Valve’s Monopoly

“Valve has a natural monopoly!”

So did MySpace.

More relevant to computer games, would be that so did Zynga.

However, beyond bumper stickers, there is the basic problem to be discussed: How much market power does Valve have? It has a little more than just your average distribution network thanks to the fact that it is also a content maker, although I’m not legal eagle and using that could for all I know fall under anti-trust, but beyond that it really functions by its ability to attract groups from both sides.

So does Sony or Microsoft, but they force people to make an investment in prosperity hardware. For many people if their chosen company goes evil they’re really out of luck. Valve on the other hand is being discussed for its software. Although, Steam may have enticed more marginal PC gamers to computers, Valve do not have any claims to that PC and people can use whatever distribution method they please.

Steam therefore is in a much more contestable market than the consoles. Although, it may benefit from network effects of the sort that gave VHS* it’s natural monopoly. The lack of investment means it  is much less the one decision that you’re stuck with. To some extent the better metaphor might be where to hold ones Christmas party. If one has always held it in one place then that is the focal point where as a default it’ll be held there again, but if it starts acting up you can send out a message and hold it elsewhere.

Can a company looking to get a piece of Valve’s pie just call everyone up and say ‘we’ve got a new club here. Come join us!”? Well, Google+ has proved how you can’t, while something like 8chan has proved  how you can.

That was for the consumer, but Valve is the middleman. It needs producers, also. With producers, I think it is a very different story.

The big producers are much smaller in number. The transaction costs with dealing with the producers are much smaller therefore. This means it would be much easier to negotiate with each of them. However, while I said that consumers have little that ties them into Steam for future purchases, it seems more likely that the big producers might have contacts, explicit or psychological, with Valve, or at least relationships.

Perhaps these facts are where Valve lauded consumer-focus comes from. Or, perhaps they’re why a consumer-focused company is coming out on top. Or perhaps the conditions are a result of the company on top’s consumer-focus. I don’t know, I’m not a doctor.

This has been my view on this issue, as you might have guessed its a response to the paid modding furore. I just needed to get this point out of the way before dealing with that point more directly.

* You can always rely on JohansenIndustries to be up to the minute.


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