The Economics of Steam Trading Cards and the Steam Wallet

steam-trading-cards-headerIt’s been six months since Steam introduced their Trading Cards. When they first launched, I was utterly confused as to why anyone would be interested in virtual trading cards that had no purpose and no value. It just seemed like a way for Valve to make some money that no one would buy into.

However, having just completed the Steam Holiday Sale, it’s readily apparent that Valve has hit a home run with the Trading Cards. It’s not just the transaction fees that are making Valve money. The spin-off effect from Trading Cards does just as much to make Steam even more profitable.

First, let’s look at how the Trading Card system works. If you’ve been paying attention to your Steam account, you already know how this works but let’s go through it for the sake of completeness. A good number of games have card drops that occur as you play them. Usually, these game will give you half of the total cards available for a game. If you collect all the cards in a set, you can craft a badge for that game (or sale in certain cases).

steam-trading-cards-dont-starveTo complete your set, you have to either have to get new cards from your friends or buy them from the Steam Marketplace. If Valve had a preference for acquiring new cards, this would be it. That’s because 15% of the purchase price are taken as fees. For example, if you sell an item with a price of $1.00, you would only get $0.85 when it’s purchased. There are two fee types. One is listed as a 10% fee for a given game (for example, buying a Dota 2 card would make it a “Dota 2 Fee”) which appears to go to the developer of a game. Given that Valve seems to be offering the most cards and items through the Steam Marketplace, they certainly like this fee. There is also a 5% transaction fee that goes directly to Steam.

The Trading Cards don’t really benefit anyone if no one buys them, though. That’s why you can’t get all the cards through normal drops. By forcing you to find alternative means to complete your collection, Valve has created a need for the Trading Card marketplace. Just like a game with microtransactions, Valve doesn’t need everyone to buy cards on the marketplace to make money. Given these are virtual items with no cost other than the bandwidth costs to send card data to your Steam client, any money in is almost instantly profit.

And this is where the Steam Wallet comes in. The wallet is designed in such a way that you can put money in but never take it out again. So even if you only sell your cards and someone else pays the 15% fee to Valve, you can’t take that money out of Steam and have to spend it on something on Steam.

steam-trading-cards-marketplaceThe combination of the Marketplace for items some people want to sell with proceeds getting deposited into their Steam Wallets and money never leaving the Steam Wallet unless it’s spent on Steam is what makes the Trading Card system such a coup for Valve. Whether you want the cards or not, by participating in the Steam Marketplace, you’re injecting more money into Steam. It’s really a rather brilliant setup from a business perspective. Money continuously enters the Steam economy but doesn’t really leave (unless it’s Valve paying devs and publishers but that isn’t really relevant to this discussion).

With that money in your Steam Wallet, you options are to buy from the Marketplace (giving of the purchase price 5% to Valve and 10% to the game’s developer with the seller taking the remaining 85%) or buy a game (with, according to my breakdown of the economics of game development, about 25% going to Valve and the publisher getting the remaining 75%).

While at first it seemed as though the Trading Cards were just a novelty that would be a short-lived fad, the fact that there is an active market for them and that they’re being added to more games all the team indicates that they’re here to stay. With both Valve and the developers making more and more money off the sale of cards and the spin-off revenue that more money in Steam Wallets causes, Trading Cards and other virtual items are going to be a lot more common before they go away.

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About Steve Murray

Steve is the founder and editor of The Lowdown Blog and et geekera. On The Lowdown Blog, he often writes about motorsports, hockey, politics and pop culture. Over on et geekera, Steve writes about geek interests and lifestyle. Steve is on Twitter at @TheSteveMurray.

Posted on January 9, 2014, in Games, Long Read and tagged , , , , , . Bookmark the permalink. 1 Comment.

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