Was Steam sued for being a monopoly?

In April 2021, indie game studio Wolfire Games filed an antitrust lawsuit in a California court accusing PC gaming platform Steam and its owner Valve of illegally monopolizing the market for distribution of computer games.

As an avid PC gamer myself who likes keeping up with the latest developments in the industry, this caught my attention immediately. In this article, I‘ll summarize the allegations against Steam in this class action suit, the implications, and some of my own thoughts on the situation.

The crux of Wolfire Games‘ monopoly allegations

Steam is by far the dominant player in selling downloadable games to PC users, with some estimates putting its market share between 75-85%. Wolfire Games argues that Valve uses this dominance to essentially force game publishers to sell most titles through Steam:

• Imposing a 30% commission fee on all game sales which is "extraordinarily high" for a digital store
• Restricting publishers from selling Steam keys at a lower price on other sites
• Requiring publishers to sell a certain high percentage of their games on Steam

According to the lawsuit, these policies constitute anti-competitive behavior violating antitrust laws – leveraging a monopoly position to inflate commissions and prices.

It claims Valve and Steam‘s actions have unlawfully stifled competitors, locked publishers into unfair terms, and overcharged consumers due to lack of price competition in the PC games market.

Steam‘s overwhelming market share leaves little choice

With a share exceeding 75% for where PC gamers buy games digitally, Steam has dominated the market for over a decade since crowding out early rivals like Direct2Drive.

As this table shows, competitors like Epic Games Store have managed to grab a slice, but Steam still enjoys an enormous lead.

For any publisher wanting to sell games to desktop users, Steam‘s sheer dominance means they HAVE to sell through Steam, or they miss out on up to 85% of potential sales. This seeming lack of choice is why Steam is vulnerable to monopoly accusations.

Valve argues Steam provides value; Wolfire disagrees

In response to the lawsuit, Valve defended Steam as a valuable platform for the PC gaming community, allowing publishers to connect with gamers. They stated:

"We believe Wolfire‘s claims are without merit and we look forward to proving this in court."

However, Wolfire Games‘ CEO Rosen counters Valve takes too large a cut of all Steam game sales through that 30% commission, contributing little value themselves:

"From offering tools like Steamworks to build in features like matchmaking, Valve promises to help developers succeed, but then it charges an extraordinarily high cut."

In their filing, Wolfire estimates Steam has yearly revenues exceeding $6 billion from commissions and game sales. And unlike physical stores, their costs of distributing games digitally is minimal.

Perhaps 30% made more sense when Steam had less dominance. But now that it has few major competitors, many developers feel Valve shouldn‘t take such a large chunk when they supply the content that keeps the entire platform running.

Judge allows lawsuit against Steam to proceed

In October 2022, Valve attempted to get Wolfire Games‘ lawsuit dismissed. But the judge denied this request, ruling that:

"Wolfire has sufficiently alleged that Valve has monopoly power, strong evidence of anti competitive effects and improper exclusion (of competitors and price competition), and that the justifications offered so far are pretextual."

So the case will now move forward into pre-trial evidence gathering and further hearings.

This means Wolfire Games successfully presented a plausible argument – though unproven so far – indicating Steam could be abusing a monopoly position illegally.

Lawsuit timeline and outcomes

With Valve failing to get an early dismissal, the case now likely heads towards extensive evidence submission and arguments, unless it gets settled out of court before then.

What would change if Steam loses the lawsuit

If Wolfire Games ultimately wins – or settles for concessions by Valve – it could force monumental changes:

• Lowering Steam‘s 30% commission fee
• Allowing publishers more flexibility in Steam key pricing/sales channels
• Opening up competition by prohibiting Steam‘s alleged strong-arm tactics

The combined effect would be better deals for publishers AND gamers – if say Epic Games Store or GOG could compete more aggressively on price.

For Valve, a loss would strike at the core of Steam‘s huge earnings. Commissions could plummet, and removing policy constraints may trigger an exodus away from Steam by publishers.

But as consumers, this all sounds pretty good right? Steam reforming some of its more monopolistic practices to allow fairer competition ultimately means WE benefit too.

My perspective as a gaming enthusiast

As someone who loves PC gaming, discovering great indie titles is important to me. So hearing about Steam‘s alleged iron-grip forcing stricter terms, I feel concerned for smaller developers dependent on Steam for sales reach.

The lawsuit waking up Valve to curb some of Steam‘s control of the market – if proven accurate – seems overdue to me. Healthier competition might encourage Steam itself to offer better features and fairer revenue sharing.

Don‘t get me wrong – Steam revolutionized game distribution and eased piracy‘s damage to PC gaming. Many of us have libraries-worth of cherished games on the platform!

But developers actually making the games we love deserve good conditions too. This includes flexibility in how/where they sell them if Steam won‘t budge on that 30% cut for access to its massive user base.

I hope evidence from the lawsuit – if demonstrating abuse of power – leads to reforms benefitting consumers AND industry participants alike. Perhaps with enough pressure, Valve will choose to adjust problematic policies even if illegal monopoly isn‘t fully proven.

The lawsuit outcome has huge implications! As developments occur in 2024, I‘ll be following closely here from a gamer‘s perspective to keep YOU updated. Please subscribe for future coverage!