cancel
Showing results for 
Search instead for 
Did you mean: 

Half-Life Alyx's core purpose is to be a "loss leader" (no money made?)

Zenbane
Level 16
I've been following this topic closely, and figured it may warrant some discussion here. While there's no doubt that HL:A is a fantastic VR experience, it looks like Valve is taking a page out of Oculus' book by intentionally planning to take a financial loss with HL:A in order to cultivate future profits around hardware sales.

For years, Oculus has practically given software away for free. I have numerous free titles (e.g. Lucky's Tale, Robo Recall, The Unspoken, Dead & Buried, etc) from Oculus, and over the years there has been discussion around how Oculus is operating at a "loss" with software in order to facilitate increased hardware sales. And based on some analysis others have done, Valve is doing the exact same thing with HL:A.

Has Half-Life:Alyx Made Money? Let's Do the Dirty Math on a VR-Only Game

it's a reasonably educated guess to say the game helped sell about 180,000 units of Valve Index
The 180K of new Index units sounds about right, considering how small the needle has moved with existing software sales, such as Beat Saber.

But did Valve make a profit?

Has Half-Life Alyx yet turned a profit for Valve? Putting publicly
available reports and estimates together, we can make a tentative
answer: Probably not yet.


Here's roughly how much Alyx has made so far:



Direct purchases of Half-Life: Alyx generated $40.7M in
revenue, and hundreds of thousands of free copies of the game were also
bundled with devices like the Valve Index headset to boost interest in
VR.





And here's how many people Valve paid to develop Alyx:



“Right now it’s around 80 people,” the company said, “which puts it as the largest single team we’ve ever had at Valve.”





And here's how long those 80 people have been developing Alyx:



We started in February of 2016, I think, with a small team, and we
brought out a small prototype. Then people started to play that,
understood what we were trying to do afterward, and started joining up.
We had 80 people on the team when we were about midway through. 


Assume a yearly salary of $150,000 each for those 40-60 employees (because Valve engineers make a lot more on average than that), and that's $6,000,000 to $9,000,000 in Alyx development payroll a year. If we assume average salary/benefits/profit sharing actually come out closer to $250,000 a year, then that range is $10 million to $15 million a year.

Over four years, that comes out to $24,000,000 to $36,000,000 on the low end or $40 million to $60 million on the high end, just in labor costs, to make Alyx.

Add $5-15 million more for marketing, advertising, publicity, various contract labor/short-term costs (playtesting/QA, plus good dialog writing, music, and voice actors don't come cheap!), and so on.

So based on all that, Half-Life Alyx cost Valve about $29,000,000 to $75,000,000 to develop and publish to the world.

And so yeah, if the mid to high range of that estimate is accurate, Alyx probably hasn't made Valve a profit. Yet.

Considering how many contributors chimed in with their analysis (e.g. veteran game designer Tadhg Kelly), this seems like a very reasonable conclusion. Personally, this is a fine strategy. It's what Facebook and Oculus have been doing all along as a means to help this tech break through the mainstream market and march towards that "1 billion users in VR." HTC took a similar approach with VivePort, and now it looks like Valve is following this business model as well.


It appears as if the very impressive high sales of HL:A (the game is getting Beat Saber numbers) are more more closely related to "existing" VR enthusiasts moreso than newcomers. And if that's true, what would be the reason that we aren't seen multi-millions of new users picking up VR for HL:A? Compared to say HL:2 which sold over 12 millions copies?

Some thoughtful answers from the blog:


VR device sales are a non-starter at the current price:




It's simply too expensive. That's it. That's literally all there is to it. No more analysis necessary, really.



Buying in to VR, even on second hand, 1st gen equipment, will run you upwards of $300-400 at least.



And that's not counting the overall hardware requirements you've got
to meet too, in an age where GPUs cost two arms and two legs because of
bitcoin miners driving the prices into the sky.



And now, with the coronavirus destroying the economy and job market,
people are being more frugal about their purchases than ever.



