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By this stage, Steam's supposed "monopoly" is a rather familiar debate. There's a range of people who engage in these conversations: those who outright deny the existence of Valve's monopoly, those who accept it, and those who accept it but are happy with the status quo. All of these viewpoints are valid, because the definition of "monopoly" actually differs depending on who you ask and where you look. And I don't just mean based on the interpretations of a layperson. First, let's go over the conventional understanding of a monopoly, compare it to an oligopoly, and then compare that to a cartel, so that we're all on the same page. A monopoly, conventionally and from an economics theory perspective, is a single seller that has complete market dominance. This means it's the only seller, and can abuse that position in order to raise prices. An oligopoly is similar, except the market is concentrated in a few companies, rather than just one. Finally, there's a cartel, which often exists off of the back of an oligopoly and has the added dimension of those companies coordinating in order to raise their profits. In fact, some of Valve's critics have gone on to accuse the company of being an oligopoly rather than a monopoly. Some have gone further, accusing the company (and other gaming storefronts) of engaging in cartel-like behavior. It's hard to make any argument for either of those being the case, but it's concerning that many would be so quick to dismiss monopolistic allegations. The important distinction here is that the legal definition of a monopoly, in many jurisdictions, often differs from the economic theory definition, and that's the case in the United States. This is actually a good thing, as it serves to protect consumers from companies that are functional monopolies, even if they aren't, strictly speaking, a monopoly. According to the FTC, Valve is a monopoly And the definition is a lot more loose than you may expect Idealistic arguments aside, the most important definition in every discussion surrounding Steam's alleged monopoly is the legal definition of a monopoly. Whether you agree or disagree with how the term is interpreted and applied as law is irrelevant, as the legal framework of the United States and any subsequent challenges invoking that definition are what will be used to decide a positive or negative outcome for Valve. According to the Federal Trade Commission, the definition of a monopoly is a lot more "loose" than most may expect: Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power. Courts look at the firm's market share, but typically do not find monopoly power if the firm (or a group of firms acting in concert) has less than 50 percent of the sales of a particular product or service within a certain geographic area. As you can see, the definition that the courts follow is very different from conventional consumer understanding, as a "monopolist" doesn't have to be the sole provider of a good or service to be considered one. In fact, stating that the courts "typically do not find monopoly power if the firm [...] has less than 50 percent of the sales" implies that a monopolization finding can be made in those conditions. The reason for this distinction is two-fold: in economics theory, a "monopoly" is not inherently a bad thing, though it often is. A monopoly gives a company significantly more power to control supply and set prices than it would ordinarily have in a competitive market, but that doesn't mean it acts on those capabilities to negatively affect consumers. That's why, under U.S. law, monopolization hinges not on exclusivity but on the abuse of durable market power. In other words, it's not about being the only player, but if the company abused that dominance to harm competition. Steam's durable market power in gaming Not even Amazon could break it Valve's market position in PC gaming is undeniably dominant. Various estimates suggest that Steam commands a vast majority of digital PC game sales, and one lawsuit even made the claim that Valve rakes in roughly 75% of all PC game revenue, largely thanks to the 30% commission it takes on each sale. That 30% commission isn't unique to Valve, though there's nuance to that. Epic Games waives the fee entirely for the first $1,000,000 in revenue, whereas Valve decreases the percentage for games that earn more money. Plus, a recent industry whitepaper from Rokky found that most game developers (72% of the 306 surveyed) believe Steam does function as a monopoly in the PC market. Tellingly, the vast majority of studios surveyed said over 75% of their revenue comes from Steam alone. In practical terms, this means many developers and publishers are heavily, and often overwhelmingly, reliant on Valve's store for their livelihood. Competing storefronts like GOG or the Epic Games Store exist, but under U.S. law, that's beside the point. As long as Valve has "significant and durable market power", it can be deemed a monopolist, even if there's nothing illegal happening. It's not for lack of trying by rivals, either, that nobody has broken Valve's iron-clad grip on gamers. Epic Games, backed by Fortnite's and Unreal Engine's billions, launched a high-profile challenger store in 2018, enticing developers with lower fees and showering users with free games and exclusive titles. Yet, years later, Steam remains the default. Even generous giveaways