Asia, 17% of Steam Sales?

In a recent presentation made by Valve, a slide was presented to the audience that shows Asia being 17% of the global Steam activations vs Oceania a at 4%. The slide is at 6.28 of the video presentation that can be found on this link (http://bit.ly/2vdED33). This number deserves a little more digging.

Firstly, I just want to frame the conversation as to why the surprise. The last five years has seen a large exodus of gaming companies from Asia. Today, 14th July 2017, Microsoft announced the disbandment of their Singapore XBOX team, which is the latest western company to move out of South East Asia and hand their sales tasks to FIFO workers in Australia. This followed Electronic Arts major downsize throughout the region and Sony’s tepid multi-channel distribution via third party partners. Most games companies have small operations in Asia at the most, so seeing that 17% was somewhat surprising.

Most gaming data companies, particularly Newzoo, tend to bundle PC games and MMO or games as service together in one category. This is the first time I have seen some real data to support that Asia has a booming ‘traditional’ western games market. Or is the devil in the detail. Alden Kroll, the presenter did so point out that this growth was recent — so what happened to deliver Steam this massive user base in Asia?

Steams fortunes changed significantly in 2012 when they partnered with Perfect World for the distribution and operation of DOTA 2. By 2013, when DOTA 2 servers were launched in China, Perfect Worlds marketing machine had delivered a considerable user base of players, all of whom requiring a Steam account to play DOTA 2, regardless the games were played on the Perfect World China servers. This was the first the first major step toward the 17%.

In 2015 Steam made some other big strides towards that 17%. Firstly they implemented local payment solutions such as Ali Pay in China. Other methods were added such a WeChatpay and TenPay. Previously you required a credit card or pay pal to purchase games directly from Steam. In the same year they implemented support for Simplified Chinese. Then they introduced parity pricing for Chinese gamers, slashing almost 50% of their US prices. Finally they commenced accept Chinese Yuan as payment on all games.

The result is that Steam has caught up with Activision Blizzard (AB also reports 17% of its revenue comes from Asia Pacific(http://bit.ly/2u5lcLv ) to be on of few western games companies that have been able to capture a significant market share in the Asia region. They have only both done so by leveraging the games as a service model.

Asia, and particularly China, have always been a difficult market for any western games company and remain so today. Steams business in China remains volatile as the government attitude to the games sold on Steam could change at any time, and their hard-fought Asian audience may instantly evaporate. There is also a challenge from Ten Cent who seek to compete openly with Steam on their own platform. The Tencent Game Platform, or TGP, has a user base that gives it a massive home advantage, not to mention the resources that Tencent has to execute its attack. It will be interesting to see whether Steam builds on its 17% over the coming years or whether its position as a foreign owned platform will make it vulnerable to local competitors.