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Comment by paxys | Hacker News Reader

Something I don't understand about Valve – the company has been around since 1996 and essentially controls the PC gaming industry. It has the dominant digital distribution platform (taking a 30% cut of all sales), a catalog of very popular games, several hardware plays (VR headset, console, linux box) and 135+ million active users. It enjoys a cult like standing among fans. Why then is its estimated valuation as little as $7.7B (from https://www.bloomberg.com/billionaires/profiles/gabe-newell/...)?

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> Why then is its estimated valuation as little as $7.7B

Because investors/VC can't buy in on it, so no trying to inflate the valuation.

We ought to turn this on its head: why are companies that have never turned a GAAP profit and have no clear route to profitability other than a vague plan at monopolization valued by VCs at (tens of) billions of dollars?

I'm not much of a video game player, but Valve seems to have millions of loyal, paying customers. Given that and their history of direct financial success (i.e., not just popularity with developers), $7.7B really doesn't seem so bad.

Because the vague plan at monopolization IS the value.

That's pretty much the point. It doesn't matter whether it's a GOOD plan. In a sense it matters much more that it's an evil plan, because that would hurt everybody else more and lead to more capital accumulation and return on investment.

Sometimes these things aren't that complicated. Whether the company's beneficial in other ways is a much more difficult question. Valuation isn't: valuation is more or less a gamble on how much the company can crush everybody else.

I'm not sure where Bloomberg is getting that number and I would debate even its ballpark accuracy - especially when Valve is a privately held company and notoriously tight-lipped about things like gross revenue and profits.

Because valve dgaf about VCs. VCs inflate prices because the whole game is a house of cards.

My wild guess is that because most of their revenue isn't recurring it's valued lower.

Given the size of the PC gaming market and the ubiquity of Steam you would think they have >>$1B in revenue though, which makes $7.7B a pretty conservative multiple.

This source says PC gaming is ~$30B, so $1-5B in revenue seems reasonable for Steam: https://www.globenewswire.com/en/news-release/2022/05/23/244...

I'd aim a little closer to that 1b than 5. Most of the "whale" cash cow games have their own launchers and don't split the revenues. Wow, cod, most MMOs, lol, fortnite, etc all huge franchises with zero steam. Since steam takes 30% or less depending on on agreements, they make good money, but not insane.

Curious as to what the average total spend per active user is. I suspect it's considerably lower than that of active console users.

Hard to say.

There are all kinds of factors at play here, none of which I have any concrete data on.

First up, there are probably way more console users than pc users. However, a percentage (not a majority, but certainly significant) of those would be kids whose parents buy them one or two games a year.

OTOH, PC gamers tend to have more disposable income (based on the fact that they have at least a pretty decent PC). Plus, steam sales come up all the time and lots of PC gamers have massive libraries of games they bought cheap and never played.

All of these (sometimes conflicting) factors make it hard to tell who spends more.

A very tiny percentage of PC gamers have the kind of rigs you are envisioning. According to Steam's data (https://store.steampowered.com/hwsurvey/Steam-Hardware-Softw...), the most common GPU in use is the GTX 1060, which was the entry level Nvidia card released in 2016. Most gamers have a <2.7Ghz processor and are on a 1080p screen.

Mostly because crypto idiots abused them to run hashing functions on pseudorandom numbers in hopes of winning the script kiddie lotto.

I believe the 3060 has taken the 1060's crown: https://www.tomshardware.com/news/nvidia-rtx-3060-begins-its...

Especially once we take into account that the "1060" is actually a merging of multiple 1060 SKUs (including mobile) with pretty different performance

Another reading of that data is that about half of gamers are on laptops and the other half upgrade their GPUs every 5-6 years.

> A very tiny percentage of PC gamers have the kind of rigs you are envisioning.

I'm not talking about the people buying i7s and 4090s. 100% agree they are a tiny minority. I'm talking about the same modest setups you are.

Even a 1060 (or it's modern equivalent) with an i3 and a 24 inch 1080p panel is more expensive than a PS5/Xbox. And I think it's becoming increasing rare for a family to have a desktop pc unless it's for gaming.

> First up, there are probably way more console users than pc users.

> OTOH, PC gamers tend to have more disposable income (based on the fact that they have at least a pretty decent PC).

If we're talking about on average it's probably the exact reverse of this. I'd be surprised if more than 25% of Steam users were in North America. Not because Steam isn't huge in NA, but because getting a console and games is way harder in most other countries than running what you can on the family PC.

For example (at least before the sanctions) Russia makes up the largest portion of CS:GO and DOTA2 players. At least for DOTA2 it's more then double the number of American players.

I assume that spend per user is higher than console users, since most steam users spent about $1000 on their computer compared to $300-500 on a console. However, the population of PC gamers is probably a lot smaller than console gamers given the money and knowledge barriers to entry.

you dont need a gpu to game on PC. you have thousands of games, old and new, that run fine on integrated graphics.

