This paper examines two questions: what is the role of active users or prosumers-i.e. users who consume as well as produce-in the transformation of a software ecosystem during its lifespan, and how does a digital marketplace transform into an ecosystem. This approach departs from the extant literature where consumers of an ecosystem are often treated only as passive participants. In this study, the role of prosumers is studied by portraying the transformation of Steam, by Valve Corporation, and discussed how it fits in the current field of software ecosystem research as well as what has been the impact of prosumers in its transformation process. The results from this case highlight the importance of users' active role in the evolution. Besides the discussion on the status of prosumers and the ecosystem evolution, the inner structure of this ecosystem is highlighted in the findings.
As the recent literature has often emphasised, different kinds of ecosystems have become
the most discussed conceptualisation for understanding and explaining how the modern
networked business world works. In the software industry, the ‘software ecosystem’
concepts and their descendants have become a liveable research field. Software ecosystem
research seems to diverge into a few main groups [
As pointed out already in the seminal paper by Moore [
The previous work has addressed, e.g., evolution of open-source ecosystems [
Thus, this study answers the call of more empirical studies on this area and focuses, firstly, on the following research question: RQ1 How does a digital marketplace transform into a software ecosystem?
In addition, the role of consumers in an ecosystem is often neglected. While their
presence is acknowledged [
Therefore, secondly, we address the following research question:
To answer the presented questions, we use a qualitative analysis of multivocal
literature [c.f. 36] regarding Steam and its evolution. We document the birth and evolution
of Steam, a digital distribution platform developed and operated by Valve Corporation
(in the following ‘Valve’). Valve was established in 1996 by Gabe Newell and Mike
Harrington as a videogame enterprise. Since its initial inception Steam has evolved
from an update tool for a few games to ‘digital distribution platform’ which at any given
time has over 10 million concurrent users [
This study aims to answer to the request of more empirical analyses of different
kinds of ecosystems and their evolution [e.g. 10, 17]. Based on the literature analysis
of the software ecosystem literature by Manikas [
We attempt to show how it was not a single decision to become an ecosystem, but a series of conscious decisions, changes and afterthoughts in Steam and other factors around it that led to its current status as a definitive marketplace-driven ecosystem for PC gaming. As an example, along the way we will see how Steam itself and its components, not once but in several occasions, started their lives as specific tools for some purpose but have been expanded to more ambitious purposes later in their lives. In addition, this shows the role of consumers—or to be more exact, prosumers—in this evolution. The results contribute to the literature of software ecosystem evolution and diversification of the research by presenting an empirical analysis of a certain ecosystem and by bringing to light a previously underrepresented actor of the ecosystem.
The remaining of this paper is structured as follows. Section 2 discusses shortly on related work and the motivation behind this study. Section 3 presents details on the research approach used in this study and the rich description of the case subject is given in Section 4. It is followed by a discussion in Section 5. Finally, Section 6 concludes the study with some proposals for the directions of future work. 2
As the recent literature surveys have shown [e.g 27, 40], software ecosystems have
become an active research topic in the computing discipline with hundreds of studies.
While there are a dozen definitions of what constitutes an ecosystem [
As observed by several authors independently [
As pointed out by Manikas [
Plakidas et al. [
Digital games are software products, and are therefore an important part of the software industry. The main difference between these from our perspective is the end use, general software is intended to be a tool or service used to fulfil a specific task. Contrary to this games are sold as entertainment, a voluntary action done for pleasure. [specifics at 22] Traditionally, distribution of games has been using the creator-publisher model, especially when games are distributed in physical format. Nowadays, with the advent of digital distribution, a growing number of games are published through digital stores independently by the creators, bypassing the publishers.
