According to Valve CEO Gabe Newell as reported in Forbes, Valve is more profitable than Google and Apple per employee.
Since Google generates $350,000 per employee and Valve has 250 employees, that would mean that Valve generates at least $87.5 million in profit yearly.
It’s an interesting number, given that Valve specializes in the PC games market, which supposedly is dead compared to social and iOS games, according to the experts.
Valve was started in 1996 and has made it big in two ways. One, they are the creators of the Half Life franchise, one of the greatest franchises in PC game history. Two, they were annoyed by the distribution model of PC games where you had to partner with a publisher to get your games on retail, who would take at least half of the developer’s money.
So, they created Steam, a digital distribution platform for PC games. They were the first to offer developers 70% of the revenues, as well as to sell game MODs and virtual items for games online. The result is that Steam now has 30 million customers and controls 70% of downloadable PC market, according to Forbes.
I think that 70% number is completely off (not saying it’s made up, but show me the money), given how much in sales Big Fish Games, Wild Tangent, iPlay, GameHouse, and the fact that all these companies are private and don’t share numbers.
But, Valve and Steam certainly is the poster child of all that is right in the PC games world. Unlike companies like Zynga, Valve hasn’t raised a cent in funding. Meaning, when the pundits estimate that Valve’s valuation is $2 – 4 billion and Zynga’s $7 – 8 billion, it has more meaning since it’s totally based on actual numbers and not investor sentiment.
Valve’s Achilles Heel, ironically, may be the fact that it is mostly focused on PC games (note, Steam did expand to Mac in 2010). Digital distribution of games is taking over every game device, be it iPhone, Android, Xbox, or your TV, and cloud-based services are starting to pick up. Gamers no longer care what device they play games on and the PC is no longer the dominant games platform (Apple’s iOS is, as I predicted earlier this year).
Given’s Valve’s path so far, I’m very interested to see where they take Steam next.