of high-profile games haven't broken gamers' entrenched habits, as users just pick up free games when it suits them, rather than completely switching to that competing platform. The network effects Valve has cultivated (friends lists, achievement systems, huge game libraries, mod workshops, and more) make switching costs high for consumers, not to mention the decades of game libraries people hold on the platform. Valve has a big first-mover advantage here because of that. Amazon's own gaming foray is a great case study, with the company's former Vice President of Prime Gaming, Ethan Evans, admitting defeat to Valve in a LinkedIn post. As VP of Prime Gaming at Amazon, we failed multiple times to disrupt the game platform Steam. We were at least 250x bigger, and we tried everything. But ultimately, Goliath lost. Amazon tried multiple strategies: it bought a small digital distributor (Reflexive Entertainment), integrated a games store into Twitch, and even launched the Luna cloud gaming platform. None gained traction. As Evans admits, Luna "went largely unnoticed" while Steam's "uncontested dominance" persisted, and he goes further to state that Amazon "underestimated the power of existing user habits." Gamers saw Steam as "a store, a social network, a library, and a trophy case all in one" and simply weren't going to abandon it for a new platform without a dramatically better offering. In other words, Valve's so-called monopoly endures not because of a lack of challengers, or because of shady practices, but simply because nobody is better. This "monopoly of quality" is reinforced by powerful economic barriers that aren't necessarily in Valve's control. It's not just that Steam's store is better; it's that its high switching costs (losing access to a curated library spanning multiple decades) and powerful network effects (the entire social graph of friends lists and communities) create a sticky ecosystem that rivals like Amazon simply cannot break with money alone. Somewhat comedically, one recently-certified class action lawsuit on behalf of consumers makes the claim that those alternative stores are cheaper for developers while offering "equivalent or better platform experiences." Amazon is listed as one of those alternative stores, yet it would appear that even the former VP of Prime Gaming at Amazon would disagree with that characterization. Indeed, as discussed above, Valve has drawn an unusually well-capitalized set of serious competitors with established positions in the PC game market and non-PC video game, software, and digital content distribution markets, including Epic, EA, Microsoft, Amazon, Discord, Ubisoft, Humble, GOG, and Green Man Gaming. These competitors have both undercut Steam on price—charging commissions in the 10-15% range—and on quality—offering exclusive games, equivalent or better platform experiences, and more. The grey area of Valve The question of whether Valve abused its position is all that matters Where things get more contentious is whether Valve has abused its dominance to unfairly maintain that position, as that's the crux of any legal monopoly question. Under U.S. law, having a monopoly isn't illegal on its own; it only becomes a problem if the company abuses that power to stifle competition or harm consumers. Valve's defenders will argue that the company earned its status by innovating and serving customers well, not through underhanded or predatory tactics. In fact, Valve has generally eschewed some of the more brazen tactics seen elsewhere, like paying for exclusive titles or forcing its platform onto users via an operating system. Steam won on PC largely by being the better product in the eyes of consumers. This is why many gamers remain comfortable with the status quo, noting that Steam's feature set and user experience outshine its competitors. You'll often hear gamers make arguments that Steam is good for gamers, and other services that maintain a similar dominance, such as YouTube, are in that position just by virtue of being better. With all of that said, it's not all positives for gaming's beloved giant. Critics and competitors have pointed out several Valve practices that do threaten to cross that line of monopolistic abuse. One major sticking point is the Steam's platform rules preventing price competition, though even that has been misinterpreted widely. In a legal filing, it was alleged that Valve has long insisted on a form of "most-favored nation" clause with game publishers. It claimed that if you sell your game on Steam, you aren't allowed to offer it for less on any other store, nor offer extra content on a rival platform as an enticement. This is only partially true. According to the Steamworks Distribution documentation, keys that can be redeemed on Steam are specifically subjected to this rule. Even going as far back as 2020, the wording of the rule still reads, more or less, the same as it does today: You should use keys to sell your game on other stores in a similar way to how you sell your game on Steam. It is important that you don't give Steam customers a worse deal. Occasionally it may make sense to offer your game in a bundle or subscription, timed at the right point in a game's life cycle. Keep in mind that the perceived price in the bundle/subscription should be a price you are willing to run the game at a standalone price or discount on Steam. Philosophically, you can think about it like any other