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Valve's Steam Box Is an Assault on Microsoft's Windows, Not Xbox

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When it comes to the Steam Box, it seems a lot of people are confused. While it is, as many would tell you, Valve's upcoming competitor to Microsoft's (NASDAQ: MSFT  ) Xbox One, it runs much deeper than that.

The Steam Box itself is sort of a faulty idea; the hardware is hardly relevant -- I have at least three potential "Steam Boxes" in my house right now, and there's good chance you're reading this on what could one day become a Steam Box of your own. What's far more important than the Steam Box is the operating system that powers it -- Valve's SteamOS, which can be loaded on nearly any PC.

SteamOS is Valve's attempt at rebellion -- fighting back against a Microsoft ecosystem which is increasingly adopting a closed, Apple (NASDAQ: AAPL  ) like structure. But Valve isn't the only company that's been alienated by Microsoft's new strategy -- Hewlett-Packard (NYSE: HPQ  ) has also shown signs of resentment.

What is the Steam Box?
The Guardian describes the Steam Box as a video game console -- it is, in the sense that's it meant to play video games; but at the same time, it isn't a console at all. Traditional video game consoles are manufactured by one company and run proprietary software -- Microsoft makes the Xbox One, the operating system that powers it, and unless you do a lot of tinkering, you can only use it in ways Microsoft intended it to be used.

In contrast, nearly any PC can be a Steam Box. The official "Steam Boxes" that will show up on the market in the coming months will be no different than the desktop PC you might be using to read this very article. Of course, there will be one major difference between those machines and most desktop PCs: they'll be running SteamOS, not Microsoft's Windows. But you won't need to buy one to use SteamOS -- Valve plans to give it away for free.

That makes SteamOS a competitor to Microsoft's Windows, and one with a huge advantage (the price). Certainly, SteamOS is designed for gaming -- not productivity or office work -- meaning that, even if it was wildly successful, it would be unlikely to steal the bulk of Microsoft's Windows sales.

Adopting Apple's iTunes model
But Valve's decision is in response to some of the changes Microsoft made to Windows, most notably, the introduction of an app store. For a company like Valve that sells hundreds of millions of dollars worth of software, having to work within the confines of an app store model could be highly detrimental.

Apple defends its controlled app store as a way to ensure a better user experience. That may be the case (consider the recent Android flashlight debacle), but it also leaves the door open for Apple to stymie or even block software from a major competitor. More important is that Apple takes a cut of the revenue -- a full 30%.

While that was once a paltry figure, as Apple's total user-base has grown, it's ballooned into something substantial, and continues to grow rapidly. Last quarter, Apple's iTunes brought in a total of $4.3 billion, up from less than $2 billion in the second quarter of 2012.

Microsoft introduced its own app store in Windows 8, and while Valve continues to operate outside its boundaries, as Microsoft continues to update and tweak Windows, that could eventually become impossible.

Hewlett-Packard sees Microsoft as a competitor
Like the app store alienating Valve, Microsoft's first true PC -- the Surface Pro, unveiled alongside Windows 8 -- may have alienated some of Microsoft's hardware partners, notably Hewlett-Packard.

Hewlett-Packard's CEO Meg Whitman characterized Microsoft as a "competitor" earlier this year, and it's hard to disagree. Every sale of one of Microsoft's Surface Pro tablets is potentially a lost sale for Hewlett-Packard. And while Microsoft robs it of sales, HP still has to pay Microsoft for the privilege of using its operating system.

Perhaps that's why Hewlett-Packard has embraced alternative operating systems to such a great extent this year. Hewlett-Packard still makes and sells Windows PCs, and likely will for the foreseeable future, but alongside its Windows devices, Hewlett-Packard has launched half a dozen Android tablets and Chromebooks just this year.

Devices and services
Valve isn't embracing alternative operating systems like Hewlett-Packard -- instead it's creating its own. More than Valve's entrance into the living room, the Steam Box and SteamOS is Valve's response to Microsoft's new strategy.

By pushing its own devices, and moving toward a more walled garden similar to Apple, Microsoft has scared the entire PC space, and the long-term consequences are only starting to play out.

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Read/Post Comments (5) | Recommend This Article (0)

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 December 10, 2013, at 1:39 PM, FoolinSD wrote:

    Is the app store the true reason? Or is MS's control of DirectX the real reason?

  • Report this Comment On December 11, 2013, at 8:08 AM, jameskil wrote:

    So who is so named as to require an "assault"? And who cares? There are plenty of OS competition out there, and of course XBOX, iPad, Pod, Phone, Google/Moto, etch all have their own closed platforms for various reasons. So, what's the deal here Fool?

  • Report this Comment On December 14, 2013, at 5:21 AM, DReview wrote:

    Good Article, and I agree.

    Not only am I a huge fan of the Steam OS, I'm also a potential buyer of their console doomsday device. Steambox.

    What Valve is making is revolutionary in the concept of interaction between the virtual living room and remote abilities. It even goes beyond gaming with their User Interface.

    Steam OS and other companies are beginning to create their own UI's for their IPs. Also Vavle's smart decision to let Steambox run open source Linux allows users technically install anything they please.

    I can install Microsoft Office on Steambox if I wanted…

    Xbox has never been a competitor in the gaming industry. They fill airwaves and news reports with rhetoric, but looking at it as a single business independent from Microsoft… Xbox is a huge failure. It has never one any of the console races and it would have died with Sega on the first box if it hadn't been for Microsoft throwing endless amount of cash into it.

    Xbox 360 didn't do so well either, and it's the only console that doesn't have a high level 1st party exclusive. Their largest game sale was Grand Theft Auto V for 360 and that game is not an exclusive. Second largest sale is Halo 3 with 8 million players. Laughable when looking at Nintendo IP's and Sony.

    Microsoft needs to be kicked off gaming due to their unsportsman like behavior in the business. Not only does it show in their poor direction of their games. It also reflects on how they treat 3rd parties. For example how Rare was bought by Microsoft; and then they tied them down to strict creative rules. That led to Rare's failure because of lack of freedoms that Microsoft always puts on people and companies… If only they had fun and trust on others.

    Also Xbox and Microsoft has been a negative influence on other hardware companies, players, developers, magazines, and so on.

    Steambox is going to make any console that has any IP Game under 8 million user base seem irrelevant… There is no chance in hell that after 10 years from now Microsoft and Sony will still be standing up. PC community is going to makes its footing for good and for the future.

    Future never seemed so bright.

    Its the gold rush, grab your shuffles!!! Time to make some new gamepads and transferable User Interfaces.

  • Report this Comment On December 14, 2013, at 5:32 AM, DReview wrote:

    Outspending your rivals, and buying out their assets hardly makes you a competitor.

    Real competitors/\ & leaders are creative, resourceful, economic, and diligent to their ethnical beliefs…

    In gaming these are qualities only found in Nintendo, Valve, and Sony… Microsoft can stand aside on those.

  • Report this Comment On December 14, 2013, at 9:20 PM, symbolset wrote:

    I actually am reading this on my Steam box. I'll be buying another within 6 months to hang on the TV as well.

    Now that the SteamOS is released we can see that it is both: a console gaming OS to compete with XBox, and a desktop OS to compete with Windows. And I'm OK with that. If the console has the grunt to be my media center and home office PC, why not also use it for that?

    As for the software store, yeah. MS messed up there and projected that they were moving to a Microsoft curated app store and Valve's competing game app store was not welcome anymore. Valve has little choice but to deal with this issue by moving their gaming platform to a system where they can continue to provide the services to the customers who love their products. Next up: expanding the Steam app store to include office and productivity applications, media editing and the like.

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