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Understanding The PC Gaming Opportunity For An Independent Game Developer

Goldman Sachs claims that there are 700mm PC gamers worldwide with 150mm gamers in the developed world. Steam, with 135mm users, is the most dominant distribution platform for games, and sold an estimated $3.5 billion worth of PC games in 2015. With PC gaming revenue approaching $32 billion in 2015, Steam owns about 11% of the market. Analysts predict that this market will grow to $42 billion by 2020. These massive numbers would entice anyone into thinking that there’s a nearly infinite market for their indie game, but as with any form of entertainment, there’s a very steep audience curve. Across the most popular forms of entertainment, television, the internet, mobile apps, music, and gaming, the audience distribution follows a power law. This power law is where the term “long-tail” comes from, and it’s in the long-tail that the distributors make a lot of money, but the creators make very little. For most indie game developers, they’ll publish a game and distribute it through Steam, and they’ll live in that long-tail. Steam’s business model counts on 1,000s of games being released in this long-tail and making small amounts from each. This is great for the distributor taking a 30% cut, but can be very difficult on the content creator. This same model exists on the iOS App Store, on the web (Google makes a lot of money on the long-tail), on Amazon, and elsewhere.

Power law in effect for the top 150 programs on TV on November 14, 2016

Steam operates similarly to the App Store, taking about 30% of revenue. In the console market, a Quora answer describes how revenue is typically split, so as an independent PC game developer selling directly on Steam, you’re definitely doing better than your console counterparts.

But how many gamers out there are actually in your target market?

The answer to this definitely depends on your game. Generally, Steam Spy points out that 1% of Steam users own approximately 33% of all games and 20% own 88% of the games. This power law distribution means that 1.3mm core gamers are buying multiple games per year. The average game has 39,000 games purchased — that seems pretty good, but when you consider the power law, it’s more important to look at the median, which is 5,000 copies. Of these 5,000 copies, a lot are probably purchased in packages or in handouts on discount days.

Finally, if you’re trying to think about your addressable market on Steam, you also should consider the system requirements for your game. If you’re building a game that only renders on machines with powerful GPUs or on PCs, you’ve already removed 21% of gamers on Steam. An alternative might be to build a game specifically for these underserved users who are typically stuck playing even the biggest budget games at low settings.

Gaming is a huge market, but it’s dominated by the largest titles that gamers spend 100s of hours playing. This is not meant to discourage the independent developers with a dream, but to set realistic expectations. Media businesses that are hit-driven, like gaming and movies, are dominated by the largest production houses. New models can open the market to independent developers, but you have to be creative, not just in your content, but also in your distribution and monetization models.

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