Steam's Explosive Launch
911. It felt like yesterday when 2001 arrived, yet February had already begun. The only notable difference was that Yoo Jae-won and Tiffany were still staying in Korea. Their original purpose for the visit—establishing domestic production of MAP 3—had proceeded smoothly, so returning to the United States would have been perfectly fine. However, there turned out to be far more work to handle in Korea than anticipated. Aside from a brief trip to Washington for President Al Gore's inauguration, they had remained in Korea the entire time. Thanks to this, Yoo Jae-won and Tiffany's Seollal holiday felt distinctly Korean.
First, ID Group kicked off the Seollal festivities by generously distributing holiday bonuses and time off to its Korean employees. The base bonus was set at 100 percent, with high-performing departments from the previous year receiving up to 200 percent. As an added touch, gift sets were prepared for employees to take home to their families. Tiffany, however, wore a puzzled expression while the gifts were being assembled. The gifts themselves were fine—the contents were the problem.
"In Korea, Spam is a holiday gift?"
Tiffany's face scrunched up at the mere mention of Spam. Yoo Jae-won's response came through action rather than words. He prepared a bowl of glossy white rice, added a slice of perfectly seared Spam, and finished it with kimchi. Tiffany's skeptical gaze transformed into wide-eyed surprise after her first bite. She had only known the American version—Spam eaten raw with its fat congealed like jelly—so the actual taste caught her completely off guard. It was a small holiday mishap.
Other matters progressed steadily as well. Following MAP 3 production, Yoo Jae-won had been closely watching the appointment of the South Korean national football team manager. As before, Guus Hiddink was selected. This would be the first World Cup hosted on home soil, with matches also held in Pyongyang as part of a joint South-North Korea event—making it far more significant than the previous Korea-Japan World Cup. Achieving strong results had become more critical than ever, so the Korea Football Association moved with great caution. Although the appointment date was delayed by about ten days from the original schedule, Guus Hiddink—who had delivered a crushing 0-5 defeat to Korea in the 1998 World Cup—was ultimately chosen. In exchange for the ten-day delay, the association promised far more comprehensive support than before, and Jeon Jae-jun, the association president, played a major role in securing those commitments.
Jeon Jae-jun had staked his career on football. After all, Mirae Group had been divided between his two older brothers, leaving him with only a small department store, the Ulsan district that had been Jeon Myeong-heon's constituency, and the Korea Football Association presidency. He realized that the only way to grow was to deliver results the public would recognize and become a major political figure, so he decided to go all-in on the 2002 World Cup. That was why he could disregard the association's long-standing practices in pursuit of results. He appointed a foreign manager solely for performance, adjusted the domestic professional league schedule to improve the national team's capabilities, and completely eliminated the practice of selecting players based on connections rather than ability.
Yoo Jae-won offered some advice, but much of the association's reform was driven by Jeon Jae-jun's own decisions. Many expressed concern or skepticism about his moves. Even Jeon Jae-jun himself seemed anxious and frequently called Yoo Jae-won, once even visiting in person. Since only the results would prove whether this choice was correct, Yoo Jae-won firmly steadied him.
ID Group's momentum showed no signs of slowing either. ESD.com, entrusted to the capable Gabe Newell, had been rebranded as Steam and had been undergoing internal testing since the previous year. After incorporating various feedback and fixing issues discovered during testing, it officially launched. The launch event was as extravagant as ID Group's financial power would suggest. Advertisements flooded Nextcom and other internet gaming magazines, even appearing in print media.
Steam supported not only PCs but also the highly anticipated Xbox. From the very start, it offered unprecedented discounts—up to 75 percent off. A special section highlighted indie games and supported small-scale developers. The most prominent feature was the discount event itself. Steam was famous for its fearsome discount rates. New releases received the usual 10 percent discount, but games that had been out for about six months were marked down by a staggering 50 percent. Titles two or three years old saw 75 percent discounts, and in cases where deals were struck with publishers or developers, even relatively recent games received the same treatment. Moreover, Steam came pre-installed on the Xbox. Consoles connected to the internet received automatic updates. For those who played Xbox offline, Steam remained a distant concept. Unfortunately, the number of people who connected to the internet for multiplayer was smaller than those who played offline.
Since its release the previous year, the Xbox had shown solid sales figures, reaching ten million units sold by the end of January. While the PlayStation 2 had achieved the same milestone during the previous Christmas season—making the Xbox one step behind—the fact that a new console was closely trailing the established PlayStation was an enormous achievement. As a result, the sixth-generation console war had become a two-horse race between PlayStation and Xbox. Sega's Dreamcast and Nintendo's GameCube had entered the competition as challengers, but the Dreamcast had already collapsed, and Nintendo was barely holding on with its Mario titles.
With ten million Xboxes sold, the number of installations of Steam exceeded four million within the first week of its launch. Thanks to the massive discounts, games that had previously gone unnoticed achieved remarkable sales. By early February, some titles had surpassed one million units sold. These statistics were shared with game developers and publishers to encourage them to join Steam. Even newly released games rarely sold over a million copies unless they were major hits. In reality, sales typically plummeted six months after release. Yet an older game that had been out for a year selling another million copies was a tremendous feat. Although the price was discounted by 75 percent from the original, generating millions of dollars in new revenue from nothing was an extraordinary accomplishment. Many began to seriously reconsider the potential of digital software distribution. This applied not only to small companies but also to major publishers like EA and Activision.
Around the same time, a significant discussion was underway at EA's headquarters in San Mateo, California, regarding the Xbox and Steam.
