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Full Steam Ahead: Inside Valve's Grand Plan to Replace Game Consoles With PCs

BELLEVUE, WA - Installed base.


It's what every gaming machine needs if it's to get even a tenuous foothold in this ultra-competitive market. Software developers won't bring their killer games to your platform if there isn't a critical mass of addressable customers - but those customers won't buy your hardware in the first place without exclusive software.


The difficulty of squaring this circle is the reason why the history of the gaming business is strewn with the bodies of failed platforms. If you release a new piece of gaming hardware without at least attempting to resolve that fundamental chicken-and-egg problem, you're dead before you even launch. Yes, there are ways to do it, but they're not foolproof, even if you're an industry giant - witness Nintendo, with sales of its new Wii U platform deep underwater and minimal developer support for its second Christmas season.


Nintendo's fall from grace might give Sony and Microsoft, the current kings of the living room, more confidence when it comes to the launches of their respective new platforms, PlayStation 4 and Xbox One, later this month. But soon enough, they'll have another competitor, one with a particular advantage: It might not have to tackle the chicken-egg problem at all.


Last week, Valve announced that 65 million people were now active users of Steam, its gaming umbrella service for personal computers. That's a number on par with the installed bases of Xbox 360 and PlayStation 3. It's a whole lot of gamers buying and playing the over 3,000 games on the service, from blockbusters like BioShock Infinite to one-man indie projects like Retro City Rampage and everything in between.


Our customers love all those Steam titles, but they also like their families.


If these players had Steam in their living rooms, it would be a close substitute for a traditional game console - if not better. And that's exactly what Valve's attempting. At the Consumer Electronics Show in January, Valve and a variety of hardware partners will unveil a range of Steam Machines, television game consoles of various power levels and price points, built with commodity PC parts, that run Valve's new Linux-based SteamOS operating system. Valve itself is nearing completion of a controller that is designed to eliminate the need for a keyboard-and-mouse setup.


'There's a strong desire from our customers that we've heard for a long time,' says Valve product designer Greg Coomer. 'They love all those [Steam] titles, but they also like their families. And whenever they had to go into the living room, they've had to abandon everything they loved about the games in the other room of the house.'


Valve doesn't need to convince anybody to give up their Xbox. All it needs to do to disrupt the game console biz is get its current customers to bring Steam out of the computer room and onto the couch.


Taking me on a brief tour of Valve's headquarters - a few floors of a nondescript office building in Bellevue, a suburb of Seattle that is also home to Destiny developer Bungie and a short drive away from the offices of Microsoft and Nintendo - Coomer is trying to impress something upon me: Valve is a hardware company now. The halls are full of 3-D printers and electrical engineers sit at desks piled high with oscilloscopes, wires, and prototype hardware. It's all done here in the same office, he says, except for some stuff - injection molding, for example - that they legally can't do in their current office space, and have an offsite area for.


'We're used to thinking of PC as an area where lots of innovation happens in hardware all the time,' Coomer says. 'It seemed like we should get involved in making that move forward.'


It wasn't so long ago that Valve Corporation, then doing business as Valve Software, was a simple game software maker, one of many. Founded by Microsoft alums Gabe Newell and Mike Harrington in 1996, it had a couple big hits with first-person shooters like and Counter-Strike. The project that made Valve more than just another hotshot game developer was, at first, just a creative solution to problems that its existing customer base was having. In 2002, buying, authenticating, installing and patching PC games could be a pain in the ass. The Steam service that Valve was introducing would automate the process. Run the program on your PC and you could buy, download and maintain your Valve games automatically. Since many players would be logged in to Steam constantly, they could use it as a meeting place for game matchmaking.


To say that it was happily ever after would be a lie. Steam began, as one story put it, as the 'butt of the gaming community's jokes.' The servers were overloaded at launch and Steam represented not a solution but a barrier between players and their games. It still wasn't well-liked in 2004, when Valve made a momentous but controversial decision: Its highly anticipated would require players to install and use Steam even if they bought it on a disc at a retail store. Gamers freaked out, and at first their complaints were validated, since Steam again suffered under the load of new players and gamers had to wait hours or days before their copy of the game would activate.


This is not the way most hardware manufacturers would behave.


And yet, somewhere along the line Steam went from boondoggle to boon. Being able to download and update games without hassle (once the kinks were ironed out) was great, especially once other publishers added their games to the service, but what really made Steam great were the prices. Steam sales sometimes let you buy full-priced games for pennies, taking full advantage of the fact that the cost of selling a copy of a digital game was effectively nothing and even a $1 sale was pure profit. 10 years and 65 million customers later, Steam has revived the PC gaming market, which had been in a death spiral when discs and CD activation keys were the only thing standing between publishers and rampant piracy.


Saving money is one of the most enticing things about the idea of Steam in the living room. While Microsoft and Sony have greatly boosted the availability and competitive pricing of downloadable games for the Xbox 360 and PlayStation 3 (neither console launched with the option to download full retail games, just bite-sized Arcade-type titles), they're still constrained by their relationships with brick-and-mortar retailers. They can't undercut disc game prices by too much, but Valve couldn't care less about that.


About a year ago, Valve took the first steps out of the computer room by introducing Big Picture Mode to the Steam platform. It was a console-style interface, a way to interact with Steam from a 10-foot distance while sitting on a couch, looking at a big screen TV, holding a controller. This was a clear indication of where Valve wanted to go, but it wasn't really useful unless you were hardcore enough to actually cram a PC tower into your entertainment center. And you'd have to haul a mouse and a keyboard out there too, since you were still running everything under Windows and since not all games used a gamepad - and even the ones that offered controller support still sometimes required you to set them up with a mouse.


'This is not the way that most hardware manufacturers would behave,' says Coomer. A company like Microsoft would have a 'monolithic unveiling of something that has been exhaustively tested under wraps.' Valve, he says, would rather introduce a piece at a time, gather customer feedback, tweak, iterate, polish, release the next piece.


Now, Valve is ready to start sending out the pieces that should completely solve the living room problem.


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