The Price of Success?

Previously, I wrote about some of the implications of Valve’s Steam Box. As with many other articles, this one touched on the amazing opportunities and potential of Steam on a console.  However, Sony and Microsoft rule the console arena that Valve seeks to emerge as a serious contender in.  Let’s take a look at some of the more significant barriers Valve will need to overcome as they seek to enter the next generation console war.

Fat stack of cash

Price Point:

Although the Steam Box will be a custom PC allowing for upgrades to its hardware in the future, to compete with Microsoft and Sony, Valve will need to come in at a price point that is comparable to other next gen consoles.  Let’s assume for a moment that Microsoft and Sony plan to price their next consoles around $500.  If Valve prices the Steam Box above $500, which means it’s priced above both their competitors next offerings, it would likely mean the Steam Box is DOA.

Update: Kotaku is reporting this morning that the first, unofficial Steam box by Xi3 will launch at $1,000. This price point is fully twice what a PS4 or Xbox720 is expected to initially launch at. At this price point, why would anyone buy a Steam Box instead of a decent PC for the same price and simply use Steam’s Big Picture mode with an HDMI cable to their TV? At $1,000 you are far from competing with Microsoft and Sony, but you will be competing with full PCs which can do substantially more than a Steam Box. Valve will need to bring their Steam box down in price, to something closer to the $500 range to compete with the console market, or they risk pushing a product to a market that does not exist.

Valve’s Linux Distro:

Valve has announced that the Steam Box will run a Linux variation which means: no DirectX; which means: no Direct3D. This implies that previous titles in the library built explicitly for Windows and Direct3D will be largely unavailable since a Linux OS (likely) means OpenGL (and possibly a WINE type application).  Direct3D and OpenGL are two separate and distinctive graphical libraries. Direct3D is the 3D component of Microsoft’s DirectX API and is the current standard used in PC and Xbox 360 games. OpenGL was originally developed by Silicon Graphics Inc.  However, it is currently maintained by the non-profit Khronos Group.  OpenGL is platform independent, but does not enjoy the kind of support you would expect from a non-Microsoft backed effort (John Carmack's comments). This presents distinct risks and challenges for future developers hoping to deploy titles on the Steam Box.  Writing a title solely in OpenGL is a serious risk given the superiority of Direct3D, not to mention the fact that if you plan for a cross console release, say Xbox 720, PC, and the Steam Box, you would have to write code for your game in Direct3D to run on the Xbox 720.

Valve could mitigate this by allowing Windows to be installed on the Steam Box, thus allowing previous Windows titles to be enjoyed, but that would be something that the customer would have to do themselves. At that point, you are basically going through the same steps you would with your current PC; the console convenience is gone. Technically, this is a huge risk for Valve, and represents a huge unknown which feeds into a second unknown…

Previous Titles:

Valve, through Steam, has a huge reserve of already released titles that it could leverage to jump start the Steam Box’s release. However, without a Windows OS most of these titles are not viable due to the previously mentioned DirectX issues. Making a Window OS installation an option for the Steam Box would open up these titles for play. This would also allow Valve to avoid paying Microsoft for Windows, but at this point what is the difference between running a PC vs. a Steam Box? If you need to install Windows then why not just use Steam from your PC with Big Picture mode on a nice TV?

Business Development:

Phil Harrison, corporate vice president at Microsoft EMEA, said it best in a recent interview that you need to have deep pockets to enter the hardware business. You have to have a supply chain, a distribution model, and thousands of people to make it happen.  Logistically releasing a console is an endeavor fraught with difficulties and a potentially disastrous learning curve.  The dread Red Ring of Death Microsoft faced on the 360 serves as a warning to others thinking of venturing into the console arena.  Getting started will be extremely difficult and to be successful Valve will need to be able to scale their physical operations appropriately.

TCR/TRC:

While this is a standard part of developing and eventually selling a video game, it bears a special relevance since getting a game certified to run on a console is its own special brand of pain. Although Valve already does this for Steam games, Valve would need some version of TCR/TRC’s (Technical Credit Requirement/Technical Requirements Credit) to ensure that the user experience and quality of console titles conforms to a minimum set of requirements. Standardizing the user experience on the Steam Box might seem trivial to some, but it is a huge undertaking requiring a very smooth certification process that communicates quickly and efficiently with developers. Developing this business unit and competence within Valve to could take time and requires a quality job to be consistently done, and done well. Failure to deliver could mean poor user experiences on the Steam Box and very frustrated developers.

Control Mappings:

Control schemes are a huge obstacle encountered changing from PC to console, and vice versa, and could play a subtle, yet defining factor in the acceptance of the Steam Box. For users, there is a huge emotional barrier to changing controller schemes when playing the same game but on different systems. PC users don’t want to use a controller with analog sticks; they want their keyboard and mouse. Console users don’t want to get off the couch for a keyboard and mouse; they want to use their wireless controllers and kick back with their feet up.  Where a keyboard and mouse using veteran you once dominated playing your favorite shooter, with a console controller you are now no better than spray and pray fodder for your enemies.  That ruins the gaming experience. Just because Valve offers gaming on my TV doesn’t mean PC gamers want to abandon their faithful and trustworthy mouse and keyboard setup. Although with enough time and practice it is possible to simply adjust to a new control scheme, very few gamers are willing to do it.

While optimistic about the Steam Box’s potential, there are serious obstacles to realizing its commercial success. Between the seemingly inflated pricing point, the technical challenges, the logistics of running a hardware business, and catering to finicky gamers, it can feel like the walls are pushing in and the sky is falling simultaneously. However, regardless of the challenges involved, very few companies today are poised to take on such a challenge and Valve is undoubtedly one of them.