Gabe Newell: Valve will release its own console-like PC

[Silent_Buddha]

Valve could also just partner with Dell. We're already starting to see Dell experiment with something like the Alienware X51 for a gaming centric PC. Have one or two very rigid hardware targets and let the Dells, HPs, and Lenovos build the machines. Games will be tailored for these machines above other configurations. Something like Nvidia's Tegra Zone. The OS will need to be clean, no antivirus, no background tasks. One of the big hurdles that PC gaming never jumped over is the pick up and play nature of consoles. It just has to work, and work with a controller except for RTS type games. No funny error messages, .Net installs, etc when first loading the game. Reducing hardware permutations and having strict OS controls is the only way this can happen. In fact it is MS more than Valve, if they wanted to, who are best equipped to do this type of thing.

In which case you just end up competing with Dell with a more expensive piece of hardware offering the same level of performance. Besides as you noted Dell already has that (Alienware). And HP has VoodooPC. The market for those machines is fairly small due to the high price premium and why you don't see many boutique gaming PC OEMs anymore.

With an open PC box, I'm not sure what Valve can really do to distinguish themselves other than just their name on the box. They'll get a bit of internet cachet and notoriety for it being a linux box, but I don't think that'll be enough to propel it into being something profitable.

We'll see how it goes. But while it's certainly a more solid foundation than the many previous linux gaming box attempts, I'm not sure it's going to be that much more successful.

As before I think it'll come down to pricing and whether they can get some compelling linux Steam exclusive games. If the price is too high that'll end up only being attractive to enthusiasts. But enthusiasts will likely prefer to build their own box. The price will have to be quite a bit lower, IMO, to attract people to a non-windows box.

Regards,
SB

 

[trainplane]

In which case you just end up competing with Dell with a more expensive piece of hardware offering the same level of performance. Besides as you noted Dell already has that (Alienware). And HP has VoodooPC. The market for those machines is fairly small due to the high price premium and why you don't see many boutique gaming PC OEMs anymore.

With an open PC box, I'm not sure what Valve can really do to distinguish themselves other than just their name on the box. They'll get a bit of internet cachet and notoriety for it being a linux box, but I don't think that'll be enough to propel it into being something profitable.

We'll see how it goes. But while it's certainly a more solid foundation than the many previous linux gaming box attempts, I'm not sure it's going to be that much more successful.

As before I think it'll come down to pricing and whether they can get some compelling linux Steam exclusive games. If the price is too high that'll end up only being attractive to enthusiasts. But enthusiasts will likely prefer to build their own box. The price will have to be quite a bit lower, IMO, to attract people to a non-windows box.

Regards,
SB

If Valve wants to compete against consoles, they would need to compete on the console's terms which basically sells the hardware at or below cost. I don't think MS or Sony will go below cost this time and Valve wouldn't want to either. To incentivize Dell to sell hardware at cost, they would need to offer Dell a cut of software sales to that machine. Of course this is tricky because they would need the machine to be locked down to not be able to install normal Window to prevent cannibalizing Dell's normal Windows machines. It would need to be UEFI locked to Valve's Linux variant. But I agree just selling a branded machine at high markup is due to failure. They need novel approach. I think overall the iOS/WindowsRT gradual upgrade model of controlled hardware is the future of consoles instead of the reset and restart every 5-7 years model that we have which is unhealthy. It just needs to be planned carefully.

 

[DuckThor Evil]

And what is saved by the lack of an optical drive will be eaten up by the lack of cost saving on just about every other component in the Steam Box due to Valve not operating at the same economy of scale that exist for MS, Sony and Nintendo.

Valve can't compete hardware cost wise with the Big Three. It will take a substantial investment by Valve to make the Steam Box cost and performance competitive with consoles.

The lack of an optical drive by itself doesn't bode well for a console like PC because it lacks an additional revenue streams like games for retailers. Retailers are going to want higher profit margins on a Steam box if its strictly a digital download based system.

If the Steam Box is going to compete on price it will be at the expense of hardware performance and vice versa when it comes to competing on hardware performance.

I'm not basically disagreeing, if they go to Intel for parts the price/performance is already settled right there. My comments about lack of optical and Kinect was mainly to show that they have some things on their side that saves costs and space to build cheaper, but effective cooling system.

Also things aren't what they used to be. Console manufactures aren't building loss leading cannons anymore. At first glance Orbis is the only one that is focused on performance and even that is not what the previous consoles were at launch. I would say that going with full AMD parts it would be easy to build a system that is more powerful than the Wii U and sell it for $300-350, so Nintendo is imo easily covered. Throw away Kinect and optical and perhaps you can build something with AMD parts that costs about $399 to make and sell it at cost. Valve doesn't need the same profit margins on their hardware as Dell does, because they'll also sell you software.

