Valve, the company behind the popular gaming platform Steam, is currently facing a US antitrust lawsuit from Wolfire, a developer alleging that Valve uses its dominant position to unfairly suppress rivals and control game prices. While Valve attempted to have the suit dismissed, the court ruled in May 2022 that it could proceed with some modifications, allowing the case to enter the discovery phase – a crucial stage where internal company communications are often made public.
Among the disclosed documents are intriguing email exchanges between Epic Games CEO Tim Sweeney and Valve’s leadership, including CEO Gabe Newell, COO Scott Lynch, and project manager Erik Johnson. These exchanges revolve around the contentious issue of store pricing and the commission that Valve takes on Steam sales, a topic that has long been a point of contention for Sweeney and Epic Games.
In 2017, Sweeney engaged in a discussion with Newell and Johnson, criticizing the 30% platform fee on Steam. He argued that while such fees were justifiable in the early days, the scale of operations and reduced costs no longer warranted such a high cut, especially considering the brief marketing value provided by the storefront.
“There was a good case for [Steam fees] in the early days,” Sweeney’s email says, “but the scale is now high, and operating costs have been driven down, while the churn of new game releases is so fast that the brief marketing or UA value the storefront provides is far disproportionate to the fee.”
Sweeney’s calculations suggested that after accounting for Valve’s 30% cut, marketing expenses, and server/engine costs, developers were left with only 25% of the revenue for actually creating the game – a figure he deemed worse than the retail distribution economics of the 1990s. An explanation of why game development costs were put upon Steam or why it was Valve’s problem wasn’t provided.
Fast forward to December 2018, and Sweeney’s frustration with Valve’s pricing model had reached new heights. At this time, Valve had introduced a royalty change that reduced its cut on the most successful games to as low as 20%. Sweeney, gearing up for the launch of the Epic Games Store and the ongoing antitrust battle with Apple, saw an opportunity to pressure Valve by attacking Steam.
In a scathing email to Newell and Lynch, Sweeney accused Valve of favoring the “strong and powerful” with special terms while the 30% cut was reserved for “the little people.” He urged Valve to offer a better deal to all developers, arguing that it would strengthen Epic’s position against Apple’s alleged monopolistic practices.
“Right now, you assholes are telling the world that the strong and powerful get special terms, while 30% is for the little people,” emailed Sweeney. “We’re all in for a prolonged battle if Apple tries to keep their monopoly and 30% by cutting backroom deals with big publishers to keep them quiet. Why not give ALL developers a better deal? What better way is there to convince Apple quickly that their model is now totally untenable?”
Valve’s response, however, was far from conciliatory to Epic Games. Lynch simply forwarded Sweeney’s email to Newell and Johnson with one line of commentary:
“You mad, bro?”
While some may view Lynch’s response as flippant, it was never intended for public consumption. Newell and Valve’s reaction seemed to be precise and well-thought.
The Wolfire lawsuit against Valve encompasses more than just these email exchanges, raising questions about who is funding the smaller company’s legal battle against the gaming giant. As the case progresses, with Wolfire seeking class-action status and reiterating its arguments about pricing practices on Steam, the disclosed emails offer a glimpse into the behind-the-scenes tensions between Valve and its competitors, particularly Epic Games, as they vied for dominance in the digital game distribution market.
Which do you use: Epic Games Store or Steam? What do you think about this gaming CEO catfight? Let us know in the comments below!
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