A Monopoly Crumbles: Distribution in the Video Game Sector

A monopoly is crumbling. This isn’t a monopoly over oil or diamonds, but over video game distribution. Steam, the king of distributing video games, is being challenged by multiple competitors.

Video GameSteam is the largest computer video game distributor in the world with 125 million active users. That’s nothing to sneeze at. Unfortunately, Steam is relatively unchallenged in the world of distribution. Sure, platforms like EA’s Origin and Blizzard’s Battlenet are alternatives, but they are only used for a select amount of games each company has acquired. Steam has tens of thousands of titles.

While Steam does have a positive overall reputation in the video game world, they could still use some competition. It’s not good for the consumers to be forced to depend on one service for distribution.

As pretty much everyone knows, monopolies aren’t a good thing. Steam’s position allows it a lot of power in pricing its games, and unchecked bargaining power because the sellers can’t go anywhere else to sell their PC game effectively.

But now all of that is changing.

Video Game Last April, the video game company known as Tencent announced that it was going to rebrand its online services to create a platform where users may buy and play games. This will be a platform nearly identical to Steam. Tencent is calling their new platform WeGame.

Tencent may be an unfamiliar name to some, but their products are big, and they are a huge brand in China. The own both Riot Games (League of Legends) and Supercell (Clash of Clans).

League of Legends alone is significant as it is the most popular video game on the market. Clash of Clans has a strong following as well. Additionally, Tencent has significant stakes in Activision Blizzard and Epic Games, two major studios in the video game world.

Most importantly, it is estimated that Tencent has 200 million active users, thanks to China and the Asian Market.

Video Game The new platform was officially released September first about two months ago. Here’s the link to their slick new platform. Now there is one noticeable problem with Tencent’s platform; you need to speak Chinese.

Despite Tencent being a “global game distributor,” there is no non-Chinese version yet. It has only been out two months, and Tencent has promised to bring it to as many countries as possible, but for now English users will have a hard time using the platform.

Despite the lack of an English version, China’s market alone is enough to challenge Steam. Things will only get worse for Steam as they will be in more trouble once WeGame can effectively hit American market as well as others. But WeGame isn’t the only competitor Steam may have to worry about.

Twitch announced several months ago that it would be selling games via Twitch. It is clear that Amazon, Twitch’s parent company, wants a slice of the market. Twitch’s offer is unique as well since it will give its Streamers a piece of the revenue earned off the purchase, which will encourage the Streamers to positively influence other users to buy from Twitch.

Video Game The rise of Twitch is an interesting development, and one that shows no signs of stopping. Similar to how YouTubers have become famous and wealthy due to their videos, Twitch Streamers are starting to do the same thing. Viewers on Twitch can now buy the game that their favorite Streamer plays, and that Streamer gets a cut of the profits, which actively encourages Streamers to promote the games they play.

This method of advertisement has been effective in the last few months that Twitch began selling games. Twitch has doubled its library of games and partnered with more game companies. If this pattern continues, they could easily become a significant threat to Steam.

It is unlikely that Steam, or its parent company Valve, will simply fall apart and disappear. However, it is likely that Steam will have to deal with some serious competition. WeGame and Twitch are already threatening Steam’s grip on the market. More competition is good for the market and consumers, so this is welcomed. It looks like another monopoly will be a thing of the past.

-Sam King

6 thoughts on “A Monopoly Crumbles: Distribution in the Video Game Sector

  1. Really cool insight into the way that the distribution of online gaming has changed in the recent past. I remember going to big box stores like Walmart and target on the night of video game releases to stand in line and collect swag for the new release. Now I can get the latest and greatest video games from the comfort of my own home, in pajamas, from the online marketplace that current gaming platforms offer to its users. I think this is a much better strategy for distribution for both the providers and the gamers. However, I find that the pricing of the digital download only games is something to behold when you can purchase a physical copy of the game (more underlying marketing, packaging, and physical distribution costs) than the digital copy of the game that is essentially “free” for a company to send you the downloadable file. (minus minimal possible licensing fees for said digital marketplaces).

  2. I see a possible end to Steam’s distribution monopoly as a huge positive. As you stated, more competition is positive for consumers. Prices would likely come down for some games with increased market share for services like WeGame and Twitch. But it also goes further than money. Steam Greenlight and Steam Direct have shown that Valve is no longer concerned with quality control on Steam which has led to a storefront over saturated with garbage. Quality games have had a harder time standing out in the crowd. Hopefully, competition will lead to quality games being presented to wider audiences and having better chances at commercial success.

  3. I think that it’s healthy that Steam’s monopoly is crumbling, especially from a business perspective even though it probably doesn’t seem that way to Steam themselves. Because once a company actually has competition, they are forced to improve, to better help the consumer, and to provide a more unique experience from their competition. I would draw the similarities to Snapchat and Instagram when Instagram released a Story mode that was very similar to Snapchat’s Stories. To many people, it felt like Instagram was copying Snapchat, but both applications started bringing more and more new features quickly to their app in order to differentiate and out-do each other. So like you said, it is super unlikely that Steam will vanish, but if Steam is able to properly roll out new features and find ways to appeal to their audience and increase their audience, they will have a lot healthier and holistic business.

  4. I think that this will be a great thing for the game industry. I remember when you could only get physical copies of games and there was no such thing as a digital download. It makes me wonder how many people will use the new site or stick the good ol’ Steam that they know and love?

  5. I really cannot imagine anyone except Steam dominating the digital distribution market. While these companies are very successful, they have a long way to go stateside before they are competing with Steam here in the US. Since Tencent has such a large stake in Blizzard, I wonder if they would ever try to have exclusive rights to a new Blizzard game as a means to get people onto their service.

  6. Competition is one of the key components to a capitalist society, for steam there hasn’t been much competition in terms of other markets to get games. I for one say, Down with the bourgeoisie steam company and long live the Tencent proletariat.

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