Steam defined the modern video game industry

Gather ’round, children, and let me tell you a story about the old bugaboo we used to call DRM.

Digital Rights Management was the beast under every gamer’s bed in the mid-2000s, an invisible bit of software baked into game discs that dictated and tracked player behavior under the guise of preventing piracy. DRM software, like SecuROM, limited the times a game could be downloaded and forced players to regularly connect to the internet for authentication checks, at a time when less than half of American adults had reliable broadband connections. DRM features soured the releases of BioShock, Mass Effect and Spore, and by 2010, anti-piracy software had rendered Assassin’s Creed 2 and Splinter-Cell: Conviction unplayable. When Microsoft attempted to release the Xbox One with always-on DRM features in 2013, intense vitriol from fans forced the company to reverse its plans at the 11th hour. There were lawsuits. DRM was a curse word.

Meanwhile, Valve was building out Steam. When it landed in 2003, the digital PC storefront was designed to streamline the patch process for games like Counter-Strike and make it easier for Valve to implement anti-piracy and anti-cheat measures. Steam was made to be a DRM machine. In 2004, with the release of Half-Life 2, Valve made Steam a requirement for every player, and even those who’d purchased new, physical copies of the game had to boot up the launcher first. There was some low-level grumbling, but PC players were used to being lab rats, and Half-Life 2 was good enough to drown out the dissent. Steam adoption skyrocketed. So, naturally, Valve turned it into a store for third-party games.

While other publishers were fighting with players over DRM features in individual titles and consoles, Steam quietly added dozens, then hundreds, then thousands of games each year. Today, Steam has 132 million monthly active users and an estimated 103,000 games, more than any other mainstream distribution service. Nearly all of these titles are playable only while connected to Steam — even after paying full price, even after downloading, even in offline mode. This has done nothing to stop Steam from becoming more essential to more players each year.

“Competition is good, but the PC market has no competition,” Super Meat Boy co-creator Tommy Refenes told Engadget in 2018. “There is only Steam.”

The widespread adoption of anti-piracy software marked an era in video games where players felt like they didn’t really own the products they were buying. And then, this practice became normal. Broadband saturation continued to climb, the market for physical media dissolved into pixelated dust and streaming entertainment media found its foothold. Today, Xbox, PlayStation, Nintendo, Epic Games and most major publishers have their own digital stores with proprietary DRM features. However, Steam is entrenched as the industry’s largest DRM machine because it’s the most popular digital games storefront, period. And if the last 20 years are any indication, that’s not going to change any time soon.

Did you hear that? That was the sound of our collective Steam libraries, representing trillions of dollars in purchased games, expelling a dusty sigh of relief. Because if Steam disappears, all of our games do too.

It’s a chilling thought — Steam’s demise would enact immediate, catastrophic chaos across the video game industry, gutting players’ libraries and cutting off one of the most direct points of sale for developers of all sizes. Steam feels too big to fail, and Valve operates it as such. Valve is a private company valued at $6.5 billion in 2021, and CEO Gabe Newell, himself, is a billionaire. The studio is similar to Nintendo in that it’s able to ignore gaming trends and carry on doing whatever it wants at any given time, while Steam prints money and its most ardent fans cheer the studio on with friendly memes. Hail, Gaben!

Steam popularized the 70/30 revenue split, giving developers on the platform 70 percent of the money their games generate and pocketing the rest. Apple and Google copied this formula with their mobile app stores. When it debuted in 2018, the Epic Games Store shaped its entire marketing campaign around taking on Steam and dismantling its rev-share ratio, claiming it was exploitative and unfair, especially to indies. Epic offered every developer an aggressive split of 88/12, and CEO Tim Sweeney literally dared Valve to match it.

Valve barely blinked. The studio shifted its Steam payout schedule slightly, offering a 75 percent cut on games that made more than $10 million, and 80 percent on anything that brought in more than $50 million. Epic eventually shifted its attention away from Valve and moved to a more vulnerable target in the rev-share space: Apple.

“If you were running a store without competition and you were making billions of dollars a year, how much time and energy would you dedicate to making it better?” Refenes asked in 2018, during the launch of the Epic Games Store. “How much money would you spend to improve the experience for everyone that uses it, if the end result is you would make the same or possibly less money? My answer is, The minimum amount of time, effort and money required.”

Valve has become more hands-off with Steam as it’s aged. In the platform’s early days, developers would pitch their games to actual people at Valve, who would launch a handful of projects on the storefront every week, ensuring plenty of attention for each title. For small studios, getting a game on Steam was like hitting the jackpot. This changed in 2012, when Valve implemented Greenlight, a process that allowed players to choose which games would make it to Steam (after developers submitted a $100 entry fee). Greenlight eventually evolved into Early Access — a system still around today and the standard on other platforms too — and the number of games on Steam rose astronomically in just a few years.

In 2013, Steam added 435 new games, according to Steamdb. In 2017, it added 6,947 games. This was a tumultuous period for developers, especially those who started production when Steam was a curated space, but ended up releasing their games into an unregulated and oversaturated marketplace.

