Let’s do a thought experiment: Most indie games make almost no money and what money they do make, Valve takes 30% for everyone and actually takes a lower percentage to games that earn $10 Million and $50 Million.
I see a lot of people suggest that Valve should just wave the 30% for those tiny indies who don’t make much money. So, let’s look at it: what if Valve just decided to waive the 30% fee for small indies so we get 100%? What would that cost? What would that do?
Steam by the numbers in 2022
The following data comes from VG Insights and represents only the games released in 2022:
- Total number of new games: 12,887
- Number of PAID games: 10,616
- Number of PAID games that earned LESS than $250,000: 10037
Yes you read that right, only 579 Steam made more than $250,000 last year.
In fact, if we look at the proportion of all the games released in 2022 by revenue groupings this is what it looks like.
Note that that $50,000,000 earning games are represented on this chart but it is such a tiny slice I couldn’t get Google Sheets to label it. There were only 13 games that earned more than $50,000,000 or 0.01%
Also note that I can’t estimate Free to Play games or DLC so that is not represented on this chart.
What is so special about $250,000?
In my experience, the Steam algorithm starts to really promote your game after you reach about $250,000 gross revenue. This isn’t an exact number, it depends on many factors like how quickly you got to 250K, but right around there is when you are eligible for things like Daily Deals and your game appears in more and more widgets. Basically at that level Steam starts promoting your game instead of you doing most of the work.
In 2022, only 4.5% of all indie games reached that arbitrary threshold. Look at the following graph of every game from 2022 and how much they earned. You can see, the graph really starts to pick up at the $250K level. That is the Steam algorithm putting its weight behind your game. Even at $87,000, gross revenue you start to see a bit of an uptick.But $250,000 seems to be where things really take off.
(note this graph is not logarithmic)
The hard truth for indies is, if you aren’t in those upper percentiles, you basically don’t exist on Steam. You must do all the work to promote your game.
I am going to write about this more in detail in a future post some time, but this hockey stick earnings is how Valve curates what games to promote. It is algorithmic curation. If your game doesn’t show signs that it has the power to convert, you basically get sidelined. There are so many new games on Steam that if you don’t come out of the gate hot, you almost don’t exist.
Why give Steam 30%?
So if we were doing some mercy revenue share, $250K might be a good starting point. What if all games that earned less than that get 100%. All earnings above that are pulled at 30%.
Let me just look at that to see how much that policy would cost Valve:
- According to vginsights.com, 10037 games released in 2022 made less than $250,000
- I went in and calculated the revenue for all 10037 new games and took 30% from each of them.
- The result is, every year Valve makes $34,000,000 from JUST indie games that didn’t make the cut.
$34,000,000!!
Even if we cut it down to just say Valve doesn’t earn anything on your first $10,000 it would cost them $9,000,000.
Summary
It does seem kinda silly that Valve is taking 30% of a game that earns less than $10,000 and has no path to earning a full-time-developer income. How can Valve justify this?
There are a few reasons why. I am not saying I agree with this, just that this is the reality.
Reason #1:
It keeps the asset flippers out. Valve’s $250,000 filter is fairly new. Games at the lower revenue tiers used to get more visibility. But the algorithm is regularly ratched up to give more visibility to the top earners. Doing this essentially cut the legs out from under asset flippers. The bottom rung earns so little that it isn’t worth churning out asset flips. If there were essentially no royalty costs, the flippers would increase their output.
Reason #2:
An extra $34,000,000 is hard to just give away for no reason other than being nice to some tiny indies. Can you imagine the meeting where someone proposes doing something that costs them that much money? That is close to the budget for developing Halflife: Alyx. They are just going to give away the budget for a new game for some games that (from Valve’s perspective) have no path to a profitable future?
Reason #3
Because they can. Although it sucks that 30% is taken from you even if you earn just $1000 TOTAL, what other choice do you have? People won’t buy a game directly from your personal website (they fear viruses and spyware.) Epic Games cannot get you as many sales as you can get from Steam. (Despite them spending millions trying). Itch.io, can’t compete either. Whether you like it or not, even taking 30% of your $1000 will still earn you more than anywhere else on the internet. Steam has the most and richest customers who are most likely to buy your stuff.
Pretend Steam is a shopping mall. You could get a 100 square foot shop in the biggest mall where the richest people in town shop but it costs $2000 a month to rent. OR, you could go to a shabby old shack 100 miles outside of town for $2 a month. You would still make more money in the rich shopping mall even though the rent is higher. You gotta set up shop where the shoppers are, and they are on Steam.
If you want to play with your own data and see what typical earnings are, use the Steam Analytics tool and filter per year, type of game, genre. Anything.