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Overgrowth dev Wolfire Games files antitrust lawsuit against Valve over Steam fees

"Valve abuses its market power to ensure game publishers have no choice but to sell most of their games through the Steam Store, where they are subject to Valve's 30 percent toll."

Overgrowth and Receiver developer Wolfire Games has filed an antitrust lawsuit against Valve after taking issue with the "extraordinarily high cut" of revenue it takes from Steam developers and its alleged "unassailable" monopoly on PC game distribution.

The lawsuit was filed on April 27, 2021, by Wolfire Games and two other plaintiffs called William Herbet and Daniel Escobar, both of whom claim Valve's "anti-competitive practices" have led to them paying "supra competitive prices" for PC games. 

It claims that Steam owner and operator Valve currently dominates the distribution of PC titles, with approximately 75 percent of PC games sales flowing through Steam, and alleges "Valve uses that dominance to take an extraordinarily high cut from nearly every sale that passes through its store."

The lawsuit is referring to the 30 percent commission that Valve levies at Steam developers and publishers, which according to the latest GDC State of the Industry survey only a small fraction of developers feel is actually justified.

Of course, it is possible for some big-earning developers to take a greater cut on Steam. As part of Valve's tiered revenue system, when a game makes over $10 million on Steam, the revenue share for that title will adjust to 75/25 on earnings beyond that point. At $50 million in revenue, the split will then adjust to 80/20. 

Still, that 30 percent fee remains the standard for many Steam developers, and was until recently viewed as the industry standard until Epic Games moved the bar with the launch of the Epic Game Store, which offers developers an 88/12 percent revenue split. Microsoft also pledged to follow suit earlier this week, and said PC developers using the Windows Store will be handed 88 percent of revenue as of August 1, 2021. Both Google and Apple have also made moves to reduce their revenue share for smaller developers on their respective storefront. 

"Valve is able to extract such high fees because it actively suppresses competition to protect its market dominance. Many other stores have tried to charge lower fees, in the range of 10-15 percent, but they have all failed to achieve significant market share," reads the lawsuit. 

"Valve abuses its market power to ensure game publishers have no choice but to sell most of their games through the Steam Store, where they are subject to Valve's 30 percent toll."

The lawsuit also alleges that Valve has "illegally monopolized the market for PC desktop game distribution" through Steam, actively "distorts competition through the Steam Key price parity provision," and uses Steam's discovery algorithm in combination with its price parity requirements  to "artificially inflate prices across the industry."

It also notes that other "deep-pocketed" companies like EA, Microsoft, Amazon, and Epic have all failed to mount a sufficient challenge to Valve's dominance and "anti-competitive restraints," which Wolfire claims is evidence that Valve's monopoly power is "virtually impossible to overcome."

Wolfire itself has some digital distribution experience. The company established and ran the first Humble Bundle back in 2010 before spinning out the project into its own entity.

Humble Bundle was in part the brainchild of Wolfire co-founder Jeffrey Rosen, who according to LinkedIn left the studio in 2011 to take on the role of CEO at Humble Bundle, which expanded to include a dedicated storefront in the Humble Store and a publishing arm called Humble Games.

Rosen stepped down from his role as CEO in 2019, a couple of years after Humble Bundle was acquired by IGN parent Ziff Davis, but remains an advisor.  

As it stands, Wolfire is seeking monetary damages including attorney's fees, treble damages, and another payout of an "amount to be determined." It is also requesting injunctive relief, including a permanent injunction barring Valve's alleged unlawful restraints -- which would presumably require a pretty seismic reworking of the entire Steam business model.

The full 78-page lawsuit is available to read over on Scribd.

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