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Valve Makes More Money Per Employee Than Google Or Apple
- bjonathan 16y agoForbes article on the subject: http://www.forbes.com/forbes/2011/0228/technology-gabe-newell-videogames-valve-online-mayhem.html http://www.forbes.com/forbes/2011/0228/technology-gabe-newel...
- sosuke 16y agoThat was strange indeed, this link to Techcrunch was a teaser for an article that was on Crunchgear that was a snippet of the actual full article on Forbes. It was a good read though.
- bpeters 16y agoI feel like Techcrunch does that a lot....
- benologist 16y agoWelcome to AOL!
- jamesjyu 16y agoMy friends and I have actually been noticing this. There's been a deluge of TC links to articles with barely any content, and/or content that simply links to another article. This is not a good trend. People: please submit original sources.
- raquo 16y agoAn opportunity to make a techcrunch url unshortener!
- saurik 16y agoYou actually missed a step, which to me is what really makes this situation amazing: the TechCrunch page is a teaser for an article on CrunchGear that was actually syndicated from "gamrfeed" (note the via link! ;P) which itself is a snippet of a full article on Forbes.
- mambodog 16y agoI was curious about the origin of the photo of gaben w/ minigun that turned up on Reddit a few days ago...
- michaelbuckbee 16y agoI've seen a couple videos of "behind the scenes" at the Valve offices and Gabe is a weapons nut: lots of framed knives and things used as decoration.
- erikb 16y agoWhy didn't you post that link as the thread's link? Makes much more sense.
- deleted 16y ago[deleted]
- icey 16y agoRevenue per employee is one of my favorite metrics. I work on B2B software & services and when we ask our customers for testimonials we ask them to figure out what their revenue per employee was prior to using our system and then compare it with current numbers. Since part of our value proposition is that we teach companies how to do more with less, it becomes a very powerful marketing tool. (We usually see an increase of 200% to 300% revenue per employee after 5 years; ordinary growth in our industry is 10% to 20% growth over 5 years.)
- klbarry 16y agoWow, may I ask what kind of software creates such an astounding change?
- icey 16y agoHeh, it's a boring industry - Insurance sales. But other than a few small players that are focused on the wrong things, we mostly compete with home-grown systems and excel worksheets over email. We made a choice to focus on this metric a few years ago and it's been a tremendous boon for us (and our customers). Now we consider every change with the lens of "Will this help our customers do their jobs better?"
- DevX101 16y agoHow'd you end up focusing on that industry? Boring, but solid industries make for excellent profit margins.
- icey 16y agoIt just worked out that way. This company used to be one of my consulting clients, and they talked me in to staying full time to fix some quality and process issues as well as tweak their sales process. It's been very satisfying to see the progress for sure.
- muhfuhkuh 16y agoWhen I used to sign up for insurance face to face through a local broker, their system was logging into a ISDN line, then connecting to a VMWare session that opened up a hosted desktop that they then used to open a TN3270 emulator to the insurance (in this case, Allstate) text-based interface. I have a feeling independent resellers of services, brokers of any kind, and management companies of all verticals are seeing this type of abysmal computing and are crying out for someone building that next Quora knock-off to give their industry some love, likely at _any_ price (because they're probably paying a fortune for their kludge solutions anyway).
- yesimahuman 16y agoDon't forget engine licenses.
- CrazedGeek 16y agoDoes Valve make much off of those? Looking at http://en.wikipedia.org/wiki/Template:Source_engine_games http://en.wikipedia.org/wiki/Template:Source_engine_games, there don't seem to be too many "other" games.
- sid0 16y agoYeah, Epic probably gets a lot more money from engine licenses than Valve does. Valve definitely makes a large portion of its money through Steam.
- andreaja 16y agoValve don't release pricing information for the Source Engine, but they say it's competitive[1]. One of their competitors is id, who charge $250k plus 5% of wholesale[2] for id Tech 3. I'd say it's probably nice side income. Epic charge $350k plus 3% of wholesale[3]. For 18 games (if I counted that wikipedia list correctly), that should be a fair take, but it would seem like more of a side income when compared with Steam :) [1] http://source.valvesoftware.com/SourceBrochure.pdf http://source.valvesoftware.com/SourceBrochure.pdf [2] http://www.idsoftware.com/business/technology/printdoc.html http://www.idsoftware.com/business/technology/printdoc.html [3] http://udn.epicgames.com/Main/Licensing.html http://udn.epicgames.com/Main/Licensing.html
- psykotic 16y agoWell, $350k is UE2's price but that's an outdated engine. A license for the current generation engine, UE3, will cost you around $1MM for a flat deal, less with back-end royalties. Epic makes significantly more from their games than from their licensing. Here's the math. The Gears of War games had sold 12 million copies as of April last year. Most were sold close to release at $60 but some sold later at a discounted price. Let's say the average sales price across the 12 million copies was $50. A top-tier developer like Epic can command a 40% or higher royalty of wholesale minus cost of goods. GameStop's profit margin on a new game is 20% and cost of goods is a few bucks. That's around $15 per copy into Epic's pockets. Multiply by 12 million and you get $180MM. When Gears of War 3 lands in half a year, it will sell more than 7 million copies and make Epic another $100MM. That's a fuckton of money. Valve's revenue from sales of their own games and cuts from Steam is stratospheric compared to Epic's. If Gabe snapped his fleshy fingers and instantly absorbed all of UE3's marketshare with Source, it would still constitute a small portion of Valve's revenues. That's probably why Valve hasn't been more aggressive about engine licensing. They already have a massive and diversified revenue stream.
