Valve marked the 20th anniversary of Half-Life 2 with a surprise update that showcased its knack for innovation. The update integrated the game’s two episodic expansions, added new commentary, and introduced several enhancements. Valve also released two-hour documentary chronicling the game’s development, the company’s existential legal battle with Vivendi, and the consequential creation of Steam—now the dominant PC gaming platform.
Steam debuted in 2003 as a solution for delivering automatic updates to Valve’s games. Erik Johnson recalled,
“Gabe [Newell] in particular, he had a pencil sketch of an idea in his head of what would become Steam. But it was clear with Team Fortress Classic and then Counter-Strike that fundamentally the thing we were really attracted to was the ability to ship content directly to our customers.”
Initially, Steam wasn’t designed for distributing games, but a pivotal realization shifted its trajectory. Engineer Yahn Bernier explained, “We ended up going out and finding this company called Applied Micrososystems, So we ended up hiring most of the original Steam team from that other company to build initially this sort of in-game advertising streaming model but then there was this epiphany that, ‘Hey, it’s just bits. Why don’t we just download whole games this way? You guys go off and do it.'”
By 2004, Valve boldly required Steam for Half-Life 2, even for physical copies purchased in retail stores. At the time, this drew backlash from players unwilling to install an extra client to access a game they’d bought. One of Valve’s earliest employees, Greg Coomer, described the internal unease:
“The decision not just to ship Half-Life 2 with Steam but to actually require Steam, even with the versions that were purchased at retail in a box, was the most interesting decision of all those, Because it turned out to be an incredibly important decision for the future of the company, and a lot of us were nervous, and a lot of the people who’d been at Valve for a long time, since the very beginning, were the most nervous about that decision. So it was one of the rare exceptions to our [usual] decision-making process, and Gabe had to really step in and say, ‘No, actually we’re doing it this way.'”
Ultimately, the move paid off. Half-Life 2’s success cemented its legacy as one of the greatest PC games of its era and served as the perfect Trojan horse to propel Steam into homes worldwide.
While digital distribution is now the norm, it was a hard sell in the early 2000s.
“I don’t think people understand how many times we would go to people and say, ‘No, you will be able to distribute software over the internet’ and have people say, ‘No, it will never happen.’ I’m not talking about one or two people. I mean like 99% of the companies we talked to said ‘It will never happen. Your retail sales force will never let it happen.'”
Newell noted. Skeptics doubted players would abandon physical copies or that retailers would accept the shift. Valve, however, prioritized its users, trusting their vision.
Today, Steam’s dominance in PC gaming sparks debate. Critics argue its market control stifles competition, while others commend Valve’s developer-friendly practices and player focus. Regardless, Steam’s origins reveal a company that saw the future before anyone else—and had the perfect launchpad to make it a reality.