What’s going to stop the Steam Machine failing again?

Hello and welcome to this week’s News edition of The Game Business.

On the Show today, we are joined by Shams Jorjani, the CEO of Helldivers 2 developer Arrowhead. Shams and I chat about the Helldivers 2 launch on Xbox, before diving into some big stories, including the delay to GTA 6, the layoffs at Square Enix, the NetEase-backed studio closures, and the debate triggered by a Eurogamer review, which marked down Arc Raiders for its use of AI voice generation.

Then we tackle the big breaking story, the return of the Steam Machine (plus Valve’s new VR headset), and what it might mean for the console space.

Meanwhile, in today’s articles (below), you can read about Sham’s experience of launching Helldivers 2 on Xbox, plus my own take on the Steam Machine, and what it might mean for the market.

Enjoy!

Valve’s Steam Machine is a threat to PlayStation and Xbox

I can’t believe it’s been ten years since the last time since we all got over-excited about Valve entering the console space.

The 2015 Steam Machines (and Steam Link) were Valve’s attempts at taking PC gaming into the living room. It failed. We estimate somewhere between 300,000 – 400,000 Steam Machine units were sold worldwide in three years.

Consoles are designed to be simple. When you buy a game, you know it will work and it has been optimised for the machine you own. There’s not a plethora of different configurations to worry about. The 2015-era Steam Machines didn’t deliver on this. They neither had the flexibility of a PC, or the simplicity of a console.

Yesterday, the Steam Machine made a comeback in the form of a cube-shaped device that has six times the horsepower of the Steam Deck. It comes with a new Steam controller, and will be available next year. It currently doesn’t have a price.

So, why will this time be any different?

Well, ten years is a lifetime in gaming terms, and Valve has taken some lessons from its previous attempts. The original Steam Machines were all made by partner manufacturers and there were multiple devices to choose from. This time, it’s just the single proposition and it’s been built internally by Valve. It’s a far clearer and cleaner offering that ties into the modest success it’s had with the Steam Deck handheld.

More significantly, PC gaming has exploded in the ten years since the original Steam Machines. Analyst Matthew Ball points out that Steam players own $90 billion worth of games (or entitlements) today, while in 2015 it was a tenth of that. Traditional console games are also common on Steam now, and even first-party Xbox and PlayStation software is available on the platform.

Put simply, the execution appears to be better, and PC gaming is dominant today. Nevertheless, I can’t help but see this Steam Machine as an enthusiast product that appeals to a small, albeit lucrative, group of players.

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From my view, there are two main potential audiences for the Steam Machine.

The first are existing PC/Steam users that want an effective way to take their PC gaming into the living room. It’s a similar audience to what the Steam Deck has been targeting, which are gamers looking for a way to continue playing Steam away from the desktop.

This is a pretty high-end customer; someone who can justify buying a second gaming PC for use in a different scenario. As a point of comparison, Steam Deck has sold between four and five million units, according to various analysts. It’s a small audience but a significant one, because these players are often the most engaged users and therefore the highest spenders.

The second potential audience for the Steam Machine are console players that are interested in PC games, but have been put off by the complexity of it all.

These people certainly exist, but it’s hard to know how large that group might be. For all its comparative simplicity, Steam Deck hasn’t unlocked many new customers for Steam (at least according to documents shared with me last year, which revealed that over 90% of Steam Deck owners are existing Steam players).

And if Valve wants its Steam Machine to expand its audience significantly, it’ll need an attractive price point, strong marketing, and wider retail distribution than just its own store. This is all very costly.

Should PlayStation and Xbox be worried?

If this is just an extension of PC gaming into a different space, is it really competition for PlayStation and Xbox? Well, yes.

Even if the Steam Machine only speaks to a small group of existing Steam customers, we can make some assumptions about who they are. It’s likely these are gamers that own multiple devices, including PS5 and Xbox machines. It’s likely they game a lot and spend a lot of money on their hobby. And if they were to pick up a Steam Machine, we might expect these high valued customers to spend more of their time, and by extension money, within the Steam ecosystem, as opposed to Sony or Microsoft’s (or even Nintendo’s).

Xbox will also be smarting from this reveal. The firm has made no secret of its future hardware plans. Last month it released the ROG Xbox Ally and the ROG Xbox Ally X, two PC handhelds it developed in partnership with Asus that directly competes with the Steam Deck. And that approach is being adopted for the next Xbox console(s), too. Which means the next Xbox will be a gaming PC that sits under the TV, just like the Steam Machine.

Now hardware is just one part of Microsoft’s strategy, and a successful Steam Machine would help the company reach more players, both with its games and its Game Pass subscription service.