How to crack Steam’s monopoly in digital games distribution

There's been a lot of talk recently about Steam having a monopoly in the digital distribution of games. Well, with about 60% market share that may be even true in the realm of PC and Mac games. However, the market is stirring. The digital distribution business is just too interesting and attractive a market to let one have it all. Traditional retailers, publishers and media companies are gearing up to get their share.

While I didn't exactly count it seems that a new digital distribution platform is popping up every month. It will be interesting to see how well all the newcomers will fare and how they are going to crack Steam's monopolistic market stance. And Steam isn't exactly sleeping. They just relaunched the entire service with new features and UI.

The service around digital distribution is getting more complex and involving. The introduction of more and more community features makes each platform even stickier. Assuming that this will increase consumer loyalty even further it will take much more than simply setting up a new digital distribution platform and providing a simple download service.

Instead, new competitors need to come up with a strong service, exclusive content and a host of comfort features like hassle-free installation or automatic patches to build a unique market positioning and to acquire and more importantly retain customers. There are examples that are taking different approaches to this: for example GamersGate is introducing its loyalty program with membership discounts and cash back concepts. Good old Games on the other hand seems to successfully build its own niche by focusing on gaming classics only. Additionally they are offering a strong service with uniform global pricing and by waiving any DRM.

Still, getting people away from Steam is not going to be easy. Probably the easiest option is to make users buy at multiple platforms.

Another growing issue is that there is no dedicated marketing space that brings together potential consumers with the new download platforms. Additionally, growing service complexity, privacy issues and different portfolios make it difficult for consumers to compare and choose. New services like www.deals4downloads.com attempt to close this gap but there is still way to go.

The digital market is just about to become really big. My guess is that in 2010 we will see some real movement here - both from business but also from the consumer side. There is lots of room in the market for new participants. There are many areas of the online shopping experience that need innovation and offer potential for a unique positioning. To just name a few that come to my mind:

-         The individual management of digital rights: consumers will want to resell, borrow or rent their digital properties as well.

-         Integration with social networks to fully use the potential of social gaming and user generated content.

-         Additional convenience features like fully automatic updates and installation, save game hosting and transfer, achievements.

And considering Steam’s monopoly; I don’t see it as a hindrance but rather I believe in the power of Schumpeter’s “creative destruction” that will see market, competition and innovation grow. In the end we, the gamers, will win :-)