Published on September 2nd, 2011 | by Queso1
EA vs Valve: Digital Distribution Debacle
I was talking to Boman a few days ago and mentioned an email I received from Amazon.com about a $10 credit (which I had no idea about, but won’t complain). I was thinking about some must have games this holiday season, and boy are there a lot! I decided I would use that credit to get Battlefield 3, but remembered that anyone with common sense would play it on PC. So, why not just get it on Steam? Oh wait . . .
Yeah, I had a lapse in memory and forgot that Battlefield 3 will NOT be coming to steam. How could I forget? It’s only been the hot topic amongst all Steam users and many others. Needless to say, that upset me and served to fuel a bit of anger towards Electronic Arts (EA). But, the more I look into it, the more I wonder whether I should be upset with EA.
Initially, I was thinking I’m not sure I understand EA right now. That, or I understand them very well. It appears to me that they are becoming (or have been for some time) quite greedy. We’re talking about a company that has seen great success in the past few years. EA has held licenses for NASCAR, NFL, NHL, FIFA, and the AFL. Both NASCAR and NFL are exclusive licenses, while the FIFA license includes exclusive rights to several leagues. FIFA11 sold more than 2.6 million units in North America and Europe, generating over $150 million at retail and making it the fastest selling sports title of all time.
During a time when many companies were losing revenue, EA saw a 15% increase in total revenue between fiscal year ending March 31st 2008 and 2009. Now, they are trying to find more ways to make more money, instead of doing what is in the best interest of consumers. For instance, not long ago, EA Sports launched Season Ticket, a subscription service granting subscribers exclusive content to five sports titles. While then EA Sports’ President Peter Moore stated that this is not intended to bypass retailers, that seems like the next logical step. Especially with Origin allowing EA to handle the entire distribution process of its products and control all revenue. And this seems to be the main issue.
What many ask is, “Why venture into the digital distribution realm which Steam now dominates? EA hasn’t had problems with Steam before.” Why not? It is a very appealing market. There is “unlimited” territory and consumers are continuing to flock to digital releases. Much like CDs, the PC games section is shrinking in every retailer. Movies are another example with business models like Netflix becoming more successful. And, if we look at those financial numbers again, we’ll see that EA’s net income has been in the red for the past three years. EA needs to start turning a profit and consumers are turning towards digital, so there’s an opportunity there.
For years, Valve has been taking advantage of this channel through Steam. It isn’t like EA had no presence in digital distribution of PC games—EA has distributed its own PC content digitally for many years under several different names (EA Link, EA Store, etc.), while at the same time, having many of their products on Steam. It seems that is no longer enough.
Valve and Electronic Arts have had a great relationship for years now. Following the resolution of the conflict between Valve and Vivendi, EA stepped into the scene in a partnership that would bring themselves and Valve much needed resources. EA became the distributor for Valve’s retail releases, even helping in the development of The Orange Box for PS3, while Valve started handling its own digital distribution (as well as providing a distribution medium for EA through Steam). All was going well: The Orange Box made it to console, EA games were selling on Steam, Valve resolved its issues with Sony and EA continued to distribute. Then, something happened. Origin was launched and EA titles began disappearing from Steam.
People really took notice when Crysis 2 mysteriously disappeared from Steam in mid-June. When people realized, questions were asked and EA responded by saying this “was not an EA decision or the result of any action by EA.” They stated Valve pulled it down due to a violation of an agreement saying that 3rd parties cannot sell DLC directly to customers of Steam. A little over a month later, another major title, Dragon Age 2, was removed from Steam just before new DLC was released. Again, EA pointed at the “restrictive terms of service.” A quick Google search of “Steam DLC Policy” shows that EA isn’t the only company that has problems with Steam’s terms of service. Minecraft creator, Markus Persson, talks about why Majong could not enter into an agreement with Valve for distribution through Steam. He says, “being on Steam limits a lot of what we’re allowed to do with the game, and how we’re allowed to talk to our users.”
The likely cause of this break-up is DLC. In a market which has seen revenues eaten away by resales and increased replay value, developers needed a way to achieve continued income. We are seeing developers (such as EA) use methods such as online passes to increase revenue. Before “online passes,” and now much more accepted by consumers, there was downloadable content. DLC has become a huge source of revenue and, judging by the current situation, what one would assume is the holy grail of both Valve and EA.
We may never know the EXACT reason for this conflict. Of course, the Steam fanboys say that it is EA’s fault, originally claiming that they were just pulling the games to make them Origin-exclusive and be “douches.” After EA started throwing out that Steam’s terms of service are restrictive, some began to say that EA intentionally violated the Terms of Service (ToS) to have Valve pull their games, so EA could make them Origin-exclusive. Some people have even said that steam doesn’t have a “restrictive policy,” pointing to Bioware (fully owned by EA) distributing DLC directly to consumers and still having games on Steam. Then, there are the EA fanboys (if there is such a thing) who are saying . . . I really don’t think there are any EA fanboys. But, EA has made several statements regarding the situation, placing the blame on Valve’s shoulder. In response, Valve has said nothing. Why would they? The fanboys are doing just fine.
Seeing that several EA games, including Crysis 2 and Battlefield 3, are still available through other digital distributors, I am inclined to believe that Steam’s ToS did force EA titles out of the distribution channel. I also believe that Gabe Newell is telling the truth when he says that Valve wants EA games on Steam, but it is likely that EA is in no rush to negotiate, preferring to push their own digital distribution channel. In the end, Steam will continue to run with a few less games, while EA will continue to push Origin with its own titles.
Valve wants to be paid for distribution through Steam. EA wants to be paid for the DLC for its own games. I can’t fault either company for wanting to be paid. If Valve wants to have all DLC distributed through Steam in order to make extra money, that’s something they have to work out with EA. It would be nice if they do so soon, because I don’t want another gaming client for only one game. I’ll just switch my pre-order to something other than Battlefield 3 for now.