Console transitions bad for gaming, says Newell

Gabe Newell is scheduled to be inducted into the Academy of Interactive Arts and Sciences Hall of Fame Thursday night, but preceded that honor with another one, as the Valve co-founder delivering the morning keynote address at the DICE Summit in Las Vegas.

Newell began his talk by laying out his two main theses. First, the PC ecosystem will expand into the living room. Second, there will be a sea change in the way people think about video games.

"A lot of this is about trying to get away from these really disruptive console transitions where everything that customers and software developers invest in gets rebooted and then we all have to start over"

Gabe Newell

Starting with the long-standing criticism that nobody wants a PC in the living room, Newell noted that the PC has spawned a wealth of industry-shaping innovations in the last decade, with free-to-play, online gaming, and other trends. The one exception where the PC hasn't led in innovation has been input, Newell noted. But it's a great development environment for programmers, and its open nature encourages more experimentation and innovation, he added.

There's no evidence of that innovation slowing down, Newell said, and the PC will be able to keep pace with the trends easily, unlike the dedicated console hardware that has traditionally dominated the living room. And because PC manufacturers have been busy solving problems related to making computing power more mobile, Newell said they've also gone beyond the needs of the living room. PC makers have solved the problems of making the boxes small, quiet, and cool running.

Reflecting on what he saw at CES this year, Newell said the show played host to numerous options for in-home streaming. The integration of the user experience is still tricky, but he added that it's going to become a standard feature of televisions where users can run a game on a PC anywhere in their home, but stream it to their TVs for viewing.

Newell said he's not worried about how consoles will respond to this change, but it's "much scarier" to think of what Apple will do. Apple has a smoother upgrade cycle than PCs, which is beneficial to both consumers and developers. On the other hand, PCs have always scaled well, with users able to tailor their systems to their needs exactly, no matter how high-end.

One question Newell said he's often asked is what the difference is between cloud gaming and in-home streaming. Newell said he's skeptical of cloud gaming, but in-home streaming is an old problem dealing with how one distributes resources around a network. Even if the industry had never made consoles and started with cloud-based clients, Newell said it would have evolved to put power and smart clients at the end of networks because it's a better way to save on the costs of remote high-speed processing. He said there's a place for cloud gaming as a feature (for providing demos, as one example), but not so much as a core piece of the living room gaming experience.

When Newell started Valve in 1996, he said the company had to figure out where to expend the power they had. In Half-Life, they determined that putting a decal on the walls anywhere the player shot was worth the time and effort needed to incorporate that feature. In the sequel, they decided that having non-player characters look directly at the player with realistic eye movement added enough to make it worthwhile. However, that line of thinking fell apart with multiplayer games. When they added a riot shield to Counter-Strike, players played it more. But when they took the riot shield away, players still played it more. So they developed a new way of thinking about multiplayer, which eventually led to their decision to create Steam in the first place.

Now Newell said they're facing another breakdown in their line of thinking. For example, online auction houses and free-to-play. Newell wouldn't have understood years ago that people could spend $2,000 upgrading their character's equipment, or that giving away a game for free could be the basis of a viable business model.

There's also been an explosion of user-generated content in recent years, as Newell noted that the fanbase for Team Fortress 2 makes 10 times as much content as the actual developers of the game. Newell said they can't compete with their own customers on that front; they're building content just as good or better than Valve's, and they're building it at a spectacular rate. Some of those content makers are pulling in more than $500,000 a year by selling their work to other players.

All of a sudden, Newell said customers started using an in-game item as a unit of proxy currency. That has introduced a number of economic concerns, from an imbalance of trade to tax concerns to liquidity crises. All of those things were connected, and Newell said they prompted a rethinking of Valve's approach to games.

Now he thinks games are productivity platforms for goods and services, which he acknowledged is a "super-weird" way of thinking about games. Economies get better the bigger they are, Newell said. And if there's no way to exchange goods and services in DOTA 2 for goods and services in Skyrim, he called it a global failure.

If Valve is right about this way of thinking, Newell said there are other conclusions to reach. There's not much difference between the way traditional applications create productivity (like Photoshop) from the way games do that, so Photoshop should be free-to-play, with Adobe getting a revenue share of the productivity that users create with the tool. The two things are now different expressions of the same underlying economy, Newell said. That changes the role of game developers, as now they have to increase the opportunities their players have for productivity.

"Think about what people are doing, then try to create frameworks that allow them to do it better," Newell said.

As for what Valve does next, Newell said they're working on input hardware. The goal isn't to sell a bunch of hardware so much as to move things forward. Valve is dependent on the vibrancy and success of the PC, and if making hardware is the best way to push it forward, Valve needs to do it. Valve is also working with in-home streaming vendors like Nvidia's Project Shield and Mirrorcast, as they need help making it a seamless experience for users.

If user-generated content is the way forward, then Newell said Valve needs to think about other ways that can happen. Stores need to be thought of as user-generated content. It's just a collection of content, Newell said. The Steam Store is a boring entertainment experience, but other people's versions of stores may be more entertaining. Each community or editorial perspective could be represented by a different style of storefront that would (ideally) be superior to the Steam Store for its intended audience.

Curation is another issue. The notion of a global gatekeeper for stores is a pre-internet way of thinking for distribution, Newell said. They still need to worry about viruses and people distributing content they don't own the rights to, but the more they can strip away the rest of the curatorial duties, the better.

Beyond that, Newell said Valve needed to identify what its users were doing that was valuable, and provide them with ways to monetize that, which is light years away from the old way of thinking about what the next weapon to be added to a single-player experience was.

So why is Valve doing this? Newell said it's the same reason it created Steam. Valve has been utterly dependent on the openness of the PC and the internet, and Newell said it needs to give back a bit to ensure the future of the platform as a place for innovation and competition.

"A lot of this is about trying to get away from these really disruptive console transitions where everything that customers and software developers invest in gets rebooted and then we all have to start over," Newell said. "I don't think there's a whole lot of value to that anymore, given modern software development and networking."