Is Windows 8 Really a ‘Catastrophe’ for Content Creators?

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Valve Software bigwig Gabe Newell has his long knives out and he’s slashing in Windows 8’s direction, going so far as to call Microsoft’s imminent operating system makeover a “catastrophe.”

It’s not the first time for Newell, who allegedly took umbrage with Windows 8 while visiting with Linux community buff Michael Larabel, who wrote “[Newell’s] level of Linux interest and commitment was incredible while his negativity for Windows 8 and the future of Microsoft was stunning.”

(MORE: Steam Native Linux Client Near? Gabe Newell Trashes Windows 8?)

No, I don’t think Newell means the operating system itself is the devil, as some seem to be reading it, but rather that he’s addressing a few significant platform-related features launching with Windows 8, and what they entail for what he refers to as “the openness of the platform.”

Here’s what he had to say during a recent Q&A at the Casual Connect games conference that ran July 24-26 in Seattle (courtesy a Venturebeat transcript):

I think that Windows 8 is kind of a catastrophe for everybody in the PC space. I think that we’re going to lose some of the top-tier PC [original equipment manufacturers]. They’ll exit the market. I think margins are going to be destroyed for a bunch of people. If that’s true, it’s going to be a good idea to have alternatives to hedge against that eventuality.

Steam, Valve’s digital distribution platform, is, by leaps and bounds, most pervasive on Windows (it’s also available for OS X, and there’s a Linux version in the offing). Windows, therefore, is no doubt where Steam makes most of its bones.

Newell’s concern: That Windows 8 is a platform-closer, by which he means Microsoft’s forthcoming “Windows Store.” Windows Store is essentially Microsoft’s answer to Apple’s App Store — a digital distribution platform for both paid and free applications that support Windows 8’s tile-like “Metro” interface. The kicker: Metro-enabled apps will only be allowed over Windows 8’s guardrails by going through the Windows Store itself. And like Apple, Microsoft intends to take a 30% cut of any sales made through the store.

That, argues Newell, means some PC makers may be forced out of the market because of dwindling sales margins (in turn because, presumably, they’d depend on revenue from bundled apps or their own Metro-enabled apps, from which Microsoft will, under Windows 8, be taking a much bigger cut). And since Valve’s revenue model is currently driven foremost by the PC, the loss of PC makers could indeed be a huge blow to its own profits. Anything that threatens Valve’s ability to access its biggest audience is a threat to its bottom line.

What about the argument that third-party software makers have generally benefitted from Apple’s App Store, despite Apple’s 30% profit “tax”? This argument goes that, without Apple, these developers would be making far less or nothing at all without their exposure, through the App Store, to a rising tide of iOS devices (and, more recently, the Mac App Store in OS X). If that argument is valid, does it suggest that Newell’s crying wolf?

Any answer’s going to be a guess, since it involves speculation about whether third parties are going to support the Windows Store. In order for developers to do well, Windows Store has to do well, and so forth — it’s an interdependent feedback loop, and the contingencies are innumerable. But a few points in Windows Store’s favor: The 30% cut drops to 20% once the applications exceeds $25,000 in revenue, and Microsoft doesn’t take anything from third-party transactions.

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What’s more, you only have to enter Windows 8 through Windows Store’s gates if you’re designing a Metro-interface application. If your app isn’t Metro-enabled, you can bypass those gates entirely. So say Valve releases a Metro-enabled version of Steam — a freely downloadable app today — to distribute through the Windows Store. It benefits from any exposure, especially if it’s a popular download and consistently ranking in Windows Store’s charts.

Of course Newell’s broader point about the recent regulation by companies like Apple and now Microsoft of the process whereby we shop for and consume content on our computers shouldn’t be simply waved off. Yes, “catastrophe” sounds a little apocalyptic to me, too, especially given the pot/kettle issue. Look at what Steam itself is, how it’s grown and taken control of PC gaming and what Valve itself does in policing its turf as well as aggregating and sharing data about its users. It’s all, no doubt to Valve’s mind (just as Microsoft’s) for the “greater benefit” of its users.

But yes, there’s reason for anyone to be concerned when a company takes an open system and replaces it with one that, in addition to requiring content creators pay at the toll booth, includes strictures that prohibit content that doesn’t meet, say, a company’s definition of what is and isn’t morally acceptable. Is it a violation of free speech when a private company chooses to censor an app containing nudity or overt political themes, as Apple has itself done in the past? Maybe not. But what happens if the market shifts so that the only way to access such apps is through a private distribution system with those restrictions?

Valve’s reaction to platform lockdowns, according to Newell: Hedge your bets.

Why do we have people working on Linux? That’s the second part of the problem. In order for this innovation to happen, a bunch of things that haven’t been happening on closed platforms have to occur and continue to occur.


So we’re looking at the [PC] platform, and up until now we’ve been a free rider. We’ve been able to benefit from everything that’s gone into the PC and the Internet. Now we have to start finding ways that we can continue to make sure there are open platforms.


So we’re going to continue working with the Linux distribution guys, shipping Steam, shipping our games, and making it as easy as possible for anybody who’s engaged with us — putting their games on Steam and getting those running on Linux, as well.

Is Linux a “hedging” strategy? An analysis of traffic patterns provided by Wikimedia for June 2012 has 70% of requests coming from Windows devices, compared with about 7% from OS X, 6% from Linux, 7% from iPhones and 3% from iPads. As a profit-minded hedging strategy today, therefore, Linux looks like a pretty dismal bet.

But what about the long game? Windows was never a sure thing. What is? But if Windows 8 arrives and developers run for the fences, I think Microsoft’s more likely to abandon the model or alter it in a face-saving way, than allow Linux, iOS and OS X to drink its milkshake. So no, I don’t know that I fully agree with Newell that Windows 8 is a “catastrophe,” so much as an intrepid — and very risky — experiment. (Also: arguably an ineluctable one, given the success a company like Apple’s had with its own heavily policed and “taxed” content marketplace to date.)

Make that an experiment in which, for better or worse, come October 26, 2012, Windows 8 users are about to become participants.

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