Steam was one of the first digital storefronts as it was announced in 2002 and
published as public beta on January 2003. In example Apple’s App Store and Android
Market (now Google Play) were both opened during 2008 and Apple’s iTunes added
store-features on April 2003 [
After this development story, we highlight the role of previously largely ignored
ecosystem actors, consumers and especially the prosumers. In this paper, we follow a
definition used previously on games and gamer related research by [
As noted, research papers related to Steam and its history turned out to be surprisingly
few in numbers. In practice, this means that we found one Master’s thesis by Shen [
During the data gathering period the non-academic sources were searched by using Google’s search engine. Search strings were formed case by case. In the beginning they were broad and general (e.g. "valve + steam + history OR development") and refined for specific events or features (e.g. "valve + steam + workshop feature"). The academic references were sought by using search engines by ACM, IEEE and Google Scholar. As both, Valve and Steam are common words in the English language, all the searches used ’Valve’ and ’Steam’ together, but results still contained lots of papers from non-related fields. For this reason, the word ’game’ was added to the base search string. Therefore, the basic searches were started with strings like "valve + steam + game + history" and "valve + steam + game + development". In both cases additional or clarifying sources were gathered by following citations and references.
The search criterion was to find sources where Steam’s development was either the main topic or important milestones were reported and possibly clarified by people from Valve itself. Every possible branch of the story is not presented here, as our inclusion criterion dictated that we exclude material that has not attributed to the expanse of Steam. From this multivocal literature, we constructed the story presented shortly in Section 4.
In the following, we will present the story of Steam so far through its five distinct phases. The first part presents Valve’s development before Steam, the second tells Steams firststeps, the third describes Steam as a digital store and the fourth and fifth sections discuss Steam as an ecosystem. At the end of this section, a summary of the birth and evolution of Steam is presented in table 1. 4.1
Development of Valve before Steam (1996–2002) The story of Steam starts with the foundation of its creator, Valve Corporation (originally Valve Software) in 1996 by Gabe Newell and Mike Harrington. In its early years, Valve concentrated on creating a multiplayer first-person shooter Half-Life, which they released in 1998. The distributor for this release was Sierra Entertainment and the core engine was licensed from id Software.
Importantly for their future, Half-Life included on its release also the level-design tool Worldcraft and software developer kit (SDK) for the players to create their own content and modifications. These tools led to popular modifications by fans, and in turn Valve hired them to turn the modifications to standalone games or purchased rights to work on them (e.g. Team Fortress Classic, 1999 and Counter-Strike, 2000).
During these early years updates for games were distributed as executable files that
you could download from either the game creator itself or from a gaming related site
that distributed them. This decentralised method of updating games led to situations
where the player base was divided in groups that had different, incompatible versions of
the game. This caused problems especially if an update was new or a game was updated
several times during short time interval. Players with the wrong version of the game
were not able to connect to the game servers, and this caused outcries and diminished
the playing experience. [
To solve this problem Valve, whose games were popular multiplayer games,
envisioned a tool that could be used to distribute updates for their own games, and also
included additional features important for their games like anti-piracy and anti-cheat
capabilities. During the process the digital store was added to the plan. They approached
companies that had experience with creating similar kinds of network services (e.g.
Microsoft, Yahoo! and RealNetworks), but they were turned down. Instead of abandoning
the plan, they decided to create Steam by themselves. [
Steam as a Valve’s Tool (2002–2004)
Steam was officially announced at the Game Developers Conference on March 22nd,
2002 by Gabe Newell6. In this initial announcement Steam was labelled as a broadband
software delivery technology [
for the then upcoming Counter-Strike 1.6. After this period Steam was released on
September 12, 2003 [
An initial release on Steam was not mandatory for all games offered by Valve, but
this changed in 2004 with the release of the much anticipated Half-life 2, sequel to their
original hit [
Within this period, all the games available on Steam were either created by Valve or Valve created them in cooperation with other studios. Additionally, during this period Valve also released their game engine Source for third-party developers. Valve’s own games using this engine were popular and thus helped to spread Steam among the players, but Source was one of the first tools for game developers that also gained fame for Valve and their new service. 4.3
Steam as a Digital Game Store (2005–2009)
During this period Steam went through important milestones which would shape its
future. First, in late 2005, other game developers started to sell and distribute their
games through Steam. The very first non-Valve -related game on Steam was the Rag
Doll Kung Fu by developer Mark Healey [
The next major milestone for Steam’s growth and emerging status came during 2007
when major developer-publisher studios like id Software and Eidos Interactive added
their games to the catalogue [
For third-party developers Valve launched the Steamworks on May 2008.
