Horses is a hit, but its studio might still be in trouble

Santa Ragione’s debut narrative horror game Horses was banned from Steam two years ago, putting the studio at risk of closure; sustained publicity and bans have driven the title to bestseller status on GOG and generated enough revenue for the founder to repay roughly half of $100,000 he borrowed. Despite the short-term commercial rescue, the studio remains financially precarious without Steam’s large user base, highlighting Valve’s outsized gatekeeper role in PC distribution and the risk of industry-wide self‑censorship that could damp future creative upside and revenue growth for indies.

Analysis

Market structure: Steam’s de facto dominance (historically ~60–75% PC market share) creates concentrated distribution rent captured by Valve; short-term winners are alternative storefronts (GOG/CD Projekt) and direct-sales/DRM‑free channels that get publicity-driven traffic, while many small indies and discoverability-dependent publishers lose pricing/promotion leverage. Middleware and tooling providers (Unity) gain strategic optionality as developers seek multiplatform, storefront-agnostic monetization and telemetry solutions.

Risk assessment: Tail risks include an EU/US antitrust probe of Valve or platform-splintering that could reallocate discoverability economics (low-probability/high-impact), developer self-censorship reducing creative output (medium-probability multi-year earnings drag), and payment/fulfillment dependency (Stripe/PayPal) causing distribution bottlenecks. Time horizons: viral sales spike for alternatives in days–weeks, revenue reallocation over months, structural developer behavior and regulatory outcomes play out over quarters–years.

Trade implications: Capitalize on shifting distribution by favoring platform-agnostic infrastructure (Unity U) and selective exposure to alternative storefront beneficiaries (CD Projekt — GOG). Use defined-risk option structures to express directional views while limiting drawdowns; avoid concentrated shorts in large-cap publishers until regulatory clarity arrives. Rebalance as EU/FTC milestones occur.

Contrarian angles: Consensus overweights regulatory doom for platforms; underappreciated is that discoverability scarcity increases value of paid promotion and publisher services (monetizable), so ad/marketing platforms and middleware could see margin uplift. Historical parallel: music streaming fragmentation briefly boosted direct / indie channels but ultimately enlarged platform ad/marketing spend—expect a similar multi-year reallocation, not immediate collapse of Steam.

Key Decisions for Investors

• Establish a 2–3% long position in Unity Software (U) over 6–12 months to capture increased demand for engine/tooling and telemetry; use a 15% stop-loss and take profits at +30%.
• Establish a 1–2% tactical long in CD Projekt (OTGLY or CDR.WA) for 3–6 months to capture GOG tailwinds; trim position if shares rise >40% or if monthly net bookings growth for PC digital sales lags by >10% vs prior quarter.
• Buy a defined-risk 3–6 month call spread on U (buy a near‑ATM call, sell a 15–25% OTM call) sized to equal 1% portfolio delta to express upside while capping premium; exit if IV rises >30% or underlying drops 20% intraday.
• If the European Commission or US FTC opens a formal investigation into Valve within 60 days, increase combined U+CDR exposure to 4–6% (reallocating from broad-cap tech), and if no investigation appears by 90 days, reduce exposure by half.
• Avoid new direct equity exposure >1% to small-cap publishers whose >50% PC revenue is reported from Valve/Steam until company-level guidance clarifies revenue diversification; consider shorting such names only after identifying >2 quarters of missed guidance.