It isn't a monopoly.
It is a private company and so is controlled by the owners (AFAIK currently Gabe has a majority stake).
The flat management structure of engineers provides a model of self-management which seems to create results.
Trust in that ownership and the corporate management of the company is what Valve sells.
They also have the best digital distribution network for games for both distribution and purchase of titles.
They provide the best visibility and statistical data / sales advice in the industry to their publisher/developer partners.
They also happen to make really great games.
And over the past decade they have earned that trust from gamers.
There are no boxes, no DVDs of data that are guaranteed to be accessed offline. This is the digital distribution system. We often have to auth online just to install a PC game, all online is managed via a cd key or DRM code tied to our account, some games even track installs and give you a limited number. DRM is a reality of the platform (something that can easily go too far, forcing some to avoid certain games) and Steam offers as little or as much as you (the dev/publisher) like. This isn't as progressive as GOG.com but the Steam powered DRM isn't limited install and is auth on install (with a local token giving offline play for X weeks, depending how well the offline mode is working at present). Back when EA was charging customers extra to unlock the right to redownload their digital purchases, Valve was saying downloads forever on Steam. When EA are forever turning off servers to disable functionality in their games, Valve have made a few missteps (eg WON transition) but are generally doing ok with it now. Because you're putting your trust in the cloud, digital stores need to court the consumer and show they are worthy of that trust. Otherwise you're paying money and may end up with nothing to show for it (if you buy a game with online auth for installation and they switch off that auth server you effectively have no way of installing the thing you purchased through the official process, SimCity may be a great game next year but do I trust EA to keep the server on for 10 years when they have stated the game must auth online at the start of every play session? I'm not really interested in renting SimCity, especially not at retail prices).
The big thing where Steam wins: critical mass. If Valve was to vanish tomorrow and left nothing behind to help gamers who had relied on Steam then the amount of free community work that would go into hacking the last client and organising data blobs for all games sold on the service would be immense. Piracy would suddenly become a much larger issue as those who legally had a claim to all these games they purchased would be forced to build into the illegal networks for game distribution and hackers would be building pirateSteam to try and make it all easy.
Steam is too big to fail. Valve have always shown a level of customer care well beyond all of the publicly traded companies out there. Hell, they're exceptional in the pool of private companies as far as working in a visibly 'do no evil' way. That's why they're doing really well. On a digital service where trust is everything because you're buying access to an unlock code for 0s and 1s in the cloud, the guys who work well with publishers to show why they should fight with prices to get their games to everyone who wants to play them (even the ones who don't have the money for $60 releases) or may want to one day play them (this is where sales work: buy now for cheap; play later) and also show customers they are a good best with a history of good decisions are going to grab a big slice of the market. As Valve say, piracy is a service issue. Steam is all about service.
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