Steam and Valve development in the VR Market

Steam and Valve development in the VR Market

Introduction

In the context of the course “Technological Innovation and its Context”, the present paper will provide a detailed analysis of the innovation strategy of Valve Corporation and its role in the gaming industry as one of its most prominent players. Before we can explore and assess the success of Valve and its most iconic product/platform Steam, we must first contextualize the market and understand the key factors that have shaped its evolution to the present day.

Description & Historical Context

History of the Video Gaming Industry

The inception of this industry can be traced to the 1960s, but its true start came at the hands of Atari, when they released Pong, an arcade table tennis game, in 1972. The commercial success and fanbase gathered had early players scrambling to attempt to replicate its popularity. Atari continued to grow the brand, releasing a home version of the game in 1975, and eventually its own console, the Atari 2600, in 1977, the first console to pass the million dollar units sold threshold. Arcade style of games dominated the decade, marked by the 1978 release of Space Invaders and the emergence of cultural icons Pac-man and Donkey Kong.

Unfortunately the gaming industry was not yet ready to cope with its massive success, and the exponential growth soon outpaced the production capacity of companies. Atari hastily released a few titles that ended-up costing millions, but perhaps the firm paid an even bigger price in brand loyalty from its customers. The copycats followed suit in rushing poor quality titles, and the entire industry took a downturn in 1982, further perpetuated by the rise of personal computers in the gaming space, which ultimately led to a crash from 1983 to 1985.

In 1985, Nintendo emerged as a major competitor by launching the Nintendo Entertainment System (NES) and a collection of high quality, well curated games that captured audiences, particularly with the iconic and massively successful Mario character, kicking off a 15 year technological race. They continued to dominate the gaming field by venturing into the handheld sector releasing the GameBoy console line. Accompanying Nintendo were two other major Japanese makers, arcade company SEGA which released both home consoles and handhelds, emphasizing their processing power, and Sony which launched the best selling home console series of all time, the PlayStation. Introduced in 1994, the PlayStation sold more than 100 million units and pioneered CD-ROMs as a better storage alternative to cartridges.

[pic 1]

https://en.wikipedia.org/wiki/List_of_best-selling_game_consoles

The turn of the century brought the advent of the internet and mobile gaming, which propelled the gaming industry from an eleven to a twelve figure valuation. Recognizing the profitability of subscription-based and freemium services, relative newcomer to the gaming business Microsoft introduced the Xbox Live Online Gaming which allowed players to use a multiplayer feature that was quite a hit with consumers. Furthermore, PCs were also growing in popularity as a console and gaming platform, which allowed game maker Blizzard to capitalize on the 14 million paid subscribers that became fans of its 2004 Massive Multiplayer Online (MMO) game World of Warcraft.

Despite attempts by Nokia and Blackberry, it was Apple’s revolutionary iPhone that truly tapped into the mobile gaming market, which had been little more than a niche up to that point. Through the App Store and its android counterpart, developers could now easily make a variety of games, whether free, paid or freemium, that catered to the desires of the masses. Mobile is now the largest segment of the gaming industry, representing over half of the total revenues, at a staggering $85Bn of which everyone wants a piece.

Currently, the video gaming industry generates a whopping $165Bn in revenue in 2020, from a population of 2.7 billion gamers worldwide, standing firmly as the largest earner in the media sector. Cloud-based subscription services and cross-platform compatibility are now the name of the game, as the largest players consolidate their positions and distribute their titles across as many platforms as they can.

Consolidations in the gaming industry:

[pic 2]

https://www.visualcapitalist.com/visualizing-the-biggest-gaming-company-acquisitions-of-all-time/

Sources

https://www.visualcapitalist.com/50-years-gaming-history-revenue-stream/

https://www.history.com/topics/inventions/history-of-video-games

Strategic Choices: Handheld console’s sector

Recent history of portable consoles up to now:

By definition, a handheld game console, or simply a handheld console, is a small, portable self-contained video game console with a built-in screen, game controls and speakers. Handheld game consoles are smaller than home video game consoles and contain the console, screen, speakers, and controls in one unit, allowing people to carry them and play them at any time or place.

There have been a multitude of handheld consoles that have been released since 1976 with the first handheld electronic game from Mattel with the game Auto race. However, we will only talk about the 8 generations of handheld consoles that have had a real impact on this sector. That's why we will start with the first real 4th generation handheld console: the Gameboy.

The Game Boy:

Nintendo released the Game Boy on April 21, 1989, following the success of the Game & Watch, however, the team that designed this console had a desire to have a larger screen and a way to manage the battery more adequately.

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