SFM was developed internally at Valve in 2005 and most of it was based on the code from the in-game demo playback tool found in Source.

[17] This version of SFM, which ran using Source's in-game tools framework, was unintentionally leaked during the public beta of Team Fortress 2 in September 2007.

It provided no ability to modify actions, repeat segments, or apply special effects beyond those already used in-game.

[26] In February 2023, Facepunch announced they were producing their own successor to SFM due to compatibility issues with their own game platform, S&box.

Longer films produced with the software include Darkest Days, an hour-long jukebox musical based on Left 4 Dead 2, and Emesis Blue, a 108-minute psychological horror feature film based on Team Fortress 2.