Recently, I was fortunate enough to come across a good deal on an Xbox, and decided to snatch it up and join the tens of millions of proud owners of Microsoft’s esteemed home console. No, I’m not referring to their current-and-aging 360. I mean the one that started it all, the black behemoth that first launched the brand. As a collector of retro games, I was late in acquiring the 6th generation upstart, mostly because it’s considered recent enough to be left out of most nostalgic conversations. This was the console best known not just for Halo, but for proving that an industry over 30 years old could still sustain a new entrant and a complete dismantling of the perceptions held by an increasingly jaded community.
Valve might be preparing to embark on the same path almost 12 years later. Talking to Kotaku last month, Valve co-founder Gabe Newell expressed an idea for a new type of PC, one that could sit comfortably alongside consoles:
"I think in general that most customers and most developers are gonna find that [the PC is] a better environment for them," Newell told me. "Cause they won't have to split the world into thinking about 'why are my friends in the living room, why are my video sources in the living room different from everyone else?' So in a sense we hopefully are gonna unify those environments."
This notion of unifying the gulf between the console and PC has a very familiar ring to it. That’s because back in 1999, members of Microsoft’s DirectX team set out to do the exact same thing. They proposed a PS2 competitor that could showcase the advantages of PCs and Windows, all while booting up instantly and allowing non-savvy individuals to play a game within seconds. Eventually this evolved into more console than PC, with only vague remnants of Windows code and a game library all its own.
At a high level, Valve’s situation seems very similar. Both companies started off in the software business, making games for the PC and seeing the console market as both a threat and an opportunity to break into hardware. Both companies decided to do so not just for strategic reasons, but to make a point: Not only is the PC every bit as good as consoles, but in many ways it can be better.
Valve has their own ideas on which direction the hardware market should go. It started when they began feeling frustrated at the lack of innovation in the world of peripherals and computers, and rather than wait for an already established player to make the changes for them, they decided they should just do it themselves. So job openings asking for hardware engineers started popping up. Valve is a company known for experimenting, so this didn’t immediately set off alarms. But as these ads appeared at increasing frequency -- often with very intriguing descriptions -- more people began to take notice.
Eventually the company prone to secrecy spoke up. Mostly about virtual reality, augmented reality, and wearable computing -- all exciting and very futuristic stuff. But until recently, no one had really suspected that Valve’s plans may actually be much bigger. As was the case in the veiled world of Half-Life, the conspiracy was growing.
Earlier this week, a supposed leak from a German website claimed that Valve was affirming behind closed doors that their turn-key computer was more than just a HTPC with their sticker. This system would not be based on Windows, but on a build of Linux. Mixing this with Gabe’s previous statements of a closed hardware environment, people were starting to speculate that this might actually be Valve’s attempt at a true console entry.
More Than Just Steam
As most people already know, Steam is synonymous with PC gaming. Part of the draw of Steam is its sheer depth of game offerings, not just 21st century contemporaries, but old releases from the annals of PC gaming history. It’s possible to buy a publisher’s entire backlog of game releases, and that kind of all-encompassing selection means that very few digital distribution services -- PC or otherwise -- could ever hope to compete.
That kind of power is a compelling leverage, and many feel that the solution to the PC-in-the-living-room problem may be to simply fold that asset into a slick package, lock, stock, and barrel. The seeds for that idea are already in place with Steam’s Big Picture Mode, and if you can just get a standard PC to boot straight into that, you could have a very attractive product with very few additional tweaks.
Clearly Valve has a very different plan, though. By utilizing Linux, they already forfeit a large part of their in-place game library, almost all of which is most at home on Windows. The Linux version of Steam, currently still in beta, supports a paltry 41 games as of this writing. If that were the launch line-up for a new console, that wouldn’t be too bad, but compared to the platform’s heritage, it’s a far cry.
However, Steam isn’t just known for its endless store options. It’s also known for its amazing deals, and the sales events that bring them about have caused many PC gamers to become inundated with games while trying to save money. Valve has been experimenting as much with the economics of selling games as they have been with the creation of games itself. They’ve made many presentations on the value of deeply discounted games, citing the exponential increase in purchases as the reason why a title at 75% off can earn more money than when it’s at full price.
They’ve also been a major proponent of free-to-play, and have transformed their most successful multiplayer game Team Fortress 2 from a traditional pay-at-the-door model to a microtransaction sensation. This is a company that wants to change how publishers do business with their customers, by immediately seeing the impact of their mark-downs and interacting with the player base directly rather than through a retailer.
This is something other companies could stand to learn from, and Valve’s console may be the tool to teach them that. Even without the well of legacy titles in tow, Steam could offer gamers not already familiar with its ways a chance to experience its brand of customer-first convenience. The mythical ‘SteamBox’ could be the first discless console, and any game purchased could then be downloaded on all platforms with the service, at a price far below norm.
Of course, with a Steam-powered platform in the living room, there’s the possibility of games made only for Steam. If in order to push the initiative Valve decided to release, say, Half-Life 3 exclusively for their own digital distribution channel, the other consoles could be left out. It would be a gamble to be sure, but Valve is a smart company, and if they think its viable then they may well be able to pull it off. Certainly it could be good tactic for pushing their platform while still selling their games to the lucrative console market.
If games need to be specially made for the Steam console, Valve obviously has the ties to all the major publishers already there. Once it has support, the focus will be foremost on selling the games, as the case has been for all consoles. For this reason they're initially sold at a loss, and that aligns well with Valve’s ever-persistent philosophy of lowering the cost of entry to virtually everything they do. The key is to get as many consoles into as many hands as possible so that your game-buying population will be large enough to generate profits.
The Hard Reality
So what are Valve’s chances of success? The fact is, they’ve never made hardware before. It’s a whole other matter when you want to sell a physical product, and Valve’s experience selling digital ones won’t help them much here.
Microsoft was in a better position by comparison. They were able to use their software ties to get publishers on board, and they had a lot of experience marketing their products in various outlets all over the world. They also had some prior experience making hardware, albeit usually small devices such as peripherals. Valve hasn’t had to do either of those things themselves, and the rare instances they’ve had to sell boxed copies of their games were facilitated through a publisher.
They’re also not as big as Microsoft, and though their capital may be large (they are a privately traded company so it’s difficult to ascertain how big they actually are), there’s no question that they’re in for a very unfamiliar uphill battle. Console gamers are a slightly different beast from PC gamers, and marketing to them will involve much more than pop-up ads and email notices. If they don't contract with a very capable and aggressive marketing firm early on, their odds of prevailing will be slim.
Still, history has shown that success is possible even against long-established competitors and a sea of naysayers. Sony was able to do it as a hardware company without any previous ties to gaming, and Microsoft did it with only limited experience creating a handful of related products. In both cases, they outsold the incumbent Nintendo in their first outing, and are now considered some of the most influential players in the industry. Of course, there’s also the software companies that didn’t succeed in the console hardware race, and if Valve is looking for any advice on the pitfalls of such an endeavor, they need only ask the grizzled veterans of 3DO.
Nathan Mayer is Associate Editor for 1985FM. Follow him on Twitter @nathan85fm