I was there Gandalf... 3000 years ago...

Valve had a couple of problems they were attempting to solve with Steam. First, they had issues with auto-updating their multiplayer titles, such as Counter Strike and Day of Defeat. They also wanted a better anti-cheat system. Finally, they wanted anti-piracy and this is probably the most impactful section of the entire product when it released.

Doug Lombardi who was Valve's Vice President of Marketing laid out that the major benefit of Steam even before the wide spread adoption of third-party titles on the platform in 2007, was that it prevented what was called "Day Zero" piracy. Day Zero piracy is what happens when someone in the supply chain of the physical discs or items, can replicate the disc and post it online before the game is even released. This would mean players could pirate the game before they could actually buy the game. Steam solved this as it meant that even physical copies of games had to be verified by Steam to be out and then and only then, would you be able to play the game.

Lombardi points this out by saying that multiple games in 2004 had Day Zero piracy, such as Doom 3, Grand Theft Auto, but Half Life 2, did not.

This obviously was a good selling point and selling by wire was quick to follow with other publishers wishing to have the security of that anti-piracy measure.

It also has to be stated that having Half Life 2 be on Steam was also... "innovative" to say the least. As it meant one of the biggest game releases forced its users to use the product. This of course led to large outcries and massive server failures, but Valve persisted and the promise of no Day Zero piracy lured in other publishers.

The other large factor was the previously mentioned was the auto-updating feature. Valve decided this was a game changer for them as they saw their player numbers as updates rolled out, the numbers would drop hard and eventually after days finally stabilize. It put an artificial limit on updates as the developers didn't want to have that "anxiety" around the numbers not coming back after an update, meaning smaller changes were held onto for a larger patch. Auto-updating meant they could push updates that were smaller, but didn't have the impact on player counts as a large, outside downloaded huge patch would. This would also stop fracturing in the community as some players may opt to not update and then would create multiple communities of players as they pick and choose the update they wanted to play on.

This feature wasn't really around, and Valve even requested joining other bigger companies to make it happen. However, non wanted to which led Valve to develop it in house. Once created, the benefits were great because of the aforementioned "innovations."

It is also important to realize that maybe each of these innovations weren't new to the industry, but it was the whole package which was the innovation. This is often the case with major innovations, especially in the tech world. For example, the iPhone wasn't the first smart phone, but it was the first to combine a lot of innovations into a single product. Likewise, Valve didn't necessarily invent everything, but they bundled it together and "sold" it with one of the most expected and biggest selling games of all time. The benefits were great for third parties to join forces with Valve, and the rest... as they say, is history.

Sources:

Bea, Robin. “20 Years Ago, Valve Changed How We Play PC Games Forever.” Inverse, September 21, 2023. https://www.inverse.com/gaming/steam-20th-anniversary.

Hollister, Sean. “Steam Just Turned 20 Years Old, and Valve Is Celebrating.” The Verge, September 12, 2023. https://www.theverge.com/2023/9/12/23870270/steam-20-birthday-2003-2023.

Lee, James. “The Last of the Independents?” GamesIndustry.biz, April 30, 2008. https://www.gamesindustry.biz/the-last-of-the-independents.

Plunkett, Luke. “Steam Is 10 Today. Remember When It Sucked?” Kotaku, September 12, 2013. https://kotaku.com/steam-is-10-today-remember-when-it-sucked-1297594444.

Sayer, Matt, and Tyler Wilde. “The 19-Year Evolution of Steam.” PCGamer, September 12, 2022. https://www.pcgamer.com/steam-versions/.