Steamworks is a software development kit, a collection of tools and application programming
interfaces, that allowed other developers to publish their own games in Steam without
Valve being part of the integration phase. Before the Steamworks Valve had to be part of
the process and act as a publisher for third-party games as they were the only one with
access to the Steam’s databases and other features [
Steamworks initial release eased the access to Steam and its features for
thirdparty developers. Additionally Steamworks made it easier for them to implement digital
rights management and crucial features for multiplayer games. This, in tandem with
Steams rising in popularity in general, furhter increased other companies’ interest in
supporting the platform. Since its launch there have been several updates on Steamworks,
for example during March of 2009 the support for downloadable content (DLC) and
matchmaking were added to it. [
Steam as Software Ecosystem (2010–2014) Steam had already been a community for gamers as the service connected them to each other and gave them a voice in the form of forums, chat features and by game reviewing. During this period gamers got more tools and opportunities from Valve to exercise their creativity and the voting power of their wallets.
Steam Workshops was added to Steam in October 20118. With this addition users could create and share content they had created for games that could be expanded or modded by the users. In 2012 players got Steam Greenlight, a service with which they could decide by voting which games Valve would add to the Steam store. In the course of this year, non-gaming software was also added to steam, in a sense ending Steam’s run as service only to the gamers. Family sharing features were added to enable content/game sharing among family members.
In March of 2013 the Steam Early Access9 was launched. Under this service players
could buy games that were still in various states of development and give feedback to the
developers10. During 2014 the Steam Curators were introduced as part of the Discovery
1.0 update. The Discovery update’s aim was to help buyers find games from Steam as the
influx of games was making the process difficult by sheer volume. Curators are people
or groups of people that make recommendations and reviews of games to other users of
the Steam. [
Signs of rising ambitions of Valve were shown as in 2012 they announced SteamOS, a Linux-based operating system and Steam Machines, console-type gaming devices for running it. The first prototypes of Valve’s virtual reality headset were showcased during Steam Dev Days 2014. Steam Dev Days was supposed to be a yearly event, but so far it has been held only twice, during the years 2014 and 2016. 4.5
Steps beyond Software Ecosystem (2015–2018) Up to this point Steam had been a platform for buying and playing games, a service that connected gamers to game developers and to each other. On the purely digital content delivery front, Steam expanded its offerings to include movies and television shows for streaming [e.g. 32]. Another feature catering for the gamers in Steam was the Steam Refund11 service, which could be used to request refunds from purchases made through the Steam storefront.
But in the fourth quarter of 2015 the previously announced hardware projects started
to materialise. SteamOS and Steam Machines, along with the Steam Controllers
(gaming controllers) and Steam Link (digital media player for streaming Steam content to
television sets) were released for consumers at this point. [
Valve’s departure from digital content continued when they, in cooperation with
HTC, developed the HTC Vive virtual reality headset [
play-games-still-in-development
10 https://store.steampowered.com/earlyaccessfaq/
11 https://store.steampowered.com/steam_refunds/
released the OpenVR software development kit to help VR content creators tackle the
interoperability issues of various VR headsets. [
In the following, we will first discuss the key findings regarding the research questions of this study. It is followed by a discussion on the recent emergence of the ‘ecosystem of ecosystems’ and how these are manifested in Steam. The final subsections discuss the key observations and the limitations of this study.
RQ1: How does a digital marketplace transform into an ecosystem?
It almost seems that Steam’s evolution has followed quite ‘natural paths’, emerged from
the needs of the customers. That is, there was no visible plan to create Steam as an
ecosystem from the fist day; however, through distinct phases it has evolved into its
current shape. Steam started as an update tool, but as we have illustrated it has since
grown far beyond its original scope. Many have already called it an ecosystem, like
McElroy [
The same trend continues when Valve announced new additions to the service that
they call the Ultimate Online Game Platform and the Ultimate Entertainment Platform
[
From a pure statistics viewpoint, as a distribution ecosystem, there has been aggressive growth. In the beginning of 2002 Steam started with one game from one company, at the end of 2017 it had 7,599 new released games and in the first six months of 2018 there are already over 4,600 new additions to the catalogue. This catalogue is serving a user/customer base of over 125 million users with a record of 18 million concurrent users.
