Valve Corporation
Valve Corporation, also known as Valve Software, is an American video game developer, publisher, hardware, and digital distribution company headquartered in Bellevue, Washington. It is the developer of the software distribution platform Steam and the game franchises Half-Life, Counter-Strike, Portal, Day of Defeat, Team Fortress, Left 4 Dead, and Dota.
Valve was founded in 1996 by former Microsoft employees Gabe Newell and Mike Harrington. Their debut game, the first-person shooter Half-Life, was a critical and commercial success that had a lasting influence on the genre. Harrington left in 2000. In 2003, Valve launched Steam, followed by Half-Life 2, the episodic sequels Half-Life 2: Episode One and Episode Two, the puzzle games Portal and Portal 2, and the multiplayer games Team Fortress 2, Left 4 Dead, and Dota 2.
During the 2010s, Valve released fewer games and experimented with hardware and virtual reality. They entered the hardware market in 2015 with the Steam Machine, a line of gaming computers, and later released the HTC Vive and Valve Index VR headsets. In 2020, Valve released Half-Life: Alyx, their flagship VR game, and released the Steam Deck, a portable gaming system, in 2022.
Valve uses a flat organizational structure, allowing employees to choose their own projects. They develop games through playtesting and iteration, describing game design as a kind of experimental psychology. By 2012, Valve employed around 250 people and was reportedly worth over US$3 billion. Most of Valve's revenue comes from Steam, which controlled over half of the digital PC games market in 2011 and generated an estimated $3.4 billion in 2017.
History
Founding and ''Half-Life'' (1996–2003)
Valve was founded in 1996 by the former Microsoft employees Gabe Newell and Mike Harrington. Newell had spent the prior 13 years at Microsoft developing Windows, including the Windows 95 port of Doom from id Software. Newell had become frustrated with game developers' approach of creating bespoke interfaces for graphics acceleration, and had also seen id outperforming Windows in sales with Doom with an alternative distribution model.Newell and Harrington founded Valve, L.L.C. in Kirkland, Washington, about five miles from the Microsoft campus in Redmond, on August 24, 1996, Newell's wedding day. In a break from industry style of the time, Newell did not want a company name that suggested "testosterone-gorged muscles and the 'extreme' of anything". Alternative names considered by Newell and Harrington include Hollow Box, Fruitfly Ensemble and Rhino Scar.
Valve's first game was Half-Life, a first-person shooter with elements of horror. The development was aided by access to the Quake engine by id Software; Valve modified this engine into their GoldSrc engine. After struggling to find a publisher, Valve eventually signed with Sierra On-Line.
Half-Life was released in November 1998 and was a critical and commercial success. With its realism, scripted sequences and seamless narrative, it had a lasting influence; according to IGN in 2014, the history of the FPS genre "breaks down pretty cleanly into pre-Half-Life and post-Half-Life eras".
Valve enlisted Gearbox Software to develop three expansions for Half-Life: Opposing Force, Blue Shift and Decay. In 1998, Valve acquired TF Software, a group that had made the popular Team Fortress mod for Quake, and remade it for GoldSrc as Team Fortress Classic in 1999. Valve released the software development kit for the GoldSrc engine, facilitating numerous user-created mods. They acquired the developers of one popular mod, Counter-Strike, to create a standalone Counter-Strike game. Happy with Valve's success, Harrington sold his stake in Valve to Newell in 2000.
Valve's publishing agreement meant Sierra owned the Half-Life intellectual property and held exclusive publishing rights to future Valve games. In 2001, Valve renegotiated by threatening to cease game development and develop other software, using an offer of a partnership from Amazon to create a digital storefront as a bargaining chip. After the agreement with Sierra was amended, Valve gained the Half-Life intellectual property and online distribution rights for its games.