discount: if you’re making an aggressive offer in one place, make it elsewhere too. We want to avoid a situation where customers get a worse offer on the Steam store, so feel free to reach out to us via the Developer Support tool if you want to talk through a specific scenario. However, in a deposition as a part of the Wolfire and Dark Catt's antitrust lawsuit against Valve, things look a bit different. While DJ Powers, speaking on behalf of Valve, states that it's "rare" the company ever takes action (and the situation usually results in a conversation with the developer to find out what's going on), emails subpoenaed from the company show one employee telling a game developer that Valve "would opt to not sell your game on our store" as a result of their actions to "disadvantage Steam customers." It's true that there's nothing in the contract ensuring that companies charge the same price on Steam as they do on other stores, but developers allege that they feel like the policy is a lot more overt than just what's in the contract. The argument made by the consumer class action lawsuit is that Valve artificially inflates prices by forcing developers to pay a 30% commission on every game sold. While rival platforms offer lower fees, it's said that the supposed existence of the most-favored nation clause forces developers to charge those same prices everywhere. Those prices include the higher costs to sell on Steam baked into the price the consumer pays, when that price is not necessary on a competing platform in order to cover those costs. This, they claim, is textbook monopolization, as it's alleged that Valve uses its dominance in one area to stifle price competition across the entire market. Valve, of course, denies wrongdoing, and neither the case brought by Wolfire and Dark Catt or the consumer class action cases have yet to reach any conclusions. Beyond private lawsuits, regulators have started to scrutinize Valve's market conduct as well. In Europe, where antitrust laws are undoubtedly stricter, Valve has already been reprimanded. For example, in 2021, the European Commission fined Valve and five major publishers €7.8 million for colluding to geo-block Steam activation keys by country, and upheld that same ruling in 2023. That geo-blocking scheme prevented EU consumers from shopping around for cheaper game prices across borders, and the EU found that it had actively cooperated with publishers to partition the market. However, it's also worth noting that Valve’s arguable monopoly hasn't been an unmitigated negative for consumers. That's the paradox of Steam's dominance, as its market power allows it to enforce pro-consumer standards that a fragmented market might struggle to adopt. A recent example is Steam's new policy on AI-generated game content. In 2024, Valve updated Steam's rules to require that developers disclose any generative AI assets used in their games, and confirmed a long-standing suspicion that Activision had been using AI-generated assets in the Call of Duty series. Because Valve controls such a large share of the PC market, its policies carry weight, and a requirement on Steam often becomes a de facto standard. In another example, the company was one of the first (though not the first, EA's Origin and GOG beat them to the punch) to introduce refunds for games purchased. You could get a refund within 14 days after a game's purchase, so long as you had played for less than two hours. Valve was also quite lenient with requests at the time, extending significantly past the 14-day window for users who wanted to refund content they had purchased before the new policy came into place. Nowadays, refunds for game purchases are commonplace, with companies like Epic Games offering the exact same terms on its own store when it comes to refunds. Valve certainly looks like it has a monopoly But what matters is whether it's an illegal one In short, I find it hard to argue that Valve doesn't hold a monopoly in PC gaming per the FTC's definition; after all, the courts don't require a literal, single-seller in order to define it as such. But a monopoly that arises accidentally or for a lack of competitors is not automatically deemed to be illegal, and it's how the company in that position reacts to the intrusion of competitors that matters most. Most would argue that Steam has a lock on the market not because competitors are barred from entry by Valve, but because none have managed to offer a better alternative to upend the network effect that Steam benefits from. That means it's a monopoly born out of being the undisputed best, and not from outright illegal scheming. With all of that said, with great power comes great legal scrutiny. Valve now finds itself defending that power in court and being put in the position to prove that it hasn't acted illegally, as plaintiffs argue it crossed the line from simply being the best into actively suppressing competition. The outcome of these cases (and any future government action) could redefine how far a successful platform can go in leveraging that dominance. Unlike the other giants it finds itself up against, Valve has the benefit of being a private company, meaning that it's not beholden to shareholders with a mandate to always drive up the share price. Maybe one day that will change, but it's one of the most unique aspects of the platform, and likely a big reason why it continues to enjoy the success that it does.