Steam was born as an idea for updating software produced and sold by one company.
Now we can look at it and see it as a multifaceted and multilayered ecosystem. On the
one hand, Steam can be characterised as a monarchistic organisation where value is
created by hybrid contributions distributed over a common platform [
Finally, it is worth to note that not all software ecosystems were just born as an
ecosystem. While, for example, Google’s Android operating system and its marketplaces
were built as an ecosystem from the beginning, this study reported a different kind of
story: the transformation of a software tool into an ecosystem. When compared to the
transformation of a closed software product line company towards an open platform
ecosystem company by Hanssen [
RQ2: The role of users
In the field of software ecosystems, consumers are excluded as they are the ‘plankton’
that keep the ecosystem alive as formulated by Jansen and Cusumano [
In Steam, consumers are not voiceless or powerless. In Steam the plankton can
become a ‘modder’ and provide extension(s) to a game using the Steam Workshop
features. Also, they can participate in a game’s success or failure by participating in their
development while they are in the Early Access program. Other means of participation
are the more traditional ways of writing reviews or becoming a curator who recommends
games to others. So they are an active part of the ecosystem in several ways, not just
by being the source for revenue to be shared by the business side of the ecosystem.
Every consumer taking part in the Steam ecosystem has a voluntary chance to become
a prosumer [
As mentioned, one way of showing their power is the usage of the reviewing
feature [
The Early Access model introduced in 2013 has granted active consumers a way to
participate in the game development process. This opportunity has since been seized
by both the prosumers and the game development companies, as currently there are
over 200 games offered for the player/prosumer communities through the Early Access
service. Another new feature, the paid mods created by other gamers, that seems to be
intended to embrace the prosumers received a different welcome. Instead of adoption,
the community of gamers and modders rallied against paid content in the Workshop. For
example on change.org, 132,458 voters petitioned for the removal of this feature, and
in this case gamers won. Valve (and in this case Bethesda, another gaming company)
12 E.g.
https://www.theverge.com/2017/9/20/16336290/valve-steam-reviewbomb-charts-abuse-update
jointly removed the feature.13; 14 These events are covered more in-depth in the article
by Joseph [
As a final note, the role and involvement of consumers in software ecosystems should be studied more. Previously, consumers have been mainly seen adding value to the ecosystem by verbal or numerical reviews [e.g. 14] or as the aforementioned ’plankton’ that keeps the ecosystem alive by providing the financial food to it. The case of Steam shows that the role of consumers—or prosumers—can be more important than previously presented in the software ecosystem literature. This might be due to the fact that games are entertainment software, which gamers use voluntarily to have fun. Bluntly this means that for the gamers it is not enough to just get the software(game) as it is in their role during working hours as workers using productivity software. If, as gamers, they are not getting value for their money and time, they will complain in reviews and on other forums, or use the Steam Refund service to get their money back instead of blowing through the game like they might be doing during working hours with productivity software. This also opens interesting research and development avenues for other kinds of ecosystems, especially in case of marketplace-driven ecosystems. 5.3
Ecosystem made of ecosystems The digital distribution service role of Steam is the backbone and the root of the ecosystem created by Valve, with estimated profits in “high number hundreds of million dollars”15. This part of the ecosystem is partly for business-to-business and partly for business-to-consumers transactions. All earnings always involve Valve as everybody pays a fee to Valve for their sales inside the ecosystem. Revenue to the third party companies, and to the other content producers, comes from the sales to other companies or to the customers. There also exist sub-ecosystems inside the overall Steam ecosystem. These can be divided into several classes. There are the per game ‘bubble-ecosystems’ created around individual games where creative gamers have created new content or mods to some popular game using the available tools and Steam Workshop features. Then, some games have their own internal economies and virtual currencies, creating another layer of ecosystems. For example, Team Fortress 2 and Counter-Strike: Global Offensive have microtransactions for cosmetics items. In some of these games players can also trade items they have gathered, which has created in-game markets and in some cases third party market sites. There are also hardware-specific and bound ecosystems inside Steam, like Steam VR, which is bound to virtual reality hardware and APIs, thus being separated from the general PC entertainment software available in Steam.
