For the past few years, console gaming has been dominated by Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT). Now that may be changing, however. Valve, the company behind Steam and popular games like Half-Life and Portal, has announced that it will join the console wars with the Steam Machine.
Full steam ahead
The Steam Machine is Valve's attempt to merge computer and console gaming and bring it into the living room. The new Steam Machine is the size of an Xbox or PS3, but the console has a Nvidia GeForce GTX Titan graphics card and a full CPU wedged inside. This works thanks to a unique case that allows each component to breath individually.
The console will run on Valve's SteamOS platform, which is the largest digital game distribution service on the market. Steam recently reported that it passed 65 million users, which is above Xbox Live's 48 million users and below PlayStation Network's 110 million members.
The Steam Machine will also come with a new controller designed to take the functionality of a mouse and keyboard and package it for handheld convenience. It uses two touchpads that can be configured to the game that is being played. The touchpads allow for better accuracy than analog sticks do in games that typically use a mouse.
Valve is also working on incorporating biometric sensors into the Steam Machine. This would allow the game to respond to the emotions of the gamer being tracked. It was originally thought that sensors would be placed in the controller, but it was later discovered that the hands were not the best source of biofeedback.
While the Steam Machine will be powerful and have technical advancements, will this be enough to compete or potentially topple Xbox and PlayStation?
Wedbush's Michael Pachter thinks not, saying that the "only way to sell it is to give us a reason why we need it." He continued, "If they make every game work better with this OS, that's great, but I don't see how it becomes a big threat to the console guys."
While the Steam Machine will have a unique controller and console, Valve has said that it won't make games exclusively for its new console. Sony and Microsoft use exclusive games like Xbox's Halo series and all of PlayStation's Naughty Dog games to boost console sales. A new, exclusive Half-Life could boost the Steam Machine's sales, but according to Valve's Doug Lombardi, "It's against our philosophy to put a game in jail and say it only works on Steam Machines."
Valve won't create exclusives for the new console, but the company is attracting game developers by making it easier to get created content onto Steam. SteamOS will allow game developers to post and update games without approving them or charging licensing fees. This will make the Steam Machine an ideal console for independent game developers to use.
Valve is a private company with limited information available, but the company has said that its sales have grown 15% per year since Steam was released in 2002. Research company IHS has estimated that Valve's revenue from game downloads reached $1.1 billion during 2012. The company is already profitable, and it has the potential to keep growing in the coming years.
A look ahead
Valve is a creative and unique company that is working to produce a console unlike any other. When released, it will be competing against consoles that already have brand-loyal customers and exclusive games. With superior and innovative products, however, I think that the Steam Machine will be as popular and successful as Valve's other products.
Ben Popkin 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.