Alternatively, after having streteched their budget for a PC, many gamers may have less money for games to play on it. Also, many PC gamers simply play on a family PC, not some dedicated machine.

the biggest reason for this is the big games that people spend money on today are free. the 30% platform fee doesn’t matter to fortnite, apex legends, overwatch, dota2/cs would be here if valve didn’t own it. the big cash making games have gone around the market place by being the marketplace themselve: gta online. and that trend will continue.

i bet without cs and dota steams revenue per user has been in decline over the past 5 years as money moves from paid libraries to paid addons in free games

GTA might be a bad example here. GTA Online sells cash cards via Steam and I'd imagine that makes up a large % of overall cash card sales

if pc gta made any significant chunk of their revenue it would get its own standalone launcher and marketplace. they have thousands of developers

It already does, it's just available on other platforms (Steam, EGS) in addition to Rockstar's own.

It takes money to run a business and pay 300-400 people every week. There is no obvious reason to value it at 300x earnings.

That link shows Gabe Newell's estimated net worth, but does he have have 100% ownership of Valve? The Valve Wikipedia page shows his ownership as ">50%" [0], but isn't more specific.

[0]: https://en.wikipedia.org/wiki/Valve_Corporation

> Valve was valued at $7.7 billion in May 2022 based on Bloomberg calculations and discussions with Michael Pachter, a Los Angeles-based analyst at Wedbush Securities. This value has been adjusted for the performance of the Russell 1000 Electronic Entertainment Index since then.

From the link I posted above.

Thank you I missed that part, I thought the "Latest News" section was the end of the article.

It's absolutely not 30% for big publishers.

It goes down after a certain amount of sales. 25% after 10 mil and 20% after 50.

It says a lot about how large valves market share is that they can take such a large cut and publishers will still sell there. Plenty have tried to release alternative clients without mixed success

It's the userbase. Steam works well enough, hasn't changed really at all in years (a feature in and of itself), and has mostly everything a user would ever want or need.

Why then install an alternative client?

Source: I tried to compete with steam once. Tech was better. Nobody cared.

I wouldn't even say Steam works well. The UI is laggy and clunky, the mobile app is a joke (literally worse than the web version). But it's good enough, it beats learning something new, especially since all game launchers seem to have some flashy custom UI instead of standard widgets.

I think Steam works very well. I heavily use in-homestreaming and big picture mode on my shield and it offers a nice experience that I've yet to see emulated elsewhere. I usually have a browse in the store and watch trailers on the TV before launching my game.

Remote Play is fun on games that support it.

And it runs on osx, linux and windows.

And then theres Broadcasting, chat. Its a heavily featured launcher, and offers way more than some of the alternatives out there.

> well enough

I had all the same gripes you do, believe me. I face similar issues with Steam. Nonetheless, people don't care. It works well enough.

Those figures are just the standard rate - there is no reason to believe the Microsoft / EA / Ubusoft are paying the same as everyone else.

Valuations are set by whatever the last found of funding was. But when was the last time Value took money?

I feel like that number should be much, much higher.

Activision was just bought for nearly 10x as much, IIRC.

Is this just because estimated valuations of private companies are much more grounded in reality than speculation on public tech stocks has been?

They no longer take 30% of the bigger games like GTA V, but announced a more modest 20% after a certain amount of revenue.

With 8 billion people on the planet and many people with Internet access these days I'm surprised there aren't like a billion people on Steam.

most of the biggest games in the world aren’t on steam

Because 1 game like fortnite makes more money than all of steam.

There's absolutely no way this is true.

Just checked and it's close. Steam is estimated to have made 7 billion in revenue in 2021 and Fortnite alone made 6 billion in revenue in 2021.

Estimated based on whose ass?

I don't know how this could remotely be estimated given both the steam store and marketplace, the various contract tiers based on prior agreements, grandfathered contracts, etc.

It's estimated by SteamSpy and such: https://www.vg247.com/steam-4-3-bilion-revenue-2017

Of Valve's 8~ billion revenue they gross only 15-30% of that while Epic has far higher margins on their ~6 billion revenue.

It's estimated due to the fact that vast majority of that 7 billion dollar revenue comes from just a small handful of games. Looking over VG Insights, almost half of all video game revenue comes from just 50 games (out of approximately 10,000 games released on Steam per year).

Oh it is. Either Valve is severely undervaluing their company at less than 10 billion dollars while Epic is worth 20-30 billion... or it's true.

and while steam was the only app store for pc that mattered for 15 years there’s more players in that space. valves only future in game distribution is to lose market share to epic store, microsoft store, battlenet, origin, gog, etc

> taking a 30% cut of all sales

So four games like Fortnite make more. There are a lot of games on Steam.

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