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Why Microsoft and Sony Shouldn't Fear Steam OS Yet

Couldn't make it to the 2014 International Consumer Electronics Show? Never fear: The Fool was there to check out the tech and report back on who was there and what was new. With thousands of products in more than 15 categories, the next big thing was surely making its debut at the CES in Las Vegas.

Valve recently launched its own gaming hardware platform: the Steam Box, running Steam OS. Will the $500 gaming system be able to put a dent in the Xbox market?

Thanks to an uncanny ability to identify key trends in technology, David Gardner has established a market-thumping track record. Investors have seen a slew of storylines coming out of CES 2014, but the real challenge is recognizing where the opportunities truly lie. Click here to get David's latest thinking on where you should be invested to profit on the future of technology.

A full transcript follows the video.

Evan Niu: Hey, Fools, Evan Niu here, and I'm joined by Eric Bleeker. We're on the floor of CES 2014, and right behind us we have Valve and Steam; a lot of Steam boxes on display. They recently launched Steam OS -- pretty interesting stuff there, really getting into their own gaming hardware platform. What do you think, Eric?

Eric Bleeker: Yeah, Valve is a very innovative company. I wish it was public so I could buy it. Of the video-game companies, you look at what they've done with Steam; it's absolutely incredible. It's become the platform for distributing video games, well ahead of its time when you think about similar platforms that exist now.

Very much a forward-thinking company, but one of the areas you have to look at with Steam Boxes, and potential impact on the market, it starts at about $500. Those are the cheapest ones, for what is essentially a gaming PC in your living room. It's just a tough to imagine it making a big dent on the market.

You could say "Xbox starts at $500," but across a generation that price dramatically goes down. I don't think these have that same obsolescence curve. It's just a different model, when you're working with what essentially boils down to a PC.

As far as a Sony  (NYSE: SNE  ) or a Microsoft  (NASDAQ: MSFT  ) , and how a Steam Box and a Steam OS might affect them, I think it will remain for the most part relatively a niche product. It appeals very well to the high end of gamers.

That being said, Valve is a pretty innovative company, and they could do some very sought-after games that the distribution only goes to Steam Box, or build an installed base that way, so they've got a couple tricks up their sleeve that I think could make this interesting.

Evan: Yeah, I'm going to agree with you on that one, because I think, like you said, Valve's real angle with Steam has always been about distribution. That was really where they hit big, was the distribution model.

They're the top dog in PC gaming distribution, so the hardware side of it ... it's kind of interesting, but it also might just be a side play, a hedge bet like, "Why not? Might as well. Maybe we do something, maybe we don't." Ultimately, I think they're still going to stay the market leader in PC games.

Eric: Yeah, and if they release the next Half-Life for a Steam Box, maybe I'll just end up buying one. There you have it, Valve. You've got me, if you just make the right move!

Niu: All right, Fools, that's it for Steam OS. For all the latest CES, check out 

Read/Post Comments (2) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On January 19, 2014, at 8:22 PM, KenLuskin wrote:

    STEAM is TACITLY acknowledging that playing AAA games on your LARGEST screen, from the comfort of your couch, with family and/or friends around you is a LARGE market.

    This is WHY the Game consoles from Sony and MSFT are in such HUGE DEMAND!

    ALL the NEW AAA games are being OPTIMIZED for the NEW CONSOLES!

    Only the most hardcore of the gaming GEEKS will choose want a STEAM machine in their living room.

    That said their are at least 20 million of these geeks world wide.

    But, what I find curious is ALL the people who criticize the $500 price of the Xbox1, which has WAY, WAY more functionality than a $500 Steam machine....

    Yet they are very upbeat about Steam machines..

    Irrationality combined with GEEKYness is a very bad combination!

  • Report this Comment On January 21, 2014, at 11:36 AM, chilero wrote:

    As a member of a hard core PC gaming group, with about 40 members, not a single member has even mentioned the steam box in our forums. We all use Steam and are fans of Steam but I just don't see this going anywhere.

    Our members are always early adopters and when nobody talks about the product, even in passing, I just can't see this Steambox going anywhere.

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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