Something I don't understand about Valve – the company has been around since 1996 and essentially controls the PC gaming industry. It has the dominant digital distribution platform (taking a 30% cut of all sales), a catalog of very popular games, several hardware plays (VR headset, console, linux box) and 135+ million active users. It enjoys a cult like standing among fans. Why then is its estimated valuation as little as $7.7B (from https://www.bloomberg.com/billionaires/profiles/gabe-newell/...)?
We ought to turn this on its head: why are companies that have never turned a GAAP profit and have no clear route to profitability other than a vague plan at monopolization valued by VCs at (tens of) billions of dollars?
I'm not much of a video game player, but Valve seems to have millions of loyal, paying customers. Given that and their history of direct financial success (i.e., not just popularity with developers), $7.7B really doesn't seem so bad.
Because the vague plan at monopolization IS the value.
That's pretty much the point. It doesn't matter whether it's a GOOD plan. In a sense it matters much more that it's an evil plan, because that would hurt everybody else more and lead to more capital accumulation and return on investment.
Sometimes these things aren't that complicated. Whether the company's beneficial in other ways is a much more difficult question. Valuation isn't: valuation is more or less a gamble on how much the company can crush everybody else.
I'm not sure where Bloomberg is getting that number and I would debate even its ballpark accuracy - especially when Valve is a privately held company and notoriously tight-lipped about things like gross revenue and profits.
My wild guess is that because most of their revenue isn't recurring it's valued lower.
Given the size of the PC gaming market and the ubiquity of Steam you would think they have >>$1B in revenue though, which makes $7.7B a pretty conservative multiple.
I'd aim a little closer to that 1b than 5. Most of the "whale" cash cow games have their own launchers and don't split the revenues. Wow, cod, most MMOs, lol, fortnite, etc all huge franchises with zero steam. Since steam takes 30% or less depending on on agreements, they make good money, but not insane.
There are all kinds of factors at play here, none of which I have any concrete data on.
First up, there are probably way more console users than pc users.
However, a percentage (not a majority, but certainly significant) of those would be kids whose parents buy them one or two games a year.
OTOH, PC gamers tend to have more disposable income (based on the fact that they have at least a pretty decent PC). Plus, steam sales come up all the time and lots of PC gamers have massive libraries of games they bought cheap and never played.
All of these (sometimes conflicting) factors make it hard to tell who spends more.
A very tiny percentage of PC gamers have the kind of rigs you are envisioning. According to Steam's data (https://store.steampowered.com/hwsurvey/Steam-Hardware-Softw...), the most common GPU in use is the GTX 1060, which was the entry level Nvidia card released in 2016. Most gamers have a <2.7Ghz processor and are on a 1080p screen.
> A very tiny percentage of PC gamers have the kind of rigs you are envisioning.
I'm not talking about the people buying i7s and 4090s. 100% agree they are a tiny minority. I'm talking about the same modest setups you are.
Even a 1060 (or it's modern equivalent) with an i3 and a 24 inch 1080p panel is more expensive than a PS5/Xbox. And I think it's becoming increasing rare for a family to have a desktop pc unless it's for gaming.
> First up, there are probably way more console users than pc users.
> OTOH, PC gamers tend to have more disposable income (based on the fact that they have at least a pretty decent PC).
If we're talking about on average it's probably the exact reverse of this. I'd be surprised if more than 25% of Steam users were in North America. Not because Steam isn't huge in NA, but because getting a console and games is way harder in most other countries than running what you can on the family PC.
For example (at least before the sanctions) Russia makes up the largest portion of CS:GO and DOTA2 players. At least for DOTA2 it's more then double the number of American players.
the biggest reason for this is the big games that people spend money on today are free. the 30% platform fee doesn’t matter to fortnite, apex legends, overwatch, dota2/cs would be here if valve didn’t own it. the big cash making games have gone around the market place by being the marketplace themselve: gta online. and that trend will continue.
i bet without cs and dota steams revenue per user has been in decline over the past 5 years as money moves from paid libraries to paid addons in free games
I assume that spend per user is higher than console users, since most steam users spent about $1000 on their computer compared to $300-500 on a console. However, the population of PC gamers is probably a lot smaller than console gamers given the money and knowledge barriers to entry.
Alternatively, after having streteched their budget for a PC, many gamers may have less money for games to play on it. Also, many PC gamers simply play on a family PC, not some dedicated machine.
That link shows Gabe Newell's estimated net worth, but does he have have 100% ownership of Valve? The Valve Wikipedia page shows his ownership as ">50%" [0], but isn't more specific.
> Valve was valued at $7.7 billion in May 2022 based on Bloomberg calculations and discussions with Michael Pachter, a Los Angeles-based analyst at Wedbush Securities. This value has been adjusted for the performance of the Russell 1000 Electronic Entertainment Index since then.
It goes down after a certain amount of sales. 25% after 10 mil and 20% after 50.
It says a lot about how large valves market share is that they can take such a large cut and publishers will still sell there. Plenty have tried to release alternative clients without mixed success
It's the userbase. Steam works well enough, hasn't changed really at all in years (a feature in and of itself), and has mostly everything a user would ever want or need.
Why then install an alternative client?
Source: I tried to compete with steam once. Tech was better. Nobody cared.
I wouldn't even say Steam works well. The UI is laggy and clunky, the mobile app is a joke (literally worse than the web version). But it's good enough, it beats learning something new, especially since all game launchers seem to have some flashy custom UI instead of standard widgets.
I think Steam works very well. I heavily use in-homestreaming and big picture mode on my shield and it offers a nice experience that I've yet to see emulated elsewhere. I usually have a browse in the store and watch trailers on the TV before launching my game.
Remote Play is fun on games that support it.
And it runs on osx, linux and windows.
And then theres Broadcasting, chat. Its a heavily featured launcher, and offers way more than some of the alternatives out there.
I don't know how this could remotely be estimated given both the steam store and marketplace, the various contract tiers based on prior agreements, grandfathered contracts, etc.
It's estimated due to the fact that vast majority of that 7 billion dollar revenue comes from just a small handful of games. Looking over VG Insights, almost half of all video game revenue comes from just 50 games (out of approximately 10,000 games released on Steam per year).
and while steam was the only app store for pc that mattered for 15 years there’s more players in that space. valves only future in game distribution is to lose market share to epic store, microsoft store, battlenet, origin, gog, etc
