[stag_intro]I was very pleased when Valve announced Steam OS, Steam Box and their new controller. In a year of console refreshes it struck me as the right defensive manoeuvre for Valve. [/stag_intro]

The computing power available in consoles far exceeds anything that people need. The move to general purpose x86 APUs to power the software experiences means that consoles will become an networked, general purpose device along side new smart TVs that every television manufacturer is pushing these days.  In fact, it looks like XBox One will at least be able to run a limited subset of Windows 8 applications.

ASIDE: I wouldn’t be surprised if the Xbox One runs a stripped down version of Windows 8

It’s clear to me that Valve saw a large opportunity to innovate and have been planning the foundations for this work for well over a year. They saw several trends and have capitalized on the opportunity in a big way:

• Steam’s Big picture captured the emerging trend of HDTV PC gaming/computing.
• The ever increasing number of console ports to PC meant existing gaming console hardware controllers could be used, and TV gaming great.
• The hardware necessary to drive a sufficiently good 1080p experience is readily available.
• Software like Plex, XBMC as front-ends for HDTV computing make the experience good.
• The PC, as a form-factor, is in decline.
• Hardware OEMS like Acer, HP, Dell, and Lenovo are pissed at Microsoft and desperatelywant out of the licensing deal.
• Digital distribution of games is a reality

With High-Definition  TV panels becoming the main “information display”, it makes sense to enter the space.  However, unlike Netflix, with their excellent OEM distribution (basically any piece of hardware that can connect to a TV including Xbox, Wii, and Playstation), Valve lacks a hardware preload strategy.

Here’s the genius: With the average PC-margin hovering at around 3-5% net, OEMs looking for ways to reduce the licensing cost of the Windows hegemony.  Moreover, they are looking for ways to compete on margin and are more than happy to explore new form factors. ((If there is one thing I credit Windows 8, is that it has allowed OEMs to experiment with different computing form-factors / designs that I find appealing — like the Lenovo Yoga 2 Pro or even the MS Surface Pro.)) A gaming console / media box makes sense, but most boxes (as characterized by the WD TV Live) are sub-$100 boxes. However, with Valve’s announcement of a royalty-free OS, high-margin catalogue of new releases and abandonware, you ave compelling platform offering with SteamBox.  I’m sure OEMs are more than happy to spend some R&D dollars towards the experiment.

With support by major hardware OEMs, it’s not surprising to see AMD and nVidia make progress on Linux only drivers–it’s the same hardware in the PS4 and Xbox One!

Here are my bets:

• Valves strategy will play out over the next 3-years.
• Microsoft will make their Xbox One experience available as a digital download–you’ll be able to run your Xbox games on your WIndows 8 PC.
• PC OEMs will manufacture generic gaming consoles certified for Windows 8.x w/ the Xbox One Experience and Steam OS, but Valve will have the upper-hand because they will support game streaming to android and iOS mobile devices.
• Game streaming from a single high-end PC to lighter / thinner clients will be norm by 2015.

It’s a Win-Win for Valve.  They’re platform is will be available on all the platforms that matter. ((I’m presuming that they are working on a way to stream Steam OS games onto Android or iOS.))