Completly disagree with Valve's desicion on this. While I personally don't care about porn on Steam, Communities cannot police themselves, even with the best of tools. I think Reddit and HN are iconic examples of this.
And it's great to see a platform moving to be more liberal for once.
Similarly people attracted to steam for pornography might stay to play a game, adjusting the demographic of the larger community.
a) a significant portion of the people who consume their porn products is not a current Steam user, b) the new users will not only buy and play games, but also interact with the community (message boards, etc.), c) these new users will on average exhibit more anti-social behavior, d) their behavior is linked to lost game revenue larger than the amount brought in by the porn sales.
I do worry a bit that it might trigger some sort of moral panic when e.g. parents hear that one game program Steam is giving 8 year olds free porno or some other exaggerated claim. Jim Sterling made a pretty good case for this in a recent video about the school shooting simulator game, that by allowing that kind of content Steam is exposing itself to becoming the victim of a hysterical panic like has happened many times in the past.
Segregating the controversial content away behind an 'edgier' brand with a different client would deflect a lot of criticism, even if it was just a new coat of paint over the Steam client. Valve needs to make the content expectations clear to people who have never used Steam themselves.
Having it seperate would also allow them to change the default UX. Among other things, the default behaviour of sending notifications to your friends like, "Bob has started playing Call of Duty," is probably not the right behaviour for porn games. If they don't firewall those sorts of games off into a seperate area, Steam at least needs to clearly communicate at every point where the user interacts with the game on Steam (store page, cart, profile, library, etc) whether that interaction is public or private, because historically just about every interaction has been visible to the user's friends.
I would bet money that the historical overlap between regular consumers of Steam and pornhub look more like a single circle than a venn diagram.
What exactly do you mean by "communities"? e.g. isolated small towns are usually viewed as having extreme levels of social control, not inadequate ones.