Valve's Newell takes video gaming to next level
— -- If you ever find yourself sitting across from Gabe Newell at a poker table, do yourself a favor. Walk away.
Forbes magazine recently added Newell, co-founder and managing director of the video-game superpower Valve Software, to its list of the world's billionaires, estimating his net worth at $1.5 billion. That figure will likely only grow thanks to his latest gamble, called Steam, which is rapidly becoming for gaming what iTunes is to music.
As video games increasingly compete with the movies for America's entertainment dollars, gaming kingpins like Newell have become equivalent to the Samuel Goldwyns and Irving Thalbergs of last century. Xbox chief Don Mattrick has a Vancouver home that was valued at more than $20 million in 2009, and developer Richard Garriott paid a reported $30 million to visit the International Space Station. Forbes' estimate probably puts Newell near or at the top of the money list.
More impressively, he's managed to earn the respect of gamers, whose ethos runs more to the renegade than the One Percent.
Newell made his bet on digital delivery of video games a decade ago. At that time, Valve's production team was working on a long-awaited sequel to "Half-Life," the company's 1998 breakthrough hit about the alien takeover of Earth. Deeply steeped in nearly every aspect of the new game, Newell felt he needed some distance on the process to remain objective on its progress. He began working on Steam, a digital delivery platform that Valve hoped would revolutionize how games are sold by shifting distribution online.
It was a risky move that demanded significant investment and forced Newell to be an industry evangelist about the potential of online sales. By 2005 though, the service was profitable, and today, Steam sells over 1,800 games and boasts 40 million active user accounts. Major game publishers, including Activision, Take-Two Interactive Software and Bethesda Softworks are among its partners. Electronic Arts has become such a believer in the concept that it has launched a competing service, while keeping many of its games on Steam.
"Gabe is an incredibly long-term thinker," says Tim Sweeney, founder of Epic Games. "Gabe had the audacity to invest in a technology that purported to put Valve, as a little game developer, in the position of digitally distributing huge publishers' games and taking a cut. … But now Steam is leading the PC game industry forward in the western world."
Valve has never released specific revenue numbers for Steam, but in January, Newell announced sales had doubled in 2011 and the number of simultaneous users had topped 5 million.
Newell didn't look like a gambler when he started out. He started designing games at Microsoft in 1983 and stayed for 13 years. He was instrumental in convincing developers to embrace Windows as a gaming platform, rather than the familiar DOS operating system. Encouraged by id Software co-founder John Carmack, Newell and fellow Microsoft employee Mike Harrington cashed in their options to start Valve.
Their hopes weren't high. Newell has said he expected to make a single "mediocre" game then be forced to return to Microsoft. Instead, their first game — "Half-Life" — launched a franchise that has sold well over 20 million copies. (Harrington left Valve in 2000.)
