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Red Eats Crow - Epic Exclusivity Re-examined

Red Thomas Posted:
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A couple weeks ago, I got an email from a friend telling me that Steam had just released an updated version of their Steam Distribution Agreement.  After reading through the document and a couple conversations with friends in the industry, I think I have a new understanding of some of the activity around recent Epic exclusives.

I was exaggerating a bit when I suggested in the article description that there’d be anything about love in here, but there’s certainly more than a little intrigue and some betrayal, as well.  What most might be most enjoyable here is my admitting I was wrong on a few counts, or at the very least had missed a relatively significant part of the story that deserves a little more attention.

I’ll be taking a look at some of the points I made in my previous article about Epic’s role in all this, as well as reemphasizing some of the points from that article that I still think are valid.  We’ll also go over the changes to the Steam Distribution Agreement and what that tells us about relatively recent events, and what impact we might see from it going forward.

Don’t Blame Epic

One thing that holds from my previous article is that I don’t think there’s any room to blame Epic here.  This is effectively like blaming the new grocery store on the block because they moved in and are now competing with the older one that you grew up with.  The new store may sign exclusivity agreements with local ranchers for beef, but it’s a completely fair trade that ensures ranchers have a buyer for their bovines.  It gives the new business the initial economic advantage they need to get over that hump, and it effectively injects money into the industry to ensure ranchers continue producing good local beef.

Epic did something similar, and you can’t blame them any more than you can blame the grocer for his business deals designed to ensure his own economic health.  That’s not to say that everything is totally kosher, though.  There have definitely been a few shady deals that left customers in the wind, but I’ll echo a point I made before.

The publisher controls the selection of the distribution model and it’s their job to ensure customers receive what they were promised.   If you were promised a Steam key, that promise wasn’t made by either Valve or Epic Games.  The distributer isn’t responsible for the publisher or the developer not maintaining their commitments.  They offer a service, the devs or the publishers elected to avail themselves of that service or not.  No one on the distribution side has the authority to dictate the solution they go with, which is why seeing Epic refund backers from projects that had promised Steam keys was something that I found really impressive in favor of that company.

Epic Games has secured enough big-name exclusives that they’re a contender going forward, Steam’s de facto monopoly has been broken.

Steam Distribution Agreement

Megan Fox from Glass Bottom Games made a public tweet about how the Steam Distribution Agreement was recently updated to include a clause requiring participants in the Steamworks Distribution Program to release their games through Steam.  It seems like a no-brainer, but it derives from the value-add Steam brings to the table with respect to marketing.

It also highlights a practice that I hadn’t picked up on when I wrote the original article.  Some game companies have signed up for Steam’s distribution program and used the tools provided by the service to market their games right up to the release date.  Signing a separate exclusivity deal with another company (typically Epic Games) separately, the companies would then abort from Steam’s program to take the better deal.

Source: https://twitter.com/glassbottommeg

Effectively, this ends up being the best of both worlds as a game gets promoted on the larger platform before actually being sold on the more cost-effective one.  This might surprise you, but this is Steam’s fault.   A company has one primary purpose, to create profit.  If you can get a better deal some place else, the CEO or President has a moral (and in many cases, a legal) obligation to the company owners and/or stockholders to maximize profits.

Don’t worry, I’m not excusing bad behavior in the name of profit.  The fact is that bad behavior nearly always comes back around and in the end isn’t as profitable as you might think.  In this case, these companies have burned a bridge with Steam, if not a sizable number of their potential customers.  Whether the swap ends up being right long-term, only their books would be able to tell.

But, it’s Steam’s job to protect themselves from being taken advantage of, and that’s precisely what you see in the new language of their agreement.  I’m actually surprised it wasn’t in there already and that’s a huge mistake on their part.  The marketing of new games is an initial cost for Steam.  They do it because a game selling well maximizes their own profits, even as it supports the game company.  Thus, it’s an investment, and one they failed to secure with an enforceable severability clause.

In a way, this really underscores just how much of a monopoly Valve has had in game distribution over the last several years.  It’s the company’s job to protect itself from being taken advantage of and out of all their highly paid attorneys, no one ever thought about what might happen if a company took advantage of Steam’s marketing and then bailed for an exclusivity deal somewhere else.

Future Distribution

The obvious question is what this means for game distribution going forward, and the answer is pretty easy.  Not much.  To a great degree, this’ll prevent companies like Epic from poaching directly from Steam’s front page, but they’ve got enough of a head start that I don’t think this is sufficient to put the genie in the bottle.  Steam’s effective monopoly on distribution had been eroded little by little over the last several years, and I’m already seeing large streamers sign deals with other distributors.

This will likely force a situation in which companies have to seriously analyze the cost savings of using Epic verses all the value-add they get from being on Steam.  I don’t think that’s a clear enough answer just yet because the difference in price is significant between the two.  I suspect it’ll create some downward pressure on Steam and pull Epic’s charges up a bit until they meet somewhere between the two.  That’s going to be very good for game companies, which will probably end up being good for the consumer in the end.

I suspect we’ll see the number of exclusive launches increase a bit going forward and could even see it expand to other distribution platforms now that it’s something publishers are thinking about before committing to Steam.  These exclusives may have their periods reduced going forward, though.

Epic already has a number of exclusives I like a lot, and those companies report exceptional profits.

So long as companies could take advantage of the Steam marketing machine before signing their exclusivity deal, there was little downside in taking that path.  Now, things are a bit different with the new Steam Distribution Agreement.  Launching exclusively for a month or two on a different platform would probably provide enough advantage to everyone to be worth pursuing, but publishers will want access to the larger market relatively quickly.

In fact, this is something that I’m taking at least in part from Steam’s agreement, which requires companies to distribute their code within 30 days of the executing the agreement.  It seems rather natural that a game would release exclusive to another distributer on the same day the game is listed on Steam, giving the other platform a 30-day exclusivity.

For the consumer, this should help hold game prices in check, resulting in a cost-savings over time.  You’ll probably end up seeing a lot of these exclusives make their way to Steam after shorter exclusivity periods, too.  It ends up being the best of both worlds, where you may even see day-one discounts in the Steam store to celebrate the Steam-release of the games, making it a little cheaper for those who want to wait a little longer to get the game on their distribution platform of choice.

Whatever happens, it’ll be as the market dictates.   If exclusives are disliked intensely enough, they’ll go away, or they’ll also come to an end if consumers like Steam enough that they’re willing to wait.  Personally, I don’t see that happening because there’s too much pressure to get a game on the release date and I don’t believe the average consumer really cares much about the platform.   I’m actually glad, because competition is good and we’ll all win in the end.


Red Thomas

A veteran of the US Army, raging geek, and avid gamer, Red Thomas is that cool uncle all the kids in the family like to spend their summers with. Red lives in San Antonio with his wife where he runs his company and works with the city government to promote geek culture.