When I think of Valve Headquarters I have to imagine the inside it looks something like a video game version of Willy Wonka’s Chocolate Factory. I imagine that somewhere out in Washington there is this fantastical place where games are mixed and churned in a digital river, and game deals just grow from threes. Employees spend all their time there dreaming and innovating and all the hard parts just work themselves out. And out in the distance a fleet of Oompa Loompa-esque users are all diligently working away at building things. Maps, mods, hats. Mostly hats.

Source: http://tf2wiki.net/w/images/thumb/7/7a/ToweringSoldier.png/200px-ToweringSoldier.png

And all this dreamery isn’t baseless (though perhaps it is more than a bit silly). Valve has been pumping out experimental updates and new services since its digital distribution service called Steam since its inception on September 12, 2003 (Can you believe it? Steam will be turning ten this year. I am getting old). Over the past year alone, Steam has released or revealed some major game changers for its service: Steam Greenlight, Steam Community Market, Steam Box, Steam for Linux, and Big Picture, just to name a few.

And it looks like Steam will not be slowing its innovation any time soon.

What is Valve?
Source: http://i12.photobucket.com/albums/a235/jungletoad/Trip%20to%20Valve/ValveLobby2.jpg?t=1288807320For those of you who don’t know, Gabe Newell is one founder of Valve Corporation, a privately owned looking to change the way players interact with games. On January 30th, Gabe held a talk with students at The Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin about his experiences titled “On Productivity, Economics, Political Institutions & The Future of Corporations: Reflections of a Video Game Maker.”

While Valve Headquarters is not really some kind of mystical paradise like I hoped, it turns out to be a fairly amazing place to work. In his talk, Gabe spoke about how Valve runs as a flat organization. There are not really any official titles, nor are there official departments. Employees simply work on projects that they can contribute to most strongly and most efficiently. Offering employees even more flexibility is their right to designate their own workspace. And finally, employees are able to place non-vital projects on hold and prioritize projects that seek to make jobs more efficient in the future. Sounds like employee heaven to me.

The Fundamental Question
While Valve’s current state is strong, it is important to look back at its history to better understand its future. During Valve’s inception, Gabe expressed that he would not use the outsourcing business practices he saw competitors using. Valve instead searches for the very best talent available, choosing quality over quantity. “Everything goes back to this fundamental question of ‘how do you attract and retain the most highly productive people in the world?’” Gabe said. This has been a big question for Valve since the beginning, and it remains as the core question that drives the company today.

Enhancing productivity by hiring highly-qualified worked led Steam to become the innovative product that it is today, however there are still major limitations that Gabe expressed that Valve needs to carefully examine. He spoke of issues such as the lack of persistent content across games. For many players, they will purchase a game and play several hours before either completing it or getting bored and switching to a new title. Often all sense of progress is lost during this switch, particularly in online multiplayer games such as Call of Duty and MMOs such as World of Warcraft.

Source: http://www.hardwarecanucks.com/wp-content/uploads/marketplace-290x300.jpg“The things that you do in these games need to have persistence and they need to be exchangeable,” Gabe said. Valve has already constructed a working model of what this might look like. Currently, players of games like Team Fortress 2, Spiral Knights, and DOTA 2 can trade items from one game for another. This encourages players to feel more comfortable putting time and effort into particular games, as they know their progress will not as easily go to waste with the passing of gaming fads.

Furthermore, Gabe states that he is not just after increasing player productivity. Right now, Valve acts as an “artificial bottleneck” as it must approve games one by one that wish to be distributed through Steam. While Gabe recognized that this sort of bottlenecking has its positive uses, such as aiding the customer in finding higher quality products, he feels that the added diversity of titles and the natural weeding-out process used on social media sites such as Reddit will allow for players to get their hands on the products that they want and help them find the products that they want at a much faster rate.

Creating Value
The matter of creating value in a gaming environment is complicated, and often counterintuitive. One particularly interesting observation that Gabe offered was that adding the riot shield item in Counter Strike temporarily increased the player base. That makes sense to me. Players would likely log in to the game to try out the new feature, and either love it or hate it. But when Valve took the riot shield back out, the player base rose yet again. “What?” asked Gabe, musing at the apparent paradox. It seems that players were drawn to the updates regardless of whether or not they felt the updates were actually good for the game.