Transition to services (2010–2014)
In 2009, Valve hired IceFrog, the developer of Defense of the Ancients, a Warcraft III mod. IceFrog led the development of a sequel not associated with the Warcraft elements, Dota 2, released in 2013. Alongside Dota 2 in 2011, Valve started the International, an annual esports tournament for Dota 2 with a prize pool supported by Valve and funds from microtransactions from battle passes purchased by players. Valve released Portal 2 in April 2011. As with the original Portal, Valve employed a Digipen student team to help develop it; the team behind Tag: The Power of Paint implemented the new gel gameplay.The Screen Digest analyst Ed Barton estimated Valve's 2010 revenue to be in the "high hundreds of millions of dollars". As of 2011, Valve had an estimated worth of $2 to 4 billion and employed 250 people; according to Newell, this made it more profitable per employee than Google or Apple. Most of Valve's revenue came from Steam, which controlled 50 to 70% of the market for downloaded PC games in 2011.
By 2011, Valve had replaced episodic development with a platform-oriented approach, whereby games such as Left 4 Dead 2 and Team Fortress 2 were continually updated through Steam updates. In June 2012, Valve hired the economist Yanis Varoufakis to study the online economies of their games. That December, Valve acquired Star Filled Studios, a two-person studio, to open a San Francisco office. Valve closed the office in August 2013 when they decided it had little benefit. At the 2013 D.I.C.E. Summit, Newell announced that he and the film director J. J. Abrams were collaborating to produce a Half-Life or Portal film, as well as a possible game.
In the 2010s, Valve released fewer games and invested in hardware development. Newell intended to make Valve more like Nintendo, which develops games in tandem with hardware, allowing them to create innovative games such as Super Mario 64. Valve initially focused on augmented reality, but in 2013 Newell laid off many staff to focus on virtual reality. In 2015, Valve released the Steam Machine, a line of gaming computers, which sold poorly. Media commentators speculated that Valve's transition to service provider with Steam, which generated an estimated $3.4 billion in 2017, had driven it away from game development.
Valve canceled games including numerous Half-Life projects, Left 4 Dead 3, a Soulslike game, and a voxel-based game, A.R.T.I. Additional VR projects included SimTrek, developed by members of the Kerbal Space Program development team, and a new VR device, Vader, that was determined to be too costly for consumers. According to the designer Robin Walker, the abundance of projects that failed to gain traction, with no shared vision, damaged morale. Many players grew frustrated in anticipation of a new Half-Life game.
Structure
Initially, Valve used a hierarchical structure more typical of other development firms, driven by the nature of physical game releases through publishers that required tasks to be completed by deadlines. However, as Valve became its own publisher via Steam, it found the hierarchical structure was hindering progress.After completing Half-Life 2, Valve transitioned to a flat organization; outside of executive management, Valve does not have bosses, and uses an open allocation system. Valve's marketing manager, Doug Lombardi, said: "Nobody writes a design doc and hands it to somebody and says, 'you go build this'. It's the teams that are coming up with the ideas and pushing in the directions that they want to take the product." This approach allows employees to work on whatever interests them, but requires them to take ownership of their product and mistakes they may make, according to Newell. Newell recognized that this structure works well for some but that "there are plenty of great developers for whom this is a terrible place to work". Following the difficult development of Half-Life 2, Newell said he became "obsessed" with improving Valve's work-life balance.
Although Valve has no bosses, some employees hold more influence due to seniority or relationships. De facto project leads became "centralized conduits" for organization and sharing information, and decisions are made collectively. Valve uses a process named Overwatch to gather feedback from senior members, which teams may use or ignore.
The success of Steam means that Valve is not dependent on the success of its games. The lack of organization structure has led to project cancellations, as it can be difficult to convince other employees to work on them. In 2020, Valve acknowledged that this made it difficult to gather momentum and had slowed their output during the 2010s. Their VR projects and Half-Life: Alyx became a turning point, setting short-term studio-wide goals to focus the company. According to Walker, "We sort of had to collectively admit we were wrong on the premise that you will be happiest if you work on something you personally want to work on the most."
In January 2023, People Make Games released a report on Valve's corporate structure and culture, based on interviews with several current and former employees. They found that Valve's flat structure and stack-ranking compensation system created a poor release record and a lack of employee diversity. In 2024, Forbes estimated that Newell owned 50.1% of Valve, with the rest owned by employees.
As part of Wolfire Games' lawsuit over Steam policies, case documents revealed details related to Valve's employee structure. Valve had 60 employees in 2003 and had approximately 350 employees between 2012 and 2021. Employees are categorized into administration, game development, Steam development and hardware development.