I know people who invested time and money in VR probably want [Alyx]
to remain an exclusive game to drive hardware sales and bring their
hobby more into the mainstream, but it's simply not going to ever reach a
sizable audience when it's being gatekept by the buy-in cost.



Not everyone is even in a position where it's reasonable to throw
500+ dollars at the hardware/equipment necessary just to play one
admittedly very nice looking 10~ish hour singleplayer campaign.



It is an absolutely terrible sell, unfortunately, no matter how good
the game is. Not really sure what Valve was thinking or what the
strategy here was, but it seems out of touch with the economic reality
of most working class Americans, to be honest.



Half-Life 2 was my first PC game. I grabbed a Nvidia 6600GT to throw
in my shitty Pentium 4 bargain desktop, and it still ran fine at medium
settings. $149 dollars and that was it, in 2004.



Now for this title, Valve wants fans to shell out $1000 for an Index first... yeah, sorry, hard pass.



https://nwn.blogs.com/nwn/2020/05/vr-alyx-valve-index-mods.html
9 REPLIES 9

nalex66
Volunteer Moderator
Volunteer Moderator
Not everyone is even in a position where it's reasonable to throw
500+ dollars at the hardware/equipment necessary just to play one
admittedly very nice looking 10~ish hour singleplayer campaign.
It is an absolutely terrible sell, unfortunately, no matter how good
the game is. Not really sure what Valve was thinking or what the
strategy here was, but it seems out of touch with the economic reality
of most working class Americans, to be honest.
Half-Life 2 was my first PC game. I grabbed a Nvidia 6600GT to throw
in my shitty Pentium 4 bargain desktop, and it still ran fine at medium
settings. $149 dollars and that was it, in 2004.
Now for this title, Valve wants fans to shell out $1000 for an Index first... yeah, sorry, hard pass.

This line of argument always puzzles me. It assumes that the main purpose of HL:A is to continue the HL franchise, but it’s being held back by being a VR game. Clearly, the whole purpose of HL:A was to make a top tier VR game; the fact that it’s in the HL franchise is being leveraged to attract more users to VR. 

i7 5820K @ 4.25GHz | EVGA GTX 1080 SC | Gigabyte GA-X99-UD4 | Corsair DDR4 3000 32GB | Corsair HX 750W
SSDs: Intel 660p M.2 2TB, 3x Samsung Evo 1TB | Startech PCIe 4x USB 3.0 | Startech PCIe 2x USB C 3.1 gen2

Zenbane
Level 16

nalex66 said:
This line of argument always puzzles me. It assumes that the main purpose of HL:A is to continue the HL franchise, but it’s being held back by being a VR game. Clearly, the whole purpose of HL:A was to make a top tier VR game; the fact that it’s in the HL franchise is being leveraged to attract more users to VR. 

Fair point! I'm not sure that I personally have an opinion one way or another on this particular issue. I do end up reading both sides of the argument. On one hand, as you said, HL:A had a purpose of attracting more users to VR; while on the other hand I remember reading so many posts (Facebook, reddit) stating that the HL:A franchise is so strong that using VR to continue the franchise was either... a genius move or a terrible move.

Perhaps this is just an issue of marketing, since there was never a clear direction/purpose for HL:A that was given. I mean heck, the first Mod for HL:A was to make it playable outside of VR lol

‘Half-Life: Alyx’ mod allows gamers to play through the game without a VR headset
https://www.nme.com/en_au/news/gaming-news/half-life-alyx-mod-allows-gamers-to-play-the-game-without...

Even if Valve's goal was to bring more VR Users with HL:A's release, clearly the community and HL fanbase had other plans (hence the non-VR Mod). Not to mention all the HL:A meme's that popped up due to the "rage" that existing HL fans expressed over the fact that HL:A was be released in VR.




Perhaps if HL:A were in fact a true "Half-Life 3" then the current stage of things would be different and Valve wouldn't be seemingly taking a loss on HL:A's development.

