GamersGate CEO: Steam Dangerous For Publishers

Gearbox Software boss Randy Pitchford caused a bit of a stir this week by saying that Valve's digital games store Steam exploited smaller publishers. It seems he's not the only one with concerns, though.

Yesterday, Blend Games had a chance to speak with Theodore Bergquist, the CEO of rival digital store GamersGate. During our discussion, Berquist explained why developer/publisher Paradox Interactive formed GamersGate and why GamersGate ultimately split off from the company. He also addressed Pitchford's concerns with Steam, stating that many publishers "see a big problem with Steam not being independent" from Valve.

For starters, why was GamersGate founded?

It basically started with Paradox Interactive, an independent developer and publisher of strategy games, who, for the longest time, struggled to find support with brick-and-mortar retailers. Eventually we started getting requests from several consumers asking us if they could just download the games from our ftp. We let them do that for a short time, but after a while it became so big that we decided to build our own digital distribution platform to sell Paradox titles directly through the Internet.

Just a few months after we established our own platform, Atari and some other publishers asked us if they could sell their games through our service as well. Noticing the potential conflict between Paradox and other publishers, we changed the platform's name from Paradox on Demand to GamersGate and spun it off as a separate business entity.

Being independent from Paradox has really been the key. We’re still good friends with the Paradox guys and are fans of their work, but we also have the privilege of forming strong relationships with the rest of our 170 partners, who range from large publishing brands like EA, THQ, and SEGA, to small independent developers with no existing publisher relationships.

Why didn't Paradox just release their games through another digital service? Steam and Direct2Drive had already been around a few years by then.

Actually Paradox did host their titles through third-party platforms like Steam and D2D well before GamersGate was spun off. As a publisher, Paradox wants their games to be available through every possible outlet, and with that philosophy we found that there is very little risk in selling our games elsewhere, in fact releasing Paradox games as Steam and D2D helped increase their sales at GamersGate.

Why did Paradox ultimately decide to spin off GamersGate as its own company?

Mostly because we observed a strong need for GamersGate to be independent. We wanted to be able to treat all of our publishing partners equally, and being independent was the only way to do that. Also, we had two separate teams managing separate entities under the same roof, so it felt natural that GamersGate should focus on the retailing and Paradox on brand building and publishing. Both companies really took off after the split. GamersGate had a 100%+ growth last year and we’ll most likely have the same growth this year. We’re looking forward to 2010 and we expect to see the same growth. Digital distribution of PC games is really exploding.

Do you think game companies are more likely to sign on with GamersGate now that it's not directly owned by a game company? Was the concern of a conflict of interest ever voiced by potential partners?

Yes, absolutely. In the beginning – before the split – we got a lot of questions about whether Paradox titles are more exposed, and we know for sure that many publishers see a big problem with Steam not being independent. I mean, hypothetically, what happens when the next Valve installment ends up being released the same week as another AAA title from a separate publisher?

It may seem wrong on principle for a game company to be in charge of the distribution of rival companies' games, but what's the real danger here?

Well, the real danger for a publisher using Steam, for example, is that they're feeding a competitor with money and resources. Consider the way Steam locks their customers into a download client; essentially they implement their technology in third party games, and force users to go through Steam in order to access games that the consumer paid full price for. What ends up happening is Steam builds an inordinate degree of control over their customer base and future revenues, and I don’t think many publishers are aware of just how much control they actually have.

This discussion was sparked by recent comments by Randy Pitchford. He said, among other things, that "It’s actually really, really dangerous for the rest of the industry to allow Valve to win." There's a bunch of digital distribution platforms coexisting right now. Do you think it's ever going to be possible for one to completely crowd out the competition?

Well I definitely agree with Randy about the danger. Even though there are other portals that do not use a client, and instead focus on retailing, creating strong value for the consumer, and rewarding users rather than forcing technology onto them, at the end of the day, "winning" simply boils down to the amount of traffic a particular platform has. Steam generates a lot of traffic from their community, but it’s also very easy to buy into the appeal of traffic numbers.

We believe being independent and working toward an open ended solution that delivers a smooth and fast retailing service is the concept of the future. The battle is far from over and I’m confident that there's plenty of space for more than one service to compete for the digital distribution throne.