Launch window for the Steam box hasn't been announced yet as far as I know and it's an evolving environment just like the PC, so it should grow more powerful. Perhaps it can bridge some of the PC and Console strengths. Note I don't expect the Steam Box to be sold as cheap as the consoles, but I do expect the base Valve version to be at least as powerful as Orbis with a lower price point than what's being thrown around.

 

[AlphaWolf]

Valve might not need margins on the hardware, but they either need to invest in an infrastructure (spend millions on their own assembly operation and acquire parts contracts) to build or pay an OEM. So they effectively gain little from that. It's unlikely they'll be selling hardware cheaper than a Dell.

 

[Deleted member 13524]

Using the car analogy , Gabe is talking concept car not the production model being launched in the near future unless he is creating a game server for games with smartphone level visuals. Any Steam box that comparable in price to the new consoles will underperform them in terms of hardware prowess. If not, then MS, Sony and Nintendo are doing something horribly wrong and shouldn't be in the console business in the first place.

Yes, just because he said the post-Kepler generation could do up to eight game calls at the same time, it doesn't mean the first Steam Box will do all that.

However, AFAIK Kepler can do multiple game calls already, though I dont' know how many calls each GPU can handle (isn't this just a driver thing anyways?).
So if the rumoured Orbis and Durango performance numbers are correct, a GPU like the GK110 could perfectly handle two next-gen console games at the same time, plus a couple of high-end smartphone quality games (NOVA3, Horn, etc.). Pair that with some 16/32GB DDR3 2133MT/s RAM and a quad-core 4GHz hyperthreaded haswell and we're good to go for a true game server.

A PC like this wouldn't have to be the Steambox, it could just be the "SteamBox Game Server" SKU, with a price over $1000. This wouldn't invalidate a different SKU, a $400 "SteamBox Starter" with a Pitcairn, a 3-module Piledriver @ 3.8GHz, some 8GB of cheap 1600MT/s DDR3 RAM and a 128GB SSD.




Nonetheless, what Gabe Newell was very clear about is that Valve is not aiming for a low-end gaming machine. Valve is not pulling a Wii U.

 

[dobwal]

I'm not basically disagreeing, if they go to Intel for parts the price/performance is already settled right there. My comments about lack of optical and Kinect was mainly to show that they have some things on their side that saves costs and space to build cheaper, but effective cooling system.

Also things aren't what they used to be. Console manufactures aren't building loss leading cannons anymore. At first glance Orbis is the only one that is focused on performance and even that is not what the previous consoles were at launch. I would say that going with full AMD parts it would be easy to build a system that is more powerful than the Wii U and sell it for $300-350, so Nintendo is imo easily covered. Throw away Kinect and optical and perhaps you can build something with AMD parts that costs about $399 to make and sell it at cost. Valve doesn't need the same profit margins on their hardware as Dell does, because they'll also sell you software.

Launch window for the Steam box hasn't been announced yet as far as I know and it's an evolving environment just like the PC, so it should grow more powerful. Perhaps it can bridge some of the PC and Console strengths. Note I don't expect the Steam Box to be sold as cheap as the consoles, but I do expect the base Valve version to be at least as powerful as Orbis with a lower price point than what's being thrown around.

Can you as an individual build a $300-$400 machine that competes with next gen consoles? Probably so. But can you sell and fill a 500K-1 million unit order for these devices with all the logistics and infrastructure thats required by a widely available legitimate retail device and still sell it $300-$400? Probably not.

The removal of Kinect and an optical drive isn't going to eliminate the cost advantage held by MS, Sony and Nintendo. Because the major cost advantage held by the big three isn't strictly determined by hardware cost savings through economies of scale. The price of a normal retail product isn't solely dictated by hardware costs. The cost of distribution, marketing, production, research and development, QA/QC, sales, operation, profit margin and warranty/support program all influence the retail price of your device. And those costs aren't immaterial and represents necessary parts of the console business that Valve hasn't fully invested in yet.

Stripping out an optical drive and kinect isn't going to make up for those cost advantages. And Steam can't as easily absorb costs as well as Windows/Office, the plethora of businesses held by Sony or the Nintendo's handheld and software business. Jumping into the console business can easily bankrupt Valve.

