Valve is currently embroiled in a US antitrust lawsuit with Wolfire, a developer that alleges the Steam platform holder uses its position to unfairly crowd-out rivals and control game prices. Valve tried to have the suit dismissed, but in May 2022 the court ruled it could go ahead with some changes and enter the discovery phase: the juiciest part of the legal process where, among other things, plenty of internal correspondence from the companies involved is made public.
Among these documents are a couple of spicy exchanges between Epic CEO Tim Sweeney, and Valve's CEO Gabe Newell, COO Scott Lynch, and project manager Erik Johnson (first spotted by Simon Carless at GameDiscoverCo). The context for both exchanges is broadly speaking store pricing and specifically the commission that Valve takes on Steam sales, which are some of Sweeney's favourite topics. The first chain in 2017 is sparked specifically by a leaked comment from Steam's developer forum, in which Valve's Sean Jenkins mistakenly said Steam may start restricting the keys it gives to developers:
On August 12, 2017, Gabe Newell emails Tim Sweeney: "Anything we doing to annoy you? We’re guessing Sean Jenkins' public dumbness might be part of it."
- Tim Sweeney says Epic is losing billions fighting Apple and Google because it can afford to, jokes that 'we might run into serious financial problems after a couple more decades'
- We learned just how small Valve really is this year, but also how good it is at raking in the cash: It's making more money per employee than Apple
Sweeney replies to Newell and Valve's Erik Johnson saying he's not annoyed "and I've never heard of Sean Jenkins" (poor Sean). Then Sweeney adjusts his flight goggles and gets ready for takeoff on one of his pet peeves: the 30% platform fee on Steam. "There was a good case for [such fees] in the early days," writes Sweeney, "but the scale is now high and operating costs have been driven down, while the churn of new game releases is so fast that the brief marketing or UA value the storefront provides is far disproportionate to the fee."
Sweeney opines that, if you were to strip away the top 25 selling games on Steam, "I bet Valve made more profit from most of the next 1000 than the developer themselves made." The maths to get there is 30% to Valve, 30% on marketing, and 15% on servers / engine costs, so "the system takes 75% and that leaves 25% for actually creating the game, worse than the retail distribution economics of the 1990s."
If either Valve employee replied to Sweeney, it's not in this disclosure. Which might be why, when we get to December 2018, Sweeney is in an even more ornery mood. At this time Valve had introduced a royalty change that almost seems custom-designed to get Sweeney frothing at the mouth: it reduced Valve's cut on the most-successful games down to as low as 20%. Not only is Sweeney all about the little guy but, at this exact moment in time, he's gearing up for the launch of the Epic Games Store and the antitrust fight between Epic and Apple (still ongoing).
Sweeney is emailing Gabe Newell and Scott Lynch, and begins by outlining his problems with Apple, before telling them about the imminent launch of the Epic Games Store. This is a direct competitor to Steam and, credit where it's due, Epic put its money where Sweeney's mouth was by launching with a flat 12% platform fee. Sweeney wants Valve to respond to this, mainly because it'll strengthen Epic's hand against Apple, but he's clearly not had too many lessons in the gentle art of persuasion:
"Right now, you assholes are telling the world that the strong and powerful get special terms, while 30% is for the little people," writes Sweeney. "We're all in for a prolonged battle if Apple tries to keep their monopoly and 30% by cutting backroom deals with big publishers to keep them quiet. Why not give ALL developers a better deal? What better way is there to convince Apple quickly that their model is now totally untenable?"
The next day Valve's Scott Lynch simply sends this email to both Gabe Newell and Erik Johnson with one-line commentary: "You mad bro?"
I imagine, at that exact moment, Tim Sweeney probably was quite mad. It should also be noted that, while some may see Lynch's response as rather flippant, it was of course never meant to be seen outside of Valve. And Sweeney has just emailed two senior Valve types, told them he's launching a direct competitor to their platform, criticised how Valve operates its store, ranted a bit about Apple, ranted a little bit more about Apple, and then called them "assholes." I mean, it's a bold move Cotton.
The Wolfire lawsuit is much wider than just these emails, and Carless does raise the interesting question of who exactly is funding the smaller company against Valve. Litigation on this scale is eye-wateringly expensive and, while Valve has large pockets, it's not clear where Wolfire is getting the money from. It's currently asking the court to resolve the suit as a class action claim, and has re-stated its core arguments about pricing, during which amusingly enough it backhands the Epic Games Store ("publishers have little incentive to offer games on EGS and consumers have little incentive to use the platform").
The suit honestly doesn't seem enormously coherent in what it claims about Valve, with various different elements of how Steam works being conflated, and I'm not sure it's going anywhere but, hey, not a lawyer. Still, thanks to this we've found out what happened behind closed doors when Epic was launching its big Steam competitor: at Valve, they were laughing.
Correction: A previous version of this article incorrectly suggested Scott Lynch was replying to Tim Sweeney directly. He was commenting on Sweeney's email to Gabe Newell and Erik Johnson.
