Valve Makes More Money Per Employee Than Google Or Apple
techcrunch.com
techcrunch.com
This is not a good trend. People: please submit original sources.
Since part of our value proposition is that we teach companies how to do more with less, it becomes a very powerful marketing tool. (We usually see an increase of 200% to 300% revenue per employee after 5 years; ordinary growth in our industry is 10% to 20% growth over 5 years.)
We made a choice to focus on this metric a few years ago and it's been a tremendous boon for us (and our customers). Now we consider every change with the lens of "Will this help our customers do their jobs better?"
I have a feeling independent resellers of services, brokers of any kind, and management companies of all verticals are seeing this type of abysmal computing and are crying out for someone building that next Quora knock-off to give their industry some love, likely at _any_ price (because they're probably paying a fortune for their kludge solutions anyway).
Steam (and other platforms for downloading and streaming videogame content) are a disruptive threat to Gamestop and the videogame sales of other retailers, such as Wal-Mart.
Given that online distribution has now disrupted music, newspapers, books, movies/video, and now tv/broadcast, I'm surprised that investors think Gamestop is worth $3b.
Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon.
This is why Gamestop should be finding support (ie, EFF, ACLU, legislators) to safeguard First Sale doctrine for digital purchases: http://en.wikipedia.org/wiki/First-sale_doctrine
I could see eBay trying to find that support, but Gamestop's just a dinosaur.
Yes but they will do that without Steam. Sony, Nintendo and Microsoft already have infrastructure in place for it and already digitally distribute small games. They just need to make it scale to full releases.
http://www.gamesetwatch.com/newzoo_2010spend.jpg
One reason is that AFAIK in Europe and most of the developing world, retail PC games are much cheaper than console games. (Here it's US $15 vs $55-60)
Also, Portal 2 is now up for preorder on Steam.
edit: of course, with digital distribution you also get a much larger cut [1] (so you don't need to sell as many copies as you do on a console to get the same amount of money).
For me, the biggest plus with digital distribution is that you get access to niche genres. I'd never imagine finding games like Reccetear or Super Meat Boy in a local store, but they're available on Steam. It's the same deal with music: outside of popular bands like Massive Attack and The Beatles, I've never been able to find any music I like in a local store. More generally, this is one of the reasons I fervently believe the Internet is the most important human invention since fire: if you take the time to explore your options, you need no longer be tied down to mainstream preferences.
[1] http://www.mcvuk.com/features/808/OPINION-Retail-vs-Steam
Where EA will release a game, and then sell you unlock codes for content already on the disc as "downloadable content", Valve has ceaselessly offered perks for new and existing customers: years worth of updates to Team Fortress 2, all for free. Left 4 Dead too. Hell, when they introduced Steam Achievements they went back and added support for it in most of their back catalog! That's dedication to the customer.
And no small surprise, people flock to Valve, even when it comes to buying 3rd party games.
They've built an enormous amount of customer trust and goodwill, and this has been paying off immensely as more and more people use steam as a go-to platform for game purchases.
But even though they are not purely a game company, Valve are among the dwindling developers that actually embrace modders and giving players choice. In the console-centered world, the idea of free custom maps or player-run servers is fading from memory.
Per-employee profit and revenue is larger in general at small successful tech companies than big successful ones.
For example, I make far more per employee than Valve, Microsoft, Google or Apple and you don't see Forbes writing about me, nor should they.
Not at Activison level yet I think.
But on the selection bias, I can't really think off the top of my head many other major founders from top C.S. schools that dropped out and were successful. Is Harvard even a "top" C.S. school?
I'd say at the undergraduate level, Harvard is a top CS school if only because the competition is so fierce to get into it at that level, the students will be among the top. And, in my opinion, the quality of the students is of more importance than the quality of the teaching at the undergraduate level, when you start talking about the top 20 schools anyways.
[1]: http://grad-schools.usnews.rankingsandreviews.com/best-gradu...
Sergey Brin "is on leave from his Ph.D. studies at Stanford."
is there some non-obvious (or perhaps it is obvious, but not to the lay-person) reason why this is an impressive or telling metric?
For 18 games (if I counted that wikipedia list correctly), that should be a fair take, but it would seem like more of a side income when compared with Steam :)
[1] http://source.valvesoftware.com/SourceBrochure.pdf
[2] http://www.idsoftware.com/business/technology/printdoc.html
Epic makes significantly more from their games than from their licensing. Here's the math. The Gears of War games had sold 12 million copies as of April last year. Most were sold close to release at $60 but some sold later at a discounted price. Let's say the average sales price across the 12 million copies was $50. A top-tier developer like Epic can command a 40% or higher royalty of wholesale minus cost of goods. GameStop's profit margin on a new game is 20% and cost of goods is a few bucks. That's around $15 per copy into Epic's pockets. Multiply by 12 million and you get $180MM. When Gears of War 3 lands in half a year, it will sell more than 7 million copies and make Epic another $100MM.
That's a fuckton of money.
Valve's revenue from sales of their own games and cuts from Steam is stratospheric compared to Epic's. If Gabe snapped his fleshy fingers and instantly absorbed all of UE3's marketshare with Source, it would still constitute a small portion of Valve's revenues. That's probably why Valve hasn't been more aggressive about engine licensing. They already have a massive and diversified revenue stream.
http://www.joystiq.com/2010/10/21/user-created-tf2-items-bri...
Judging by how much they pay out, TF2 virtual goods are a profitable side business for Valve.
When you license UE3, you receive technical support from the programmers who implemented the engine. That's part of the sales pitch. Epic's marginal expense cannot be covered by just hiring more random hackers; it's mainly an opportunity cost. The engine is also in continual development, so you can't think of marginal revenue after the initial R&D investment as pure profit.
An alternative licensing model was followed by id Software back when they were still in that business. You sign the contract, pay the license fee, get a full day of face-time with Carmack, and then you're all on your own. There were other reasons that id's licensing business collapsed but the non-support was a contributing factor.
But there are also strategic technical issues that discourage Valve from chasing Epic's engine marketshare. Building an engine that's fit for many genres and platforms takes longer and is fraught with compromises compared to catering solely to your own needs.
It's a good business but there are reasons Valve focuses their attention elsewhere.