Given that console manufacturers operate using a software subsidization model where console hardware are sold at cost neutral to cost negative level. A small company is unlikely to enter the space with a device that on competes on price and performance.

MS has sold over 100 million consoles and still the Xbox division hasn't recoup all the cost incurred by MS from entering the space. Furthermore, MS is far more experienced and already had infrastructure in place to produce, market, distribute and sell hardware and software into the retail space before the Xbox. Valve doesn't have that luxury as it uses EA to distribute its software titles. The only way Valve is going to compete on price and performance without such a major investment is to produce the Steam Box at soo small of volume that it will never be a serious rival to consoles.

 

[DuckThor Evil]

Can you as an individual build a $300-$400 machine that competes with next gen consoles? Probably so. But can you sell and fill a 500K-1 million unit order for these devices with all the logistics and infrastructure thats required by a widely available legitimate retail device and sell it $300-$400? Probably not.

No I cannot. If I sell my car and empty my bank account I might be able to make 100 of them
I'm not Valve though and Valve is not a garage company. They can order 500k units no problem imo. I'm thinking their financials are pretty solid, low % credit etc. You can install Windows into these, which increases their base appeal and due to that they should be relatively easy to sell if the Linux side bombs hard.

I don't know if this thing has to be widely available at retail or basically why any of what you listed in your post would be particularly problematic for Valve to make happen. Their operation doesn't need to be at a similar scale to Sony or MS. Putting a product on sale is imo not the hard part here, it's getting proper software content for it and customers to buy it. I'm not expecting price parity if that wasn't clear, but I'm not expecting double price either.

 

[AlphaWolf]

If you want developers to code games specifically for this box, you need to sell lots of them. They won't. Get software without an install base. If its just another boutique type pc, why should anyone give a crap?

 

[DuckThor Evil]

Well they wouldn't be specifically coding for this box, but for Steam on Linux, that should see boxes from other manufacturers as well and also people that has Linux on their current PCs.

The "another boutique type pc" was description of a worst case scenario where they can dump these at a low price to minimize the damages. With a low price the value should easily be good enough for customers to buy them.

 

[Shifty Geezer]

MS has sold over 100 million consoles and still the Xbox division hasn't recoup all the cost incurred by MS from entering the space. Furthermore, MS is far more experienced and already had infrastructure in place to produce, market, distribute and sell hardware and software into the retail space before the Xbox. Valve doesn't have that luxury as it uses EA to distribute its software titles. The only way Valve is going to compete on price and performance without such a major investment is to produce the Steam Box at soo small of volume that it will never be a serious rival to consoles.

Google was in exactly the same position when it decided to launch its own hardware. With zero experience, it has commissioned excellent hardware from IHVs and sold very competitively in a very competitive marketplace. Unlike every other PC manufacturer, Valve would have after sales software (and service?) revenues, so could be more competitive on price. Obviously they can't be too competitive, or they won't make any actual money...

 

[Mobius1aic]

Dell already does those things.

Dell still sticks to PC-centricities (I don't think that's a real word lol), like a large number of USB ports, 5-pin audio out + in, multiple SATA ports.

At most, Steambox realistically needs very little to be a completely useful PC gaming machine:

Standard 3.5mm audio in & out in the front + two USB 3.0.

Ethernet, HDMI, and two USB 3.0 in the back.

I would also equip it with Bluetooth for wireless external devices.

 

[dobwal]

No I cannot. If I sell my car and empty my bank account I might be able to make 100 of them
I'm not Valve though and Valve is not a garage company. They can order 500k units no problem imo. I'm thinking their financials are pretty solid, low % credit etc. You can install Windows into these, which increases their base appeal and due to that they should be relatively easy to sell if the Linux side bombs hard.

I don't know if this thing has to be widely available at retail or basically why any of what you listed in your post would be particularly problematic for Valve to make happen. Their operation doesn't need to be at a similar scale to Sony or MS. Putting a product on sale is imo not the hard part here, it's getting proper software content for it and customers to buy it. I'm not expecting price parity if that wasn't clear, but I'm not expecting double price either.

LOL. I know Valve is not a garage company. Its that manufacturing, marketing, distributing and supporting a console that sells at significant volume through normal retail sales chains requires a rather significant investment. Those costs will affect the cost of the hardware itself.

The cost of a console is more than just the aggregation of the its components cost.

 

[dobwal]

Google was in exactly the same position when it decided to launch its own hardware. With zero experience, it has commissioned excellent hardware from IHVs and sold very competitively in a very competitive marketplace. Unlike every other PC manufacturer, Valve would have after sales software (and service?) revenues, so could be more competitive on price. Obviously they can't be too competitive, or they won't make any actual money...

