It’s still being used by Valve for inhouse development, but I remember back when HL2 was release it was as big as Unreal. What happened?
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Answer: Unreal was already a major player at the time, being used in a lot of games that didn’t make use of their own in-house engine. So Source had something of an uphill struggle out of the gate. Valve decided the USP for it would be its real-time physics capabilities – and HL2 was a big showcase for this. It had an incredibly in-depth physics model allowing objects to interact in ways most gamers had never really seen.
But with this came a lot of complexity. Even HL2 had a certain amount of “jank” to it in the puzzles. Objects would move and fall off each other in unpredictable ways at times. If Valve themselves couldn’t tame it fully, what hope would other developers have? Many simply decided that if their game didn’t need the level of realism and depth to the physics that Source provided, then they’d be better off sticking with what they knew.
And then of course Unity came around and although it’s certainly nowhere near what Source 2 & Unreal can offer, its big USP was accessibility – both in terms of price and ease of use. There’s a reason Steam is plagued by Unity Asset Flip games. Suddenly just about anyone with almost no programming experience could get something up and running out of the box fairly quickly.
So using Source just felt like a bit of a weird choice for many. Unreal was the big “professional” choice. Unity was for the indies and upstarts. And others like Rockstar, Bethesda or Polyphony would just continue to use their own because it was custom made for their needs.
Source just couldn’t fight the momentum.
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