Valve made its fortune selling other people's games, not only its own
Valve became famous for Half-Life, a game that split the history of first-person shooters into before and after. Yet most of its money came from a storefront it built partly to escape a publishing contract. By 2011 the small company claimed to be more profitable per employee than Google or Apple.
Gabe Newell and Mike Harrington, both former Microsoft employees, founded Valve in Kirkland, Washington, on 24 August 1996, which was also Newell's wedding day. Newell had spent 13 years at Microsoft working on Windows and had watched id Software sell Doom through an alternative distribution model with striking success. The founders deliberately avoided an aggressive-sounding name; rejected ideas included Fruitfly Ensemble and Rhino Scar.
Their first game, built on a modified version of id's Quake engine, came out in November 1998 and was a hit, admired for its realism, scripted scenes and seamless story. But the deal with publisher Sierra meant Sierra owned the Half-Life brand and exclusive rights to Valve's future games. In 2001 Valve renegotiated by threatening to stop making games altogether, dangling an offer from Amazon to build a digital store, and won back the intellectual property and online distribution rights.
That leverage led to Steam, initially just a way to deliver Valve's own titles and required for Half-Life 2, and later a store for other publishers' games. Valve also bought the creators of popular fan modifications, turning Counter-Strike into a standalone game. With its own distribution, the company adopted a flat structure where, outside top management, there are no bosses and employees pick their projects.
By 2011 Steam held an estimated 50 to 70 per cent of the downloaded PC games market, and the company, with about 250 staff, was valued at 2 to 4 billion dollars. Steam brought in an estimated 3.4 billion dollars in 2017, as Valve shifted toward hardware such as the Steam Deck handheld of 2022.
Source: Valve Corporation
