Watch the full video interview embedded above, or click here for the HD streaming option

: Hey guys, you’re here with Stephen Farrelly, your editor and interviewer-extraordinaire (sometimes). We’re out at Valve headquarters in Seattle. It’s snowing outside, but it’s warm in here, and it’s warm because I’m with these guys. [laughs]Now this is Doug Lombardi, who many of you probably already know has been with Valve for quite a long time. But for the sake of those that don’t: Doug, you came from Sierra [Entertainment] I believe?: Yeah, I came over from Sierra at the end of 1999. I was Valve’s marketing guy for Half-life One and Opposing Force and then I came over right before we shipped Counter-strike as a retail title.: For you, coming into the company when it was still quite small, to this now -- and we talked and joked about this before, that it’s somewhat corporate even -- has there been much of a change in philosophy, despite the growth in the company?: Yeah it’s really surprising that it hasn’t. I mean, there’s more people now, but it really is kind of the same place. When I came over, like you said, there was about 20 or 25 of us, and it was a one-game team. We were basically working on Half-Life 2; there was a small group of people working on TF2 [Team Fortress 2] that sort of got bigger and smaller as time went by. Then after Half-life 2, the company had grown by that point to about 60 people and since Half-life 2, it’s now up to about 260.But our hiring policy is all about trying to find people that are the best at their craft, in their field. Always having people that can manage themselves and teams that manage themselves. We don’t have producers; we don’t have a top-down hierarchy. Nobody writes a design doc and hands it to somebody and says “you go build this”. It’s the teams that are coming up with the ideas and pushing in the directions that they want to take the product.So it’s pretty remarkable, but it still has that small company feel and I often joke with Gabe [Newell, Valve Software CEO] that almost like a family business because it’s been the same group of guys just growing and growing and growing as time has gone by.: Could you attribute some of that to the manifestation of: [laughs] I don’t know if it’s so much that, as much as it is that we’ve been really, really fortunate that we’ve been able to work on things that we truly are interested at working on. We haven’t everand said “well let’s just make fancier versions of Half-life for the rest of our lives and collect all the money”. We’ve actually done the opposite, sometimes to our fan’s chagrin.But going off and doing things like Portal and Left 4 Dead, sort of pushing in different directions -- and now DoTA 2 -- rather than just doing the flat obvious thing that you know is going to make money, but maybe isn’t always the most interesting thing. And taking time between those sequels to let them build fresh ideas, so that when the sequel does come out, it’s truly exciting as an event. I think those are the things that have kept so many people here -- I mean, I certainly didn’t think I would be here for eleven years when I took the job, and it feels like it’s gone by in a heart beat.: You mentioned this just a moment ago, that innovation is a big, huge thing. Obviously Steamworks is one of the biggest that you guys have pulled out over the last decade or so -- well not quite that long, but can we talk a bit about that because it’s starting to become its own platform almost. You’ve kind of created a home, a proper home, for PC games and so many other desktop platforms like that have tried and failed.What can you attribute to the success of that, and -- I’ll get to another question about it in a minute, that I know the community is in a bit of... I wouldn’t say an uproar, but we’re definitely questioning. But first, how do you feel from how it started to where it is now, that it’s maintained that ability to survive?: Well you have to remember that it was built as an auto-updating system for Counter-strike. That was the genesis of Steam was, we had this thing called Counter-strike which had come to us from the mod community and at the time, Quake 2 I think was the leading FPS online game with about eight thousand concurrent users. Counter-strike goes out, it goes to eight, 12, 20, 30 thousand concurrent users and at that time that seemed like just this astronomical number of people.And they were all playing different versions. We’d release an update and we’d break the game for 48 hours and we’d see the concurrent users go from 30,000 down to zero and then we’d sit there anxiously for a week to see if it would come back. And it did and we were like “okay, enough with this inertia”. It was slowing down our releases, because we didn’t want to put out a release and break the game until we had enough that it was worth breaking it for.We were, like, “this has to stop, it’s not sustainable”. So Steam really came out of that and it was something that came out of a developer’s wish to make the game experience better for the gamer. Steam has always operated on that principle: like, what else can we do? We’ve got Steam Community; we’ve got Steamworks so other developers can use some of the matchmaking and anti-piracy stuff that we’ve put out there. We brought the game to the Mac; you know, just always looking for more ways to make the experience better for the gamer and now with Steamworks, for the developer as well.The fact that we’re selling games over that platform is just sort of an “oh by the way”. The fact that we have all these other things, that’s where the real value is and the fact that we’ve started selling more and more games is just, oh that’s a happy coincidence that sort of came with all of that. Once we were connected to all of those customers, it was, like, “well if you put a billing system in there, you could sell games over that too” and it was, like, “okay, well let’s do that too”. There was no reason not to.So I think that’s part of the reason that it’s continued to grow and it’s because it’s been built as a developer’s toolset and always continued to be thought of that way.: One of the big things then, that has come as a result of the selling side is regional pricing, which we happen to take a bit of a punch