Other bubbles are formed around the productivity software sold in and distributed through Steam. These could be seen as business to business ecosystems coexisting with gaming software, which are part of the business to consumers ecosystem. 13 https://www.change.org/p/valve-remove-the-paid-content-of-the-steamworkshop 14 http://steamcommunity.com/games/SteamWorkshop/announcements/detail/ 208632365253244218 15 https://www.forbes.com/forbes/2011/0228/technology-gabe-newellvideogames-valve-online-mayhem.html
There is interaction between these separate layers and bubbles. The big question for
Valve has been how to control these bubbles and the virtual economy in the overall Steam
ecosystem. To tackle some of these issues, Valve hired economist Yanis Varoufakis as
the economist-in-residence [
Key observations, limitations and future work
1. Users have had a clear role in the evolution of the Steam ecosystem. This contradicts
the extant literature, which often understates the role of consumers in the ecosystems.
While Steam as a ‘video game ecosystem’ might differ with its key characteristics
from other kinds of ecosystems [c.f. 13], this, nevertheless, hints that consumers as
active participants – i.e., prosumers – of an ecosystem should be addressed more.
2. The evolution story of Steam has followed quite ‘natural paths’, which enriches our
understanding of the transformation and birth of software ecosystems. While the
previous studies have reported the transformation starting from technical changes [
As with all studies, there are certain limitations restricting the validity of this study and generalisation of the results. First and foremost, we are looking at Steam and its history as outsiders, relying on clues and scraps of information coming from third-party sources. As so, it might be that we are missing some parts of the story and, thus, future work should verify these results as well as add more details by interviewing the personnel related to the development of Steam.
Secondly, generalisation of this study is remarkably limited to this kind of an entity. Steam is an interesting research subject due to its popularity, being the first and the largest gaming ecosystem; however, it is hard to generalise from such a case.
In addition to the already proposed issues for further studies, Steam also offers an interesting study subject to understand the value creation and caption in an ecosystem. Thus, by studying Steam, a more comprehensive picture of ecosystem value creation mechanisms could be created. Furthermore, Steam and its rival gaming ecosystems could also serve as case study subjects for further studies aiming to understand the competition between ecosystems. For example, Valve’s games currently cannot be found from, e.g. GOG.com by CD Projekt, while some of CD Projekt’s games can be found on Steam.
Also, in general, marketplace-driven ecosystems offer an interesting cases for the study of how the power of different actors are manifested on them. For example, in the case of Steam it is privately owned and solely under control of the mother company Valve and its decisions, but so far they seem to have been distributing their power to other actors, e.g. the power to accept new products into the ecosystem has been moved from Valve to consumers and then from this player curated model to simpler paid-entry.
Another future direction would be to observe and study how ecosystems respond
to an emerging competition. In case of Steam, there are, for example, two emerging
competitors in the form of Discord and Tencent. Discord is a popular communication
app with 130 million users [
In this work, we documented the birth and evolution of a gaming software ecosystem: Steam by Valve Corporation. Steam started its life as a digital tool to distribute digital updates for games. Currently Steam does that and has also crossed from totally digital phenomena to the physical side with related hardware products. Steam can be easily described as a software ecosystem and this study discussed the distinct evolution phases of it and especially how the end-users have their own active and power-wielding position inside it. The study contributes to the field of software ecosystem research by responding to the call of more work on different kinds of software ecosystems. Furthermore, the case of Steam emphasises the need to discuss the role of consumers in the software ecosystems more, as well as to study the emergence of ‘ecosystem of ecosystems’ in large ecosystems.