Kentobi
Level 7
Valve is maybe the last true black box in the industry - since they’re a private company, there is no public knowledge at all of their finances, sales, or anything. Yeah, we’ve all kludged up some tools to make estimates, but that’s truly what they are. (And the SteamSpy dude that dug for a ton of that information was maybe secretly working for Epic? Topic for another day) 

What we believe, though, is Valve is not hurting for income or business. Percentage cuts on software plus micro transactions plus trading cards plus DOTA2 etc. allows Valve the safety net to take creative risks and do things however they want - I.E. making Alex at a potential break even or loss. We’ll learn more in the Last Hours of Alyx, but it’s become pretty clear that Valve noodled on and threw away a ton of work over the last few years. They’re not under any pressure to publish or to get money back unless they’re truly happy. 

Certainly it’s much more complicated than that, but at the end of the day, Valve has no one to make happy but themselves. As long as they can have fun, work on interesting problems, and stay employed, they’ll just keep doing their thing. Shoot, they’re taking another shot at Artifact. That seems nuts. 

I really don’t care how much money Valve made on Alyx, and I don’t think they do either, to a point. Hopefully the critical response encourages them to make more games and publish at a faster rate than we’re used to. The industry is in a better place when Valve is putting out games. 

dburne
Level 16
Valve brings more made for VR games like Alyx, and I will fully support them.
Best made for VR game I have played to date, for me anyway.
Rift CV1| Rift S| Quest| Reverb G2| Index| Vive Pro 2

Zenbane
Level 16

Kentobi said:

Valve is maybe the last true black box in the industry - since they’re a private company, there is no public knowledge at all of their finances, sales, or anything. Yeah, we’ve all kludged up some tools to make estimates, but that’s truly what they are. (And the SteamSpy dude that dug for a ton of that information was maybe secretly working for Epic? Topic for another day)



Sure. And we've seen the same information digging, guessing, and speculation about Oculus and their VR hardware/software sales over the last 4 years. It's fairly common to take these types of guesses for the sake of conversation and analysis.

What's more telling is that these types of guesses are "needed" in the first place. Clearly, if VR was selling in the 10's of millions or 100's of millions each year, then none of this guesswork would be needed. It's not like people have to make these guesses for smart phones.

What we believe, though, is Valve is not hurting for income or business.

Agreed. I don't think anyone believes that. Similarly, Oculus and Facebook have a "loss leader" business model for VR since release in 2016, and clearly Facebook is not hurting for income nor business.


I really don’t care how much money Valve made on Alyx, and I don’t think they do either, to a point.

I would imagine that anyone trying to invest their own business in to VR software would probably care. If something like Alyx can't make a profit, then what chance does a VR Software startup company have at making a profit? We've already seen this type of discussion happen over the years. For example, it's the reason the developers of Eve: Valkyrie abandoned VR development.
https://techcrunch.com/2017/10/31/eve-valkyrie-developer-ccp-games-goes-cold-on-vr/

And we saw HTC go through a Google buyout not long after their investments in VR with the Vive.

So while you may not care, and while you may believe Valve doesn't care... the reason that others are doing this critical analysis is because Virtual Reality is a rising Industry; and like all Industry, there will be those who want to analyze the potential for success vs failure in terms of monetary profits/losses.

Kentobi
Level 7
Hey man, I’m not trying to get into an argument, I’m just not sure what point you’re trying to make. 

Yes, both Facebook and Valve have resigned themselves to making less money/taking a loss right now with the thought of positioning themselves for growth in the future. This isn’t anything new or unusual. Like you say - loss leader - grocery stores sell eggs at cost way back in the back of the store in the hopes that you’ll pick up higher margin items. Valve wants everyone to try Steam in the hopes of getting them more locked into the ecosystem, and same with Oculus. I would guess that Facebook has more riding on the sales of hardware, since they’re trying multiple price points. The Index is a high cost enthusiast product, and Valve has a very spotty history of hardware success. I don’t see that there’s a ton of high-end vr hardware business for them commercially - my guess is that as VR developers, they’re more designing a high-end set for their corporate use and happy to sell as many as they can. 

I don’t understand your point on guesses of sales - we don’t have to guess on cell phone  numbers because they’re public information. Apple tells us how many they sell. Valve and Facebook don’t make that info public. And yes, if it was 100s of millions, they’d be happy to make it public. Companies love to brag about big numbers - since VR headset sales are relatively small and unimpressive - they don’t tell us and we have to educated guess our way into sales figures. 