The other driving question for Valve in the coming years will be, “How do we explore ownership and authorship throughout the whole system?” In increasing numbers, players are contributing their content to the Steam Workshop which allows players to share maps, models, and modifications for games that are compatible with the service. These users create “ten times the content” that Valve creates, says Gabe. “We can’t compete with our own user base.” And nor should they, really. The additional content users create extends the longevity of a title and increases its sales. Essentially, these users as a voluntary workforce. The question of proper compensation for content providers is tricky, however, particularly when video game development is so inherently collaborative. What happens in the case where someone’s texture is used in someone’s map, for example? Gabe suggests there are ways to address these issues, but did not go into detail during his talk.

A New Direction (Slantways? Longways? Up and Out?)
Source: http://www.gamasutra.com/db_area/images/blog/5951/steama.png“You have to predict and advance… and it has to be quantitative,” says Gabe. Valve is currently working on the development of their own prediction pipeline that will be publically available. Currently, game producers have their own tools to gauge audience reaction toward a particular title. This helps produces decide how much funding a project should receive. However, Gabe claims that the tools do not properly examine the actual behavior of players. By examining a service like Steam, Gabe feels that within three months its implementation, their tools will be more accurate than publisher prediction markets simply because it is not operating on private data.

These tools will help determine how best to go about incentivize and reward players for getting immersed in gaming. Valve will be looking at ways that they can treat gaming on a meta level in a way similar to MMOs. Achievements can help with this. In particular, achievements that carry specific rewards. Craft something in Team Fortress 2? Receive a free weapon in game. Make your first video in Source Filmmaker that reaches 10,000 hits? Sponsor its link on the game’s community page. These reward-based achievements will be designed to help the player get immersed step by step, guiding their involvement much like Minecraft achievements show players what kinds of activities they can do in the game. This fights the oh gosh, I have no idea what to do feeling many players would otherwise feel and incentivises creative engagement with the game worlds.

Nickle and Diming
Whether or not certain players enjoy the free to play model that is becoming more and more popular in video games, it will certainly be staying for the foreseeable future. According to Gabe, when a developer releases a free to play game, “Audience size goes up by a factor of ten, and… gross revenue goes up by a factor of three.” Free to play games do not have an entry barrier to prevent players. This allows for friends to more easily pull their friends into playing with them. Microtransactions in these games sell so well because they are essentially status symbols for players to show their love and devotion for a game. This leads to very interesting player-driven economies.

Source: http://cf.shacknews.com/images/20110420/hat_bots_17841.nphd.jpg

Even Portal 2 has hats.

These microtransactions are so successful, in fact, that at one point Team Fortress 2 players “actually broke PayPal.” “Maybe they thought we were selling drugs,” Gabe mused, “No…” they’re actually selling hats,” he clarified. The hat phenomena in Team Fortress 2 sets an interesting precedent for other games, and a difficult question. How will Valve look to bring more and more games, third party games in particular, into this cross-game content marketplace?

Play That Helps Everyone
Source: http://i.imgur.com/jBdN0.jpgValve has already implemented proof-of-concept systems to demonstrate the power of user-driven game economies. In the case of DOTA 2, players can currently purchase pennants for their characters to show their fanaticism toward professional DOTA 2 teams. The proceeds of these items go toward both Valve and the particular team associated with the banner. In this scenario, all three parties are receiving something of perceived value. More importantly, player personalities are being given “a much more direct way to engage with their audience,” allowing them to focus more on actually playing the game and less on publicizing through outside services like Youtube and streaming sites.

Questions Unanswered
While Gabe speaks idealistically about turning Steam into a platform for user content creation and monetization, there are several critical issues that will take Valve’s unique brand of creativity to solve. These issues include the matter of copyright and filing for copyright infringement in the Steam Workshop. Also, how closely monitored will Steam’s economy need to be monitored? Valve already employs economists to watch over the budding economies forming within Team Fortress 2 and DOTA 2. Will players be able to repackage and trade their games on the marketplace? And how will all of this be done freely and openly?

No matter what direction Valve and Steam will take, Gabe believes that the “lessons that we’re learning today in the video game space are probably going to be true of a much wider range of industries tomorrow.” Will user-created content be the way of the future? I feel it is likely, what with high development tools being made more and more available for lower and lower prices across every industry. Perhaps Steam will become the Youtube of games (if it is not that already). Who knew that the buying and selling of hats change gaming culture as we know it?

Source: https://www.youtube.com/watch?v=t8QEOBgLBQU