You're sure you don't want to try something else that might make you richer and happier, like, I dunno, join a monastery and take a vow of eternal poverty and lifelong fasting?

Okay then.

You've done all the minimum things you need to do to Not Fail Immediately. You've dodged all the bullets on your long walk to the edge of the diving board and you're ready to jump head-first into an ocean full of hungry sharks. You are now worthy of the secret. Here's what you really need to compete with Steam.

Super Powers

That's right. You need something so special and crazy and unique to you that no other company can do it, or at least nowhere near as well as you. Notice I said Super Powers, plural. You're gonna need more than one. Because that's what your competition has.

  • Steam is Steam and has all the games and all the players and all the money.
  • GOG has retro games, and retro gamers, and also CDProjekt Red.
  • Amazon has Twitch and Amazon Prime and Jeff Bezos, who cannot be killed until the six horcruxes scattered across the galaxy are gathered and cast into the fires of Mount Doom.
  • Blizzard has all the AAA Blizzard games and all the money.
  • Origin has all the AAA EA games and all the money.
  • TenCent has one Metric China of customers, a special relationship with their government, and all the money.
  • Humble is at least as good as you at most things and already has a bunch of people locked into a fancy little subscription service and they give more money to charity than you.
  • Itch has the best tools and lowest overhead, and also by the way the devotion of all the scrappy small-time indies you thought were free for the taking.

Good luck out there, and mind the sharks.

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