 And I’d also argue that if Valve can’t make a profit, no one can. Maybe I’m projecting, but Valve didn’t just make Alyx to boost SteamVR, they did it to boost VR as a whole - they almost developed it as a public service. Yeah, if a Valve-backed AAA title is a middling success at best, it makes it hard to justify AAA budgets, but indie and smaller budget titles can find success. If you believe the articles out there, Alyx is responsible for an additional 1M of headset sales. That’s an extra 1M users that will be looking for something to do after Alyx, and will help support other developers. 

Yes, I’d like to see more Valve AAA and more AAA in general, but I’m almost more interested in the next BeatSaber, the next Job Simulator, the next I Expect You to Die, the next Accounting, the next The Under Presents. Valve is helping to move the industry as a while forward, and I’d argue that’s where they see themselves. 

Zenbane
Level 16

Kentobi said:

Hey man, I’m not trying to get into an argument, I’m just not sure what point you’re trying to make. 




Nor I, I was just replying and agreed with some of your points. I'm not taking offense to your responses. I appreciate the back n' forth and welcome the disagreements.

So, my main point was to share some insights from a very popular blog. And if the blog is leaning towards something accurate, I wanted to showcase how Valve's strategy would align with that of Facebook and Oculus. Which leads to a bigger discussion about how, after 4 years of mainstream VR, the main strategy entails being a "loss leader."

The Index is a high cost enthusiast product, and Valve has a very spotty
history of hardware success. I don’t see that there’s a ton of high-end
vr hardware business for them commercially - my guess is that as VR
developers, they’re more designing a high-end set for their corporate
use and happy to sell as many as they can.

Valve gave away Alyx for free with orders of Index. So, I'm not sure how that fits in to what you are saying here.


I don’t understand your point on guesses of sales - we don’t have to
guess on cell phone  numbers because they’re public information.

Private companies making software applications do not have their sales figures public. My point is that when it comes to building software for smart phones, there isn't much guesswork to see how much profit can be made. In gaming, smart phone games sold more than both PC and Console games combined. With VR, no one knows who is making any sort of real profit anywhere. Both with Hardware and Software.

Apple tells us how many they sell.

I'm talking about the software others build for the MAC OS. This thread is about Alyx, which is software not hardware.


Valve didn’t just make Alyx to boost SteamVR, they
did it to boost VR as a whole - they almost developed it as a public
service.
While that may be true, you are actually doing more guesswork in that statement than what is in the original blog post I presented, but you aren't really providing the evidence to back up the guesswork; while the blog provides quite a bit of references.


Yes, I’d like to see more Valve AAA and more AAA in general, but I’m
almost more interested in the next BeatSaber, the next Job Simulator,
the next I Expect You to Die, the next Accounting, the next The Under
Presents.


Agreed! I'd also like to see more amazing VR Titles that cater to more than just gaming. Data Analytics is more my jam.


Valve is helping to move the industry as a while forward, and I’d argue that’s where they see themselves.

I would challenge this by referring to what you said earlier:
They almost developed it as a public
service.

We rarely see public service products move an entire Industry forward. It's usually the expensive innovations that do it. And with VR, it seems that there's a strange battle in what this entails between Hardware and Software.

And since VR user numbers are still so small (not even in the 10's of millions), I don't think anyone is moving the industry forward. At least not by any numbers that would show a blip on the Stock Market radar, that's for sure.

Digikid1
Level 12
Damn.  That means that it won't be on sale for QUITE a while.

I want the game but NOT at the price they are asking for it.  $69.99CDN is pretty steep.

Kentobi
Level 7

Digikid1 said:

Damn.  That means that it won't be on sale for QUITE a while.

I want the game but NOT at the price they are asking for it.  $69.99CDN is pretty steep.


I’m not saying this is the deciding factor, but it is pretty long. It took me 11 hours on normal difficulty, and I feel like that’s on the short side from what I’ve read.