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Valve to turn Steam into global digital film distribution platform

May 27, 2016  | Subscribers Only

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Valve Corporation and Lionsgate have signed a partnership agreement, under which Lionsgate will make films available for retail and rental distribution though Valve’s popular online digital store Steam. The available content will include titles from Hunger Games, Twilight, Divergent, and Saw franchises, among others. The companies have not provided the exact date the agreement comes into effect, but have stated their commitment to expand the partnership worldwide in the future.

Our analysis

The Valve Corporation is one of most well-known and highly regarded consumer brands in the video games industry. Since releasing its debut title in 1996, Valve has drastically expanded the scope of activities from being solely a games developer. In September 2003, Valve launched what would later become their most successful venture, their digital distribution platform Steam. The platform kept a strong lead over the competition, and according to Valve today numbers more than 125 million active users from around the globe. It is worth noting that Steam platform tends to be used as a central hub of PC gaming entertainment among individuals, where users frequently spend considerable time being exposed to the store.

Valve, since August 2011, has also hosted some of the largest esports events in the world. The company also created a number of the more popular esport titles played today, and the move into hosting competitions, therefore, can be interpreted as a logical extension of Valve’s line of games rather than a step in a new direction entirely. Valve continually develops this “eco-system” for their players, thus keeping the player base interested and involved in their products.

On 19th March 2014, following this direction, Valve released a self-produced video documentary looking into the lives of those who take on esport professionally. Using Steam as the platform for film’s distribution, the store became involved in selling more than just games, with a new video category on the home page. The selection was gradually expanded and today numbers 166 titles on offer, with content ranging from niche game-oriented short films, to some feature length titles. In September 2015, with the release of Mad Max video game, Valve added all the movies from Mad Max franchise including the latest instalment Mad Max: Fury Road (2015). The idea was to benefit from each piece of content creating mutual interest in one another, and also to add value for the customers by making the selection readily available at the store. Such strategy is likely to be later repeated for Lionsgate titles, as at present there are already Lionsgate commissioned games.

November 2015 marked another important development, as Valve has released its own line of hardware. The line included a range of game consoles designed to run Steam as a standalone device; and a cheaper streaming device capable of projecting Steam onto a TV, from a PC on the same network, somewhat resembling Chromecast in its functionality. Furthermore in April 2016, in collaboration with HTC, Valve has released its own Virtual Reality headset. All these devices form an extension of the existing Steam eco-system, as for example, the interface of the VR platform is being powered by SteamVR, a version of Steam modified for VR experience. This development reinforces the strategic advantage of broadening the offerings on the platform, encompassing other home entertainment activities of its users.

Lionsgate has demonstrated willingness to make their content available through more platforms for digital distribution, and also to leverage content assets in new, innovative ways. Recently the company has invested in VR, and commissioned movie themed video games, investments which have clear synergy with what Steam has to offer.  Steam, being a global platform, will also allow Lionsgate to make their titles available for purchase in any territory worldwide.

Historically, Valve’s scope of activities has remained exclusively within the video game industry. The video content selection has been closely correlated with games, indicating that Steam could not have been strictly considered a film distribution platform. Now, however, it is clear that Valve is turning video offering into a separate, independent arm of the store.

While the steam video platform is slightly more resilient than a dedicated PC-only video store, PC has historically been the least successful platform to get customers to pay for video content. The successful growth of this venture will be heavily influenced by Valve’s ability to provide content on devices other than PCs, most importantly those that make use of the main screen in the house. The success of this venture will therefore be correlated with the uptake of the hardware line, which is partially suited for this. Valve’s VR headset may also play an important role, as it has the potential to become a key media consumption device for Steam users.

The main difference that separates Steam from other PC focused video stores that have failed to gain popularity, lies in the fact that Steam doesn’t need revenue from video sales to survive, and can benefit from cross promotion between games and film titles. Strategically Steam can only stand to benefit from incorporating more products into the offering. Valve and Lionsgate show great potential for beneficial collaboration, and it can be expected for the present partnership to grow beyond the current agreement.

This article has been updated from the previous version published on 26th May 2016.

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