Valve's Vivendi settlement raises £8 million question for UK retail

The recent settlement in the long-running legal spat between Valve and VU Games will see Valve's entire portfolio of boxed product being pulled from shelves in August - creating a potential loss of millions to UK retail alone.

Under the terms of the settlement, VU Games is required to cease distribution of Valve's games - up to and including Half-Life 2, and Valve properties developed by other companies, such as Counter-Strike Condition Zero - on August 31st.

Valve, whose heavily promoted online distribution service, Steam, was the root of much of Vivendi-Universal's legal complaint, has remained silent on the question of whether its back catalogue and future titles will be distributed in boxed form by a new publishing partner, or whether it plans to move entirely to online sales.

However, the developer has hinted strongly that the forthcoming Half-Life 2 expansion pack, Aftermath, will be available through Steam only - at least initially - which points to the future direction the company may be planning.

Such a move would be a major blow to traditional retailers. In the UK alone, Valve's PC products accounted for over a quarter of a million unit sales last year - which translates as around £8 million in revenue through the tills.

The story is repeated in other territories around the world; Half-Life 2 was one of the best-selling games on the PC last year, despite its availability on Steam, and titles such as Counter-Strike: Condition Zero and budget priced packs like Half-Life Generations have also sold strongly.

If Valve does pull its catalogue from stores, the move will be watched with keen interest by other players in the PC game market. With margins growing increasingly tight in this sector for many developers, the chance to establish direct sales to consumers is a hugely attractive one - but one which could seriously affect the sales of more "hardcore" PC game titles through traditional retailers.

"We're yet to hear exactly how Valve plan to distribute their portfolio once this is in place," Doug Bone, sales and marketing director of UK retailer Simply Games told GamesIndustry.biz today, "but if it IS via Steam, then I'd suggest there's an element of trying to run before they can walk."

"Steam is regarded in a love / hate manner by people that have used it (in equal measures)," he continued, "and whilst I understand why Valve are trying to do this, there are as many pros and cons for them as there are for VU and retailers. In short, does Valve no longer want to sell to browsing customers? Impulse buyers that like to browse a range on a shelf then buy accordingly?"

"Were they to limit the distribution of their range purely to the hardcore that hunt down Valve product via an exclusive site, I'm not convinced that, now, in 2005, this will improve their revenues and profitability from its existing model..."

Another group who will be hit by the settlement are cyber-cafî operators, many of whom purchased site licenses for Valve products from VU Games or its subsidiary, Sierra - particularly due to the popularity of Counter-Strike among cafî denizens. Those licenses will now be terminated.

It's also as-yet unknown who will now be publishing Half-Life 2 on Xbox, which is due for release in late summer, with VU Games referring all queries on the matter to Valve - who had not responded to our request for comment at the time of publication.