Serious Gamers: Get Ready for the Steam Machine -- A Radical Upgrade From PS4 and Xbox One

For serious gamers, there are currently only two real options. The first is to buy or build a gaming PC, the cost of which can range from $500-$600 for an entry-level machine to well into the thousands of dollars. The second option is to buy a console, such as the recently released PlayStation 4 from Sony (NYSE: SNE  ) or the soon-to-be released Xbox One from Microsoft (NASDAQ: MSFT  ) . These cost $399 and $499, respectively, well below the cost of even a mid-range gaming PC.

There will soon be a third option for gamers. Valve, the company behind such games as Half Life, Left 4 Dead, and Portal, as well as the Steam platform for PC, Mac, and Linux, is planning to launch the Steam Machine in 2014. Here's a look at Valve's prototype:

What is a Steam Machine?
The Steam Machine is Valve's attempt at taking over the living room. Unlike game consoles, the Steam Machine will come in all sorts of varieties. There will be low-end versions meant for streaming, as well as high-end versions meant for serious gaming. Multiple partners will be manufacturing the devices, and there should be a wide range of options to choose from.

The Steam Machines run SteamOS, a free Linux-based operating system created by Valve. While SteamOS will ship with all steam machines, it will also be possible to install it on a custom-built machine. SteamOS comes with all the features of the Steam platform, optimized for a TV screen. Valve claims that it's achieved significant performance increases in graphics processing compared to traditional PC gaming.

The cost of these machines hasn't been disclosed, but various websites have broken down the prices based on the components mentioned by Valve. The low-end option would be around $800, while the highest-end option would be a staggering $1,750. The graphics card alone in the highest-end option is more than twice the cost of the PlayStation 4.

Who is this for?
Because of the price, the Steam Machines are not really direct competitors to Sony or Microsoft game consoles. Rather, the Steam Machine is an attempt to get PC gaming into the living room without having to drag Windows along with it.

The problem is that Steam Machines can only run games built specifically for SteamOS. They can stream games from a gaming PC to a TV, but this obviously requires a gaming PC in the first place. And there are other devices that allow for such streaming, like the NVIDIA Shield, for example.

I see little reason for those who already have a gaming PC to buy a Steam Machine, as there are far less expensive options available to play games on a TV.

The advantage of consoles
The PlayStation 4 and Xbox One have a big advantage over Steam Machines: price. Typically, console manufacturers sell the hardware at a loss in order to be able to offer an attractive price, making up for it later from game licensing fees. The PlayStation 4 probably costs Sony more than $399 to manufacture, but building a large user base is more important than immediate profitability.

Another advantage consoles enjoy is a single hardware design. Game developers can optimize their games specifically for the console hardware, not having to worry about different versions. PC gaming, and Steam Boxes, are not like this. Game developers need to make sure that their games run on low-end hardware while looking good on high-end hardware, a balancing act which adds time to the development process. Steam Machines in no way solve this problem.

The bottom line
The details of Steam Machines and SteamOS aren't fully finalized, but unless Valve's strategy is very different than what it seems to be right now, I don't see these devices selling very well. Steam Machines are certainly no threat to game consoles, as the price difference guarantees that the PlayStation 4 and Xbox One will rule the living room. Unless PC game developers suddenly abandon Windows for SteamOS -- unlikely, given Window's massive install base worldwide -- Steam Machines will at best be a very niche device.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 23, 2013, at 7:35 PM, Dvoraak wrote:

    I think this article is likely very far from Steam's plan.

    Do you really think the company savvy enough to take over and dominate the digital distribution of games and skilled enough to give us games like Half Life and Portal doesn't realize they can't possibly interest developers in programming for a closed ecosystem that has priced itself out of the market? I'm going to guess the author really doesn't know much about the gaming industry or he thinks Steam is full of idiots.

  • Report this Comment On November 23, 2013, at 9:04 PM, Bunnyking77 wrote:

    I like steam, i think it's a great service. I like the steam consoles and to be honest it's going to be that much more powerful than any console out there when it hits in 2014.

