Windows Store ... the biggest threat to Steam yet?

In 2004, Valve took a huge gamble by offering people a chance to purchase and download its long awaited first person shooter Half-Life 2 via a new service called Steam. The wild idea was that some gamers would rather sit at home to purchase the game rather than drive to a retail store and buy the game on a disk in a box. When it launched, Steam took more than a few knocks from critics who felt that the service was full of issues and bugs.

Rather than just abandon the project, Valve took the notes to heart and slowly Steam's features began to be improved. It later added more games from Valve's library of titles and in 2005 it added its first third party games to its storefront.

Fast forward to 2012. Steam now has well over 1,000 games in its download library with more being added every weekday. It has 40 million registered users and has had a total of 5 million concurrent users at one point this year. Valve's Steamworks tools, which add features like achievements, multiplayer leaderboards and anti-cheat measures, are also being used in hundreds of PC games.

More to the point, Steam has pretty much saved the PC game industry. Retail revenues have dried up as fewer and fewer stores sell physical boxed PC game products in favor of console games. Steam led the way for PC games to be sold primarily, and often exclusively, via digital download.  It has given a number of independent game developers a chance to reach a worldwide audience with their products without having to deal with traditional publishers.

Steam currently has a number of competitors to its business, including Gamefly's PC game download service (formerly Direct2Drive), Impulse (bought by GameStop in 2011), GamersGate and most recently Origin from Electronic Arts. While all of these services have had some degree of success, Steam is still the clear leader in terms of its massive number of users.

But is that leadership role going to change?

In December, Microsoft gave the first concrete details on Windows Store, the downloadable storefront that will be a part of all versions of Windows 8. Much like the iOS and Mac App Stores from Apple, Windows Store is designed to be an easy one stop shop for PC owners to purchase and download software, including games.

In a recent post on the Windows Store blog site, Microsoft gave some information on how developers could submit their apps to be published via the store front. Based on the information, the submission process seems pretty straightforward without a lot of hoops to jump through. As a result, we expect a lot of PC games, especially from independent developers, to use the service when Windows 8 officially launches, hopefully later this year,

The idea of a software download store in every PC that has Windows 8 installed almost certainly represents the biggest threat to Steam since its launch nearly eight years ago. It will take some time but a year after Windows 8 is launched we should see at least some of Steam's market share taken away by Windows Store.

There are two big reasons to make such an assumption. One is that Windows Store will be installed as part of Windows 8 while Steam and similar services all need third party client downloads. While current Steam owners will likely continue to use the service, we suspect that some, perhaps many, Windows 8 owners who have never used Steam won't bother to download Steam in favor of using the Windows Store. If major games are released on Windows Store such as, for example, the next Call of Duty game, non-Steam users could flock to Windows Store.

The other big reason is that the submission process for adding new games and programs to the Windows Store looks to be as seamless as possible. There is no such automatic game upload service on Steam; before a game is sold on Valve's service you have to convince the people running Steam at Valve to offer it. Windows Store has more of an automated process and as such we could see app developers gravitate to it.

Of course, this is not 100 percent certain; this is Microsoft we are talking about. The company's efforts to get PC developers to adopt Games for Windows Live over the years have not been all that successful. As a result, it has been overshadowed by Valve's Steamworks. There's also no guarantee that Windows 8 will be embraced by PC users. If Windows 8 fails to reach a mass audience, that bodes well for Steam, so the Windows Store could turn out to be harder to use by consumers than Microsoft thinks.

On top of that, Steam has other threats to deal with, such as the streaming game services OnLive and Gaikai. Why bother downloading a game to your hard drive when you can play it almost instantly? However, it may be a while before a large group of PC gamers embrace cloud gaming over downloading titles to their hard drives. In fact, we suspect many will never use streaming games due to several factors (poor broadband connection, game pixelation and the need to have an "always on" Internet connection to play a game).

Microsoft is scheduled to talk more about Windows 8 gaming at the Game Developers Conference in early March, and it's likely that Windows Store will be a major focus in the company's presentation to game developers. On the other hand, Valve might have some interesting tricks up its sleeve that will be revealed at GDC that we don't know about yet that will be included as new features for Steam.

While Steam may currently rule the roost of downloadable PC gaming, the Windows Store feature included in Windows 8 should be considered to be the biggest threat to Steam's audience (sorry EA and Origin). While there still are a number of unknown factors to be determined, we should get a lot more info very soon via the launch of the Windows 8 Consumer Preview on February 29, followed by Microsoft's all day GDC developer event in early March.

In the meantime, feel free to continue to purchase and download games on Steam. It still is the most used and most popular service of its kind, and for good reason. But that doesn't mean that the service is invulnerable to threats and you can bet Valve knows it.

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