"Cumulative Xbox sales through January 2001 stand at 11.06 million units. The average number of titles per console is 4.6, significantly higher than the PlayStation 2's 3.1. Furthermore, the recent launch of the ESD service called Steam is generating considerable momentum."
The presenter standing before EA executives, with statistical data on Xbox and PlayStation 2 displayed on the projector, was James Web. He had joined during President Hawkins' tenure. A former hacker, his exceptional skills had earned him the position of chief software engineer at EA. Even after Hawkins stepped down, his abilities were recognized, and he rose to become the company's chief technology officer. Initially skilled only in programming, his sharp mind allowed him to develop a broader perspective on the entire gaming industry while handling game-related work. This enabled him to reach the CTO position despite Hawkins being ousted.
EA had undergone major internal changes as it entered the new millennium. The founding generation's President Hawkins was pushed out in 1996. Larry Probst was brought in as the new CEO—a man who had founded 3DO Company, which had quietly disappeared during the 32-bit console wars. Probst's internal reputation was poor. He had led the copyright lawsuit against ID Group and lost, which only served to destroy the once-solid partnership between EA and ID Group. The revival of FIFA and Need for Speed, along with the indiscriminate acquisition of various game studios, were the few points that could be viewed positively.
Even Larry Probst could sense the shifting tides of the world, and he knew that ID Group's Xbox stood at the center of those changes. That was why he had called this emergency strategy meeting.
"What we must pay particular attention to is the Xbox," James continued as the projector slide changed to a graph comparing monthly sales of Xbox and PlayStation 2. Early on, PlayStation 2 sales had been overwhelmingly superior. The Xbox lagged roughly one tier behind. However, extending the graph through January of this year revealed an interesting picture. While the Xbox's sales slope declined relatively gradually, the PlayStation 2's slope was considerably steeper. In other words, although the PlayStation 2 had sold in large volumes initially, its sales declined rapidly over time, whereas the Xbox continued to sell steadily.
"Does this mean a sales reversal will occur within this year? What gives you such confidence?" asked President Larry as he studied the graph. James answered concisely.
"The cause is the unexpectedly rapid adoption of LCD TVs. Last summer, entry-level HD LCD TV models exceeded one thousand dollars. Now the price has nearly halved to six hundred dollars. There's a very high possibility it will drop below four hundred dollars during the summer peak season, especially since ID Display is deliberately flooding the market with panels."
James did not elaborate on the visual quality difference between Xbox and PlayStation on LCD versus CRT televisions. EA was, after all, North America's largest game publisher—it would be a dereliction of duty not to know such a well-known fact. Yoo Jae-won's decision to release the Xbox had never been impulsive. When Android was excluded from the PlayStation 2's operating system, the Xbox had been hastily developed as a countermeasure—a story everyone in the industry knew. That was why many had predicted its failure, and EA, given its past conflicts, had been reluctant to release games for the Xbox. Looking back now, however, it could not have been impulsive at all.
ID Display, the world's largest LCD panel manufacturer, had mass-produced large panels without restraint, and the market responded by churning out monitors and televisions. What had initially seemed like over-specification was now proving its worth as the United States prepared for HD broadcasting centered on terrestrial networks, and Timeflix, the VOD service, already supported HD streaming. Above all, LCD TVs paired exceptionally well with the Xbox.
"It's highly likely that the PlayStation 2's lifespan will end earlier than Sony's warranty suggests. Therefore, it's time for us to set aside our pride and actively release games for the Xbox."
James Web's presentation concluded, and the conference room atmosphere grew heavy. All eyes turned to President Larry. No matter how incompetent he was considered, he remained EA's ultimate decision-maker.
"Haha, I understand your concerns. Very well. If it's for the company's benefit, I'll gladly swallow my pride as much as needed."
At Larry's words, James had to work hard to conceal his expression. Pride? The entire endeavor had been flawed from the start, and he was disappointed by the president's refusal to ever acknowledge his own mistakes. Yet years of corporate experience had taught him that hiding such feelings was often the wiser course. In any case, it was fortunate. The video game console market was larger than the PC game market. EA had only been playing half the game in this vast territory—now, at last, it could target the remaining half as well.
"Ah, what about the ESD service called Steam? It's causing quite a stir with those aggressive discounts. Should we start supplying our games to Steam as well?"
Moreover, President Larry seemed to have genuinely changed his thinking and showed a positive attitude toward Steam.
"No. Given our long history and extensive game library, we can decide whether to proceed independently or supply our library after observing Steam's performance metrics."
James, on the other hand, was less enthusiastic about Steam than expected. Having examined its distribution structure, he judged that the drawbacks outweighed the benefits. While online game distribution was still in its early stages, James highly valued its potential.
"You're quite relaxed about Steam."
"Technically, it's not a particularly difficult challenge."
"Is that so?"
"Yes. I stake my reputation on this—if you give the order, I can create an ESD service superior to Steam."
Convinced by James's assurance, President Larry ultimately nodded. His skills were genuine, after all. Furthermore, EA's situation was somewhat better than others. The company whose feet were truly on fire was Sony. In every sector Sony Group had designated as its next-generation growth engine—film, music, games—it was being outpaced by ID Group. Yet there was one place in even greater turmoil, and oddly enough, it was neither Sony nor any corporation. It was the CIA and NSA.
These agencies typically operated in complete silence, as though they did not exist. Amid the chaos surrounding the inauguration of the 45th President Al Gore, an urgent tip from a VIP had arrived, requiring immediate verification. Had it been an ordinary person's report, it would have been handled through standard procedures. But the informant was none other than ID Group's Chairman Yoo Jae-won—making this anything but an ordinary matter.