Google licenses it OS to hardware manufactures for free and a few caveats. Its very unlike what Valve is trying to do.

The first time Google commissioned an Andriod based phone (Nexus One), it was initially forecasted by some analysts during launch to sell by 5-6 million units. It sold 135K in its first 74 days and 4 months later was discontinued.

Google does sell hardware now, its called Motorola and Motorola does nothing but eats into Google bottom line to the tune of almost $1 billion dollars of losses over the last 4 quarters.

Furthermore, Google makes more money with iOS than it does Android. And Android may be a poor example as some have calculated that Google has made less than a billion dollars off of Android since its release in 2008. Given the 1 billion in recorded losses from its Motorola business and the 12.5 billion it invested in purchasing Motorola, I doubt Valve is looking to be in the same boat as Google 4-5 years from now.

 

[Silent_Buddha]

Google was in exactly the same position when it decided to launch its own hardware. With zero experience, it has commissioned excellent hardware from IHVs and sold very competitively in a very competitive marketplace. Unlike every other PC manufacturer, Valve would have after sales software (and service?) revenues, so could be more competitive on price. Obviously they can't be too competitive, or they won't make any actual money...

The thing is there was virtually no risk to Google to start it up other than the investment cost of developing Android. Arguably cheaper than the investment cost of designing a console, designing special controllers, incentivising developement of Linux games for Steam, and then the big one...the cost of manufacturing/procuring said hardware to sell. If it doesn't sell that's a large chunk of money that is constantly depreciating.

For Google entering the smartphone arena, the risk was limited to the developement costs of Android. The bigger risk, hardware manufacturing, marketing, and sales was taken on by the companies making and selling said hardware.

It's a completely different situation.

For Valve they have to make a profit on the hardware, otherwise why make the effort. It's doubtful that the Steambox will greatly expand the user base buying Steam games. Most of the potential buyers are likely to be PC gamers that dislike Microsoft and don't want to use Windows anymore. Outside of PC gamers, Steam doesn't have a lot of cachet. It's not like most people playing on X360 or PS3 or Wii are sitting thinking to themselves, "Man if only I could run Steam games on my console." That isn't to say there aren't a lot of people that have a console that aren't aware of Steam, just that most of the console users probably either aren't aware of them or have only heard of them from a friend of a friend.

Hence, if the hardware doesn't make money the only thing they've done is lower their operating margins.

Of course, if we try to think about this as a long term play (5-10 years before profitability), maybe it could work out. But that requires a lot of things to break in their favor. Again not least of which is having a compelling Linux Steam exclusive.

Without Halo and Gears of War, it can be argued that the Xbox brand wouldn't be nearly as well received as it is currently. And with Valve trying to be the 4th player in a market where consumers are more comfortable with only 2 players, they have a lot of work cut out for them.

Regards,
SB

 

[dobwal]

The thing is there was virtually no risk to Google to start it up other than the investment cost of developing Android. Arguably cheaper than the investment cost of designing a console, designing special controllers, incentivising developement of Linux games for Steam, and then the big one...the cost of manufacturing/procuring said hardware to sell. If it doesn't sell that's a large chunk of money that is constantly depreciating.

For Google entering the smartphone arena, the risk was limited to the developement costs of Android. The bigger risk, hardware manufacturing, marketing, and sales was taken on by the companies making and selling said hardware.

It's a completely different situation.

For Valve they have to make a profit on the hardware, otherwise why make the effort. It's doubtful that the Steambox will greatly expand the user base buying Steam games. Most of the potential buyers are likely to be PC gamers that dislike Microsoft and don't want to use Windows anymore. Outside of PC gamers, Steam doesn't have a lot of cachet. It's not like most people playing on X360 or PS3 or Wii are sitting thinking to themselves, "Man if only I could run Steam games on my console." That isn't to say there aren't a lot of people that have a console that aren't aware of Steam, just that most of the console users probably either aren't aware of them or have only heard of them from a friend of a friend.

Hence, if the hardware doesn't make money the only thing they've done is lower their operating margins.

Of course, if we try to think about this as a long term play (5-10 years before profitability), maybe it could work out. But that requires a lot of things to break in their favor. Again not least of which is having a compelling Linux Steam exclusive.

Without Halo and Gears of War, it can be argued that the Xbox brand wouldn't be nearly as well received as it is currently. And with Valve trying to be the 4th player in a market where consumers are more comfortable with only 2 players, they have a lot of work cut out for them.

