Business Take: Will Valve's Steam Machines Disrupt the Video Game Console Business?

The gaming network is making a move into the hardware business in an attempt to win share from Microsoft and Sony.

Jun 3, 2014 at 10:45AM

Valve's Steam network serves as a digital distribution system for video games. The service allows users to buy games and access them through their account. The company, which has so far solely existed to sell games and facilitate game play, now has plans to become a player in gaming hardware.

"They're going to try to get into the video game hardware market with these Steam Machines," said host Jason Hellmann on Business Take, the show that gives you the Foolish perspective on the most important business stories of the week. 

The path to creating a console that would ostensibly compete with Microsoft's (NASDAQ:MSFT) Xbox and Sony's (NYSE:SNE) PlayStation 4 has been bumpy for Valve. The machine has been talked about for quite a while but it's actual release date has been pushed back from this year to some time in 2015. The Steam console, when it does arrive, won't be a proprietary machine like Xbox One or PS4. Instead it will be a PC-based platform tailored for gaming. Valve will also not be manufacturing the hardware. Instead the company will work with a third party to make a Windows-based machine designed to cater to the needs of its audience.

"Where it gets interesting is that this is all a vehicle for Valve to get Steam in front of more gamers," Hellmann said. 

Valve does have some proprietary games, including DOTA 2 and Counter-Strike: Global Offensive, that can't be played on Xbox One and PS4. The company caters to more of a hard-core gaming audience.

"Is their whole market people that also own an Xbox and a PlayStation?" asked Business Take panelist Daniel Kline. "Because if you're a hard-core gamer you're probably going to have every platform."

"it depends," answered Hellmann. "There are people who are PC gamers.... I am one of them. I don't have a PS4 or an Xbox One. I love my PC. I love my Steam library."

Cost of games can be a reason some people choose using Steam on a PC over buying a dedicated game console. In general, Hellmann explained, Valve sells new games for less than the $60 common for new titles on Xbox One and PS4. The company also runs frequent sales.

"This seems to me like a very small play. First, you have to price the machine at less than $399," Kline said. "It also has to cost less than a decent laptop."

Hellmann disagreed with Kline's assessment about the size of the market for a potential Steam machine, suggesting that the company could win market share over casual gaming machines like Amazon's (NASDAQ: AMZN) Fire TV.

"I think what Valve is really trying to do here is introduce what PC gamers have known for a long time -- that Steam is an awesome platform to a market that is used to how Microsoft and Sony do things," Hellmann said.

Do you think Steam can be more than a niche player? Watch the video for the full story, then share your thoughts and comments below.

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Daniel Kline is long Microsoft. Jason Hellmann has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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