- Aaronontheweb 16y agoI'm not surprised - Valve's business model with Steam is really smart and it's a great way to PC game publishers to sell older inventory (like my beloved Lucas Arts classics) without having to take any real risks. They're going to become the Amazon of PC games if they aren't already.
- deleted 16y ago[deleted]
- DevX101 16y agoDidn't know Newell was a Harvard dropout. What's it with Harvard C.S. students dropping out and making it rich?
- kirubakaran 16y agoSurvivorship bias, selection bias etc
- DevX101 16y agoI agree with the survivorship bias, maybe there are other dropouts who I never heard of. But on the selection bias, I can't really think off the top of my head many other major founders from top C.S. schools that dropped out and were successful. Is Harvard even a "top" C.S. school?
- mdwrigh2 16y agoAccording to US News [1], it's ranked 17th which is decent, but not great. On the other hand that ranking is for graduate schools though, which takes into account things like citations of research published, which is less important at the undergraduate level. I'd say at the undergraduate level, Harvard is a top CS school if only because the competition is so fierce to get into it at that level, the students will be among the top. And, in my opinion, the quality of the students is of more importance than the quality of the teaching at the undergraduate level, when you start talking about the top 20 schools anyways. [1]: http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/top-science-schools/computer-science-rankings/page+1 http://grad-schools.usnews.rankingsandreviews.com/best-gradu...
- Retric 16y agoIf you include grad school it seems fairly common. Sergey Brin "is on leave from his Ph.D. studies at Stanford."
- endtime 16y agoYou mean, what's with people smart enough to get into Harvard, studying one of the fields most conducive to tech entrepreneurship, who then see a business opportunity with so much potential that they are willing to leave Harvard for it, being successful?
- allwein 16y agoMeasuring any "Random Tech Company" versus Apple on the metric of Revenue Per Employee is always going to be skewed in Apple's disfavor. Everyone always forgets the thousands of retail employees at Apple Stores which are obviously going to generate much less revenue than say Johnny Ive or the programmer's writing the next version of OSX.
- _delirium 16y agoValve is also really small compared to Apple (250 employees versus 50,000). If we're willing to compare among that level of size difference, then Mojang (of Minecraft fame) has better revenue per employee than Valve.
- ZachPruckowski 16y agoDoes it? "High Hundreds of Millions"/250 could be greater than or equal to $10M-$15M/7 employees.
- dorkitude 16y agoTrue, but Mojang grew 7x after most of that revenue ;)
- joh6nn 16y agothat's a fun metric, but is it useful? i ask in seriousness. granted i'm no economist, but i'm not sure it's actually telling us much. Google and Apple, unless i'm mistaken, have way more product diversity in much larger markets; that Valve should have lower overhead per employee doesn't come as a surprise to me. is there some non-obvious (or perhaps it is obvious, but not to the lay-person) reason why this is an impressive or telling metric?
- Tiktaalik 16y agoEven aside from their Steam distribution system I think Valve probably does better than most game companies at producing hit games while keeping their teams small. If you look at titles such as Left 4 Dead and Portal it's clear that there's not a whole lot of feature bullet points. These hit games are short, well crafted, tight experiences. In contrast many other AAA titles out there offer a massive array of features and options to the player. Grand Theft Auto, Mass Effect, Fallout, and Halo are all massive games that require massive teams to create.
- MLR 16y agoSo their profit is somewhere north of $70 million if I did my maths right and Wikipedia is reliable. Not at Activison level yet I think.
- mjfern 16y agoAside from the Valve's revenues per employee, what I find interesting about Valve is their Steam platform. Steam (and other platforms for downloading and streaming videogame content) are a disruptive threat to Gamestop and the videogame sales of other retailers, such as Wal-Mart. Given that online distribution has now disrupted music, newspapers, books, movies/video, and now tv/broadcast, I'm surprised that investors think Gamestop is worth $3b.
- georgemcbay 16y agoOne thing Gamestop still has going for it is used game buyback and resell, which IIRC is where they make the vast majority of their money. Considering this market is completely unserved by Steam and other online delivery platforms, I can see why Gamestop would still be valued pretty highly, for now. Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon.
- r00fus 16y ago>Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon. This is why Gamestop should be finding support (ie, EFF, ACLU, legislators) to safeguard First Sale doctrine for digital purchases: http://en.wikipedia.org/wiki/First-sale_doctrine http://en.wikipedia.org/wiki/First-sale_doctrine
- ianferrel 16y agoIs there any reason to believe that Gamestop will get any of the business from digital resale? I could see eBay trying to find that support, but Gamestop's just a dinosaur.
- city41 16y ago> Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon. Yes but they will do that without Steam. Sony, Nintendo and Microsoft already have infrastructure in place for it and already digitally distribute small games. They just need to make it scale to full releases.
- masklinn 16y agoAnd still no Episode 3.
- iwwr 16y agoShowing up is 90% of winning a battle. Other companies didn't bother with digital distribution and left the field wide open to Valve. All for the better, perhaps, it would be terrible if EA or Activision had the market all to themselves. But even though they are not purely a game company, Valve are among the dwindling developers that actually embrace modders and giving players choice. In the console-centered world, the idea of free custom maps or player-run servers is fading from memory.
- bugsy 16y agoThis is not a news story, it's a marketing story promoting the company. The reason is that the claims are not remarkable at all, but the story promotes them as if they were, which is misleading. Per-employee profit and revenue is larger in general at small successful tech companies than big successful ones. For example, I make far more per employee than Valve, Microsoft, Google or Apple and you don't see Forbes writing about me, nor should they.