    There are a lot of problems though. Mainly, gamers are into PS4 and XBOXone, and it's a new entry into gaming.

    I believe in the Steam machine, but like every rolle rcoaster, it's gonna be a rough ride.

  • Report this Comment On November 23, 2013, at 10:10 PM, Keegs79 wrote:

    Its not as simple as this article thinks. The market isn't going to get serious gamers simply because its Steam or because its powerful. Its a huge mark up. The PS3 sold poorly at 600 dollars. I can't imagine an 800 dollar system doing much better, especially without any exclusive games to warrant such a price tag. Why would PC gamers flock to it when they will have update about every two years and when they do, they don't upgrade their whole hardware. This simply is trying to find a middle ground and its going to be very hard. It will also be hard to track console gamers who showed reluctance to support a console that is digital only (Microsoft's reversal with the XB1). Steam is awesome but I find it hard to believe it will take much market share away from not only from Sony, Microsoft, and Nintendo but move Steam users to the Steam Box.

  • Report this Comment On November 23, 2013, at 11:32 PM, locsphere wrote:

    No disc drive? No thanks! Unless that sucker has a 500gb ssd drive with a back up 1tb hd and is somehow able to offer extremely fast download speeds during peak demand for game releases I am not sold on this system. If we get another 8 core system under 3 ghz Im going to laugh. I'm a pc gamer here and I like steam, but there is nothing like getting your hands on a dics and being able to use mods on your game like what Counter Strike was to Half Life.

  • Report this Comment On November 24, 2013, at 1:15 AM, spinod wrote:

    It's not an upgrade.... all it does is stream your PC to a Tv. Anyone that wants to do that probably already has it hooked up via HDMI.

    Even if this does concern someone, they still need to upgrade their PC every year to keep up with the latest specs. This is what console gamers avoid, so it does nothing to help in that regard.

  • Report this Comment On November 24, 2013, at 6:28 AM, moopert wrote:

    I have no reason to believe this will be more than a blip on the radar of gaming as easily thrown aside as the 3DO or the Atari Jaguar. Unless there's a rash of exclusive titles, noone in their right mind is going to shell out $800-$1750 for proprietary games and streaming PC games to a TV(a feat easily accomplished with a $10 HDMI cable)

  • Report this Comment On November 24, 2013, at 9:36 AM, Tw1tch wrote:

    You beat me to it moopert. lol

    More like the Phillips CDI, remember those from back in the day? $800 on launch day & they sold maybe what, five consoles at best. Not to mention there were only a handful of games available, they also all mysteriously sucked really bad at a price of $79.99 a pop.

  • Report this Comment On November 24, 2013, at 10:21 AM, Costanzawallet wrote:

    Steam is a very buggy system and often times downloaded games are troublesome and have problems loading properly etc. It can also be burdensome and heavy to load, with constant updates and tedious hoops. It is a marketing platform that has become a game hub. they need to do some serious back end fixes before I would buy a machine, and make the interface and installation/loading/playing much simpler before it can be used by non geeks if they want to increase their market share. Stick with Sony.

  • Report this Comment On November 25, 2013, at 6:05 AM, ChMacQueen wrote:

    Sounds real negative from Fool, almost as if they have some reason to support traditional consoles.

    What the article doesn't mention is a low end gaming machine can often out perform consoles plus do a LOT more that average people do regularly such as internet, email, news, and plenty more. Further some games are simply better on PC then consoles hands down, consoles have only ever really ruled in sports type games.

    Further they knock the SteamOS, but one would think that SteamOS would be designed to be able to use fully Valves "Steam" which has a HUGE assortment of new and old games. Emulating Windows with a prebuilt system like Steam Machine is simple easy with its own Linux OS to go with it.

    Now this means someone would be able to play their entire Steam library on it along with new games made for PC's and all the the comfort of a console and the ability of a PC.

    The TRUTH is that this poses a real threat to current style consoles especially when their money is in selling games again and again for the next gen console.

  • Report this Comment On November 25, 2013, at 2:25 PM, chrismireya wrote:

    The problem with a "Steam machine" is that everyone who wants one already has one...in the form of their computer.

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