Regards,
SB

If Valve really wants a chance of changing the PC/console gaming landscape it will have to release HL3 as a Linux exclusive. Steam might not be what it is today if wasnt for HL2. Initially, Steam was basically a DRM system which used HL2 as a gateway onto the rigs of Half Life fans and fans of other and subsquently released Valve titles. I still get wierded out by the very positive mindshare Steam has today because I left PC gaming shortly after the release of Steam (not because of Steam). But I hated Steam as HL2 was the first game that required online activation and authentication to play. Steam was like a yesteryear version of today's carrier branded smartphone app that you can't delete. That being said, If Half Life 3 can recreate the past glories of the previous titles in the franchise, Steam on Linux at least would have a real chance.

They could heightened that chance by moving all future Valve development and ip over and exclusively to Linux.

 

[Ethatron]

Most of the potential buyers are likely to be PC gamers that dislike Microsoft and don't want to use Windows anymore.

Are we able to quantify the number of Linux-"natives" and people that already jumped the ship yesterday and wait for the revolution to happen to play games [again]? I mean, couldn't the potential market emerge from something else than people jumping over from PCs after it has been established?

 

[Silent_Buddha]

Are we able to quantify the number of Linux-"natives" and people that already jumped the ship yesterday and wait for the revolution to happen to play games [again]? I mean, couldn't the potential market emerge from something else than people jumping over from PCs after it has been established?

Sure anything is possible. But consider that the install base of active Linux users (ones who don't have Windows on another machine) is likely under 2% of the install base of Windows users (including ones that have Linux on another machine).

Now consider that most of the ones that only have a Linux box are mostly non-gamers. I have a few colleagues like that. Ones without a Windows box I mean. None of them play games. Although I'm sure there are people who have Linux boxes and no Windows boxes that also game. But I'd argue that it is a vanishing small percentage compared to the install base of only Steam Windows users.

Is it enough to make a significant profit in the face of the developement and hardware manufacturing and marketing costs? I find it unlikely.

To woo non-Windows console gamers it's going to have to be at least price competitive to the major consoles by Sony, MS, and Nintendo. And then it has to also offer something more compelling than PC games. I don't see much prospects for profit for them with this strategy at least not for the next 5 or so years and not without some extremely compelling exclusives.

Getting Windows users to buy the Steam box doesn't really increase their Steam game purchasers. Which means that doesn't increase their Steam revenue or profits. It only shifts the purchases from Windows to Linux. Hence the hardware needs to be sold at a high margin to generate profit.

Selling it at cost means they don't recoup their investment. It might gain some minor marketshare. Selling it at a loss could potentially gain more. But that's a huge risky gamble.

And to put things into perspective, I would love to see it succeed as it would likely mean more PC developement (Windows in addition to Linux). But as basically an open PC box, I really fail to see how it will succeed.

Opening up Steam to Mac users was low risk. Opening up Steam to Linux is low risk. Launching a console (branded steam PC basically) is a lot more risky. Especially when the pool of Linux games isn't terribly large and most of which can also be purchased for Windows or Mac already.

Regards,
SB

 

[Shifty Geezer]

The thing is there was virtually no risk to Google to start it up other than the investment cost of developing Android.

Android = Steam. Nexus = SteamBox.

For Google entering the smartphone arena, the risk was limited to the developement costs of Android. The bigger risk, hardware manufacturing, marketing, and sales was taken on by the companies making and selling said hardware.

For Valve to enter the software market, they only had to developer Steam. The risk of hardware to run it was placed on Dell, HP, ASUS, and IHVs.

After Google's OS, they then decided to create their own hardware range, which they didn't have to do. Valve are considering the same. Whatever issues Valve would face, they have already been faced by Google with Nexus hardware from IHVs. That doesn't prove the venture will be successful or not, but it does prove a software company can commission hardware and sell it. Design, manufacturing, distribution, needn't be crippling (unless Google have lost gazillions on Nexus, I've no idea!).

 

[trinibwoy]

Content is the only thing that matters. If Valve is serious about this venture they will not ship a Linux based console. Nobody will buy it because there are no games. Nobody will code for it because the install base will be near zero.

We have a hard enough time getting devs to properly support windows PCs and now they're expected to support yet another target platform? Not gonna happen.

http://steamlinux.flibitijibibo.com/

Give me the ability to use my windows desktop as a rendering server to play Steam games on my TV and I'm sold.

 

[patsu]

Too early to kill off the idea. There is at least one "easy" way to tackle the economy of scale issues w.r.t. channel and distribution.