I still have big hopes for Steam, but I think we will have to wait a few years to see all of the great changes it can bring to the industry.

When Steam debuted, I saw a future where developers get more creative control about what kinds of games to make and when to ship them. I envisioned a time where developers sold directly to their customers, reaping big rewards. I saw the opportunity for big time developers to make games that aren’t forced to be sized up for retail, especially if they have some great gameplay that doesn’t hold up past 5 hours of play. I even considered that piracy could be eliminated if you require a customer to login to your distribution channel to play.

Now I think any major success for Steam or any other PC digital distribution channel is still quite a few years away. Digitial distribution lacks convenience. What we need is iTunes for games. What if I told you there was an online service that offered you all of the selection of a Best Buy or EB? You might be interested since it saves you a trip to the store. If I told you there were free downloadable demos for every last game there – something bricks and mortar could never do – you’d probably be very interested.

Even the folks who are aware of Steam know it’s only going to have a very limited selection of all the PC games that exist. They’re only going to open up their Steam client to purchase something specific that they’ve seen hyped somewhere else. When Valve announced the upcoming release of Team Fortress 2 and Portal, I thought “Awesome! Here’s a smaller game from a big developer that would have never existed outside of digital distribution.” But, oh, wait, why are these games only available as part of an HL2: Episode 2 bundle? I understand it’s a necessity for retail, but it still doesn’t make immediate sense. There’s not a strong gameplay link between the three titles. So, why bundle them on Steam? Why not release them one by one, price them individually, and make more money?

If a friend walked up to me at home tonight and offered me a copy of Portal for $5, right-there-right-then, I’d say yes. But if it was released on Steam as a standalone, I’d probably never get around to buying it.  A $5 game isn’t enough motivation for most to get their buts in gear and make a purchase. Valve has to make a compelling enough case for players to open up their Steam client or go out to a store. Episode 2+TF2+Portal is pretty compelling.

It’s still too inconvenient to buy a smaller game, relative to the value of the game. Yet, plenty of people will go and buy a single, $1 song on iTunes. We need an online superstore for games.

I think the key ingredient – the one that will get all the big publishers to commit their big games – is a mandatory login to play. I know this would piss off a massive number of people, but stay with me. One reason for the huge success of MMO’s is that there is no piracy. Requiring your customers to login to your servers in order to play the game eliminates the opportunity to steal it.

Obviously, if your 43 year old Aunt goes out and buys The Sims 7 and finds out that she has to have an Internet connection in order to play it, she’s going to be upset. Requiring a login means eliminating all customers without a connection available all the time that they are gaming. That’s a big loss.

But how big of a loss is it compared to the number of sales lost to piracy? The pirates are already online. I don’t think there are any good numbers out there to answer this question. Yet, there’s enough anecdotal evidence to suggest that if something like Sin Episodes went for a free-to-try, required-login-to-play model, they might come out ahead, even in today’s market. For certain kinds of hardcore games, I think the anti-piracy gains would be bigger than the luddite losses.

I’m speculating without any data to back up my argument, so I could be wrong about coming out ahead in todays market for even an online-only title like Battlefield 2. But, more game players are online every day, so even if my argument doesn’t hold water today, it will soon.

One sure way to attract these developers and publishers to your store is to prove that it will make them more money:

If (Cost of goods savings + distribution savings – customers lost to Internet requirement) > (customers lost to piracy)

Then you’ve got a compelling case. Required-login-to-play is part of the deal because it’s trivial once you have a convenient superstore. Consumers win by gaining a superstore and a more democratized market. Publishers and developers win by cutting into piracy and saving on distribution. Required-login-to-play is the key to it all.

Plus, once you’re logged in, it’s so easy to go an buy some little games – they’re all right there! So this mega-channel can offer all the little games too. It’s the big games and the little games living together in harmony with hearts and rainbows and pixie sprinkles! I honestly believe this will happen, just not anytime soon. I don’t think the weather will be right for any digital distribution channel to make this jump for quite a while.

Likewise, for consoles, major success will have to wait until the next-next-generation. They’re fixed platforms, and while Xbox Live Arcade is great, it doesn’t have the complete package. The Core console doesn’t even have a hard drive. None of the big three are making a big push to sell their marketplaces as a primary distribution source. That means we’re locked into the current system for the next 5 years or more.

So, I was wrong about the Digital Distribution Revolution being upon us. But, hopefully it’s just around the corner, waiting for somebody big to step up.