in the face in Australia over. Obviously, it’s a digital distribution platform, so you’re not really buying physical copies of anything. How do you guys work that pricing system out, because some games are 40 dollars here in the US but even with our dollar as strong as yours it’s still 80, 90 dollars in Australia.: It’s something that’s just really hard to navigate. The value of currencies, especially in today’s market are going up and down. When we launched Steam, the Canadian dollar was about 60 cents to the American dollar; today it’s flat even. And there’s just tonnes of currencies around the world and we’re constantly trying to match that and work with the third-party publishers and how they want to price their games in what territories and when they want to release. So it’s constantly something that there’s a big army of people downstairs on the Steam team that are trying to manage, to give the best possible results to gamers and publishers for their games.There’s a balancing act there. Some places we get it more accurately on than we do in other places, but we’re trying to listen to people and adjust things to make sure that it’s a level playing field and that folks are getting a higher service value at the right price for their games.And folks vote with their dollars. If we’re getting it really, really wrong, that territory or that country will turn off and we have to stop and scratch our heads and say “well where did they all go and what happened? Was it a pricing issue and we need to resolve it?” But it’s something that we’re aware of and we’re constantly trying to manage, but I think it’s going to be one of those things where it’s always going to be an ongoing effort, because markets and currencies are always changing. We’re never just going to get it right, freeze it, and it’s always going to be okay.: Do you think there’s an unfortunate parallel between physical retail and digital distribution at the moment as well that could be factored into that?: How so?: In that, publishers are still so aware of particular prices that they make for games at retail, that they’re still offering them for the same price across digital distribution platforms despite the fact that digital distribution negates certain sections of the market.: Yeah I think there’s probably a little bit of that going on. A little bit of that too is probably just that for some folks, different areas of the world are really managed by wholly different teams. So there isn’t one person at a given publisher who controls the whole world. So as we get into that with them, as a world-wide publisher, we’re a little bit different for them, right. Because they’re talking to like EB in Australia; the guy in Australia is talking to them and they have a plan, versus the folks in France or whatever are talking to a completely different retail and they have a different mindset.We’re in both places, so how do they deal with us? So yeah, there is a little bit of that and I think more than anything else, it’s something that time will ferret out. As digital distribution becomes a bigger part of the marketplace, it will become a different consideration for stuff and we’ll see pricings start to filter out.It’s still very much in its infancy, I mean it’s only been about the last three years or so that we’ve really been distributing third-party titles in a big way, day in day out, with the monster titles. In 2005 I think it was, there was Ragdoll Kung Fu that was the first third-party title to come out [on Steam] and it wasn’t until 2006 that we saw even another third-party title, and it wasn’t until ‘07 I guess when we started getting the big Triple-A blockbusters and less of the indies and what have you in the back-catalogue. So we’re still evolving, we’ll get there.: Now let’s move on to the fact that Steamworks is now on PS3. Obviously it’s in a pretty raw form at the moment, but you’ve also just launched a bunch of new games on Mac and it seems like you’re kind of opening up the idea of division between platforms a little bit more -- well the first time that anyone’s ever been able to boast that they have a game that people can play from Mac to PS3, PS3 to PC, PC to Mac.: And they get access to all three with one purchase.: Exactly, so what’s the future for that? And I guess at the other side of that question I had was: you obviously approached Microsoft about it, surely, so why haven’t they jumped on board because it seems like there’s a lot of people [Xbox owners] that are going to miss out because of that.: Yeah, I defer you to Microsoft to find out what their thoughts on it are. We offered it to everybody; our goal is to have folks be able to access their games on whatever platform they’re on and as much as we can deliver that through Steam, the better. It’s worked really, really well on the Mac; we’re going to deploy our first experiment with Portal 2 on the PS3 and folks seem really, really excited about it. We’ve put a lot of time and detail into that so that the experience is highly satisfactory, right out of the gate.So we’ll see where it takes us. I mean, again, our goal ultimately is that folks pay for a game and then whatever platform they sit down in front of, it’s there for them. That just seems right. That’s the way your music is, right? It doesn’t matter; you don’t have to pay for it on your car stereo and on your home stereo, it’s just your music. So for us, that’s kind of a philosophical goal to get to and we’re taking baby-steps towards it.I think we made a really nice move last year with the Mac and hopefully this year, we’re able to move things forward on the PS3 a little bit and we’ll see where the future takes us.: Now I’ve got the all-important question; you probably already know what it is.: [laughs] And I already know my answer. [laughs harder] Or my non-answer I should say!: For the sake of everybody back home, that’s been desperate to know. Will we ever see it [more Half-Life]?: You will ever see it, yes. We are not done with Gordon Freeman’s adventures. I have nothing other than that to tell you today, but hang in there with us.: Well thanks very much for your time today Doug. The game looks fantastic; the new office looks fantastic; you guys are doing a great job.: Thank you. It was a pleasure.: Cheers