Steam Workshop paid mods: like Uber, but for horse armor

On April 23rd, Valve announced that they would allow mod makers for the game Skyrim to sell mods, after a long period of only allowing them to be given away for free. Users can now trade Steam Wallet currency for custom Skyrim content produced by people who don’t work for the game developer, Bethesda Game Studios, after it passes a no-curation curation process. The creator of the content gets 25%, and the remaining 75% goes to Bethesda and Valve. The details of the breakdown between Bethesda and Valve aren’t mentioned anywhere, though a safe guess would be 55% for Bethesda (70% of the developer/publisher share, which is the same cut of revenue that goes to Steam and app store developers) and 20% or so for Valve.

Yes, 25% of $5 is better than 100% of $0. But the best mod creators had ways of selling their mods before (or selling the companies that made those mods), and services like Patreon opened the doors for at least some modders to get money for their labor, and all of these things bear better than a 25% revenue share. Indeed, the 25% revenue share seems like a thoughtless carryover from the Workshop of Dota 2, which is a game that differs in at least two key ways from Skyrim: it cost $0 rather than $60 at launch, and it has significant ongoing development and operations costs. At least notionally (if not in reality — Dota’s tournament tickets, co-branded merchandise, and $10 virtual programs all seem like big additional sources of income) Dota items fund the development of the game, justifying the 75% toll paid to the company that makes the ecosystem possible. The same is not true of Skyrim, an exclusively single-player game whose development was bought and paid for by ZeniMax Media four years ago (and last patched in May 2013.)

The problem with Steam Workshop’s paid mods is ultimately the same problem we’ve seen in “sharing economy” startups like Uber and Postmates. All the responsibility for footing the risks of mod development falls to independent contractors operating in the 1099 economy (with 1099s to show for it.) These contractors have to pay additional taxes for employing themselves; they have to pay for their own health insurance; they have to buy hardware to develop their content on. A game’s obsolescence by its developer, moderation from the platform holder (or a lack of moderation swamping the market with crap), and unlicensed redistribution can all cut into the money they earn from a fixed amount of labor. And not all mod creators are unknown outsiders doing it as a hobby either; the example of Dota 2 shows that many of them are industry veterans who didn’t want to, or couldn’t, find wage-paying jobs elsewhere. (That independent developer for Cities: Skylines? He was just laid off by Maxis, creators of the SimCity series.)

Despite making a lot of hay about its 24-hour returns for mods the user dislikes, Valve sees nothing but profit: your money comes back not as actual cash, but through Steam Wallet — it’s a store credit, not a refund. Since at least 20% of that money is going to stay with Valve in the long run, it doesn’t matter to them whether the mod you bought is good or bad; by getting you to buy $20 of bad Skyrim mods, Valve has earned almost as much as they would by selling you their 2003 game Day of Defeat. Bethesda has more skin in the game — building a game to be modded takes additional engineering work, which costs money— but they got to draw a box around mods wherever they wanted, and Bethesda was obviously counting on Skyrim’s moddability paying for itself through additional sales long before Steam Workshop was announced.

Finally, the age of $2.49 horse armor has given way to the age of pay-what-you-want swords (suggested donation: $0.49.) Why buy the cow when you can rent access to someone else’s for a 20% cut?

This is the second thing I’ve written about the business end of Steam. The first one can be found here, and goes into the math of Steam Wallet and the 2014 Holiday Sale.