Indie developers Ben Ruiz and Matthew Wegner began building the stylish brawler Aztez in 2010, and it received a ton of pre-release hype. Aztez finally went live on Steam on August 1, 2017, but was immediately lost in the crowd.

“There were 40 other games that launched on August 1,” Wegner told Engadget in October 2017.

Ruiz added, “If I was paying attention to Steam, maybe I wouldn’t be so blindsided by what happened, but I’m also not necessarily sure what I would’ve done differently. If I’d have known like, oh, it’s a saturated market now — what the fuck do you do? …There’s a billion indie games that come out on Steam every single day.”

Today, Steam is a self-sustained game-distributing machine with more than 100,000 titles and counting. Getting on Steam no longer equates instant success for any developer, but it’s a necessary aspect of most release plans. There are other options: GOG, operated by The Witcher and Cyberpunk 2077 publisher CD Projekt, is one of just a few digital distributors committed to DRM-free game purchases; large publishers like Ubisoft, EA and Microsoft all have Steam-like storefronts and the Epic Games Store has a superior revenue split for developers. Still, giants like Microsoft and EA find it necessary to simultaneously release their games on Steam, handing Valve a cut of each purchase in the process.

As a private company raking in endless piles of Steam cash, Valve has the freedom to operate on its own timeline. The company famously has a flat hierarchy with no strict management structure, and developers are encouraged to work on pet projects or just generally follow their hearts.

As a result, Valve is an incredibly rich company that doesn’t produce much. Its games are legendary, but there’s a running joke in the industry that Valve can’t count to three: Half-Life 2: Episode Two and Team Fortress 2 came out in 2007. Left 4 Dead 2 came out in 2009. Portal 2 came out in 2011. In 2020, the VR game Half-Life: Alyx landed as an entrée into Valve’s Index headset, which came out the previous year and cost $1,000. The studio is still ignoring an extremely disruptive bot invasion that began consuming TF2 in 2020, despite consistent pleas for support from dedicated players. In December 2023, Valve replaced Counter-Strike: Global Offensive with Counter-Strike 2, interrupting an ESL Pro League tournament in the process.

Meanwhile, many of the writers who helped create Valve’s most iconic franchises left the studio around 2017, after years of inactivity. In 2018, Valve hired all 12 developers at Firewatch studio Campo Santo, who were at the time working on a very-rad-looking new game, In the Valley of Gods. There have been no updates from that team since.

Steam’s unwavering success has helped turn Valve into a senior resort community for computer science nerds, where game developers go to live out their final years surrounded by fantastic amenities, tinkering and unsupervised. It’s a lovely scenario, really. It’s just not particularly productive.

Matt T. Wood worked at Valve for 17 years, helping to build Left 4 Dead, Left 4 Dead 2, Portal 2, CS:GO and both episodes of Half-Life 2. He left in 2019 and is now preparing to release his first independent game, Little Kitty, Big City.

“Valve talks a lot about, like, you can do anything you want,” Wood told Engadget in 2023. “And it’s like, well — that’s never true. Valve has a direction, and they have a trajectory. And so, for me, it was realizing that the direction that Valve was going in was not a place that I wanted to be long-term. …They were sitting on their laurels a little bit, and it’s like they weren’t really challenging themselves, taking risks or doing anything. Steam’s making a lot of money so they don’t really have to.”

Little Kitty, Big City is coming to Steam, of course.

Valve is supremely skilled at making money off of other people’s work, and Steam epitomizes this trait. The company did the same thing with Steam Machines back in 2014 too: Valve created a Steam Controller, but it never actually built a Steam Machine. Instead, Valve licensed its name to PC manufacturers, and these companies built boxes to beam Steam into people’s living rooms. Valve offloaded manufacturing costs while collecting market data about actual demand for quasi-PC, quasi-console hardware. Valve never ended up making its own box (unless you view the Steam Deck as a Frankenstein hybrid of the Steam Controller and Steam Machines, which I do).

The Steam Deck is the most exciting thing to come out of Valve in decades, and that’s largely because the company actually seems dedicated to improving and supporting it. Valve seemingly gave up on VR hardware after the Index, but less than two years after the release of the Steam Deck, Valve dropped an OLED version featuring a gorgeous screen and other improvements.

The Steam Deck is, of course, all about Steam. Just like Half-Life 2 was a clever ruse to get more people registered on Steam back in 2004, the Steam Deck is positioned to dominate the handheld PC market in 2024, and it comes with Steam installed.

Today, digital distribution is the backbone of the industry (which I guess makes DRM the spinal fluid), and Steam is the undisputed leader in this space.

Steam’s legacy is a vast and varied landscape of games serving millions of individual libraries, some thousands of titles deep — all of which can disappear with a snap if Valve decides to stop, sell or pivot. It’s a storefront that set the standard and refused to stop growing. It’s entire studios of artists and writers devoured, and beloved franchises left to rot. It’s a stranglehold that allows Valve to ignore market pressure from consumers, creators and competitors.

Behind the curtain of the video game industry, there’s Steam, constantly churning, powering everything.

To celebrate Engadget’s 20th anniversary, we’re taking a look back at the products and services that have changed the industry since March 2, 2004.