The Hardware Nobody Asked For… That Might Change Everything

So, let's keep going and we are going to go to the next story, which is the hardware nobody asked for that might change everything. Disruption. Disruption. I'm just kidding. I actually don't think that's exactly the case. But Valve's newlyannounced Steam Machine, and no, this is not a retread on their failed 2015 experiment. This time it's different. The Steam Machine is a consoleiz PC running Steam OS and it's coming out in early 26. It's alongside a new Steam controller which reviewers seem to say is pretty cool and the I can't wait for Chris and the Steam Frame VR headset. Watch out MetaQuest 3. So on paper it sounds like they're going to go headto-head with Microsoft and Sony. It's about $550 for base unit that performs kind of like a PS5. It runs 4K at 60 frames per second and looks like a mini Xbox. Looks

like a actually like a black GameCube. So, Adam, tell me a little bit more about what you see with this thing.
There's speculation that it's like 700 plus.
The article I read had like two sizes. One was like a 512 gig box for that lower price point and then like a one gig box for a higher price.
Just people fishing. I don't think it has not been announced yet as far as I'm aware. Yeah. I guess my my quick take here is that like I I like this play by Valve, but like anything like I I look at LinkedIn and the opinion pylon is already in like extrapolation to the moon mode, which I [laughter] I don't really want to jump into like let's compare this 2015, right? Those machines failed for some pretty critical reasons. Number one was that they were built by third parties which led to a bunch of confusing options, price point pressure, and really led to a really tough comp to just buying a regular PC. Now in 2026, Valve is building it like they did with the Steam Deck. Now also Steam OS before it was Linux. Nothing

ran on Linux in 2015. In 2026 because of Proton that's been fixed on most things run on Steam Deck absolutely well obviously based on the specs. 2015 was also early in sort of that PS4 generation. 2026 is late in Gen 9. I think that's actually pretty good timing. So PS5 and Xbox gamers have some money to spend now late in cycle. And I think this should compwell to PS5 Pro.
To be clear, it's still running Linux.
It is. Yeah. But the Proton um system has fixed the Linux issue. Okay.
Now things run on it. Before very few games actually ran on Linux. Now most games do.
So my hope as well is that maybe for the Steam Machine they actually bring out some content exclusives if they do Halfife 3. Why would that would be damn good time on it? But there's those are just rumors. The challenges I'll call it two. One is the specs and their actual shelf life.
Buying sort of like a PS5 Proesque spec

thing right now. How long will that last? like a 2026 machine. NextG is coming in 2027, 2028. So for me, like the deck when it launched barely ran Elden Ring and Cyberpunk and now my deck is actually bricked [laughter] that could only play indie games. So I think they're going to need to figure out some better life cycle management to make sure titles actually run well on the hardware for the foreseeable future. Otherwise, it ends up just turning into the Steam Link. The main spec to watch there is 8 gigabytes of VRAM. This is the critical spec to watch since it'll actually bring down 4K and sort of high refresh rates, but I think players have been pretty focused on sort of PS5 Pro and above. Also, anti-che and sort of anti- Steam. So, Steam OS can't run titles that have kernel level anti-che. So those are titles like Valerant, Battlefield 6, GTA Online, just the online component, Fortnite, Rainbow Six

Siege, PUBG, Call of Duty.
What the [ __ ] is left?
Yeah, major major
major PVP titles right now can't run on Steam OS. So they have to aggressively go after the relationships with these studios to figure out how to make sure that those things can run on this hardware. Also, things that are just off Steam can't run. So, League of Legends, Fortnite, Minecraft, Roblox are definitely the notable ones.
90% of the revenue driven by gaming is not allowed to play on the Steam Deck. It's like,
well, it's the same thing as like most of those titles like Okay, so League of Legends, Fortnite, Minecraft, Roblox are not on Steam. So, you have that on PC.
So, for those reasons, the C machine will not outsell the PS6. So, LinkedIn, please get off that [laughter]
that soap box. That's not the goal. It'll sell singledigit millions in sort of year one. And that's mainly going to be on price point and availability. It might take some share from Xbox given

that it can play a substantial number of titles and also get access to your existing Steam library. And I think it'll just do what Valve wants, which is to continue expand its ecosystem. That's why I think it's a smart move and why Valve continues to be a pretty durable company. I don't think it needs to be a console killer to win here. can sell singledigit millions and make its margin off of those. It just needs to execute against increasing engagement and expanding the ecosystem.
You know, I have to admit, Adam, sometimes I love you on the podcast and sometimes I just generally don't like you on the podcast. [laughter] You make too much.
You make too much sense, you know? It's like it's just like it's hard to get like over the top when you're just making total sense. It's like what you say is what I should say, but what I'm going to say next is what I want to say. Okay. I I don't disagree with any reason. [laughter]
Like,
sorry, I'm not a very dramatic person.
No, clearly not. Clearly not. First of all, let me just say one thing. What the [ __ ] are they doing making a VR headset

at this day and age? What the [ __ ] is that about? Like, why would you waste any money on R&D building that [ __ ] They must be seeing something I am not in terms of usage on their platform or something. I don't know. But that seems like a really expensive thing. I think VR is kind of deed dead. All right. So, let me start there. I do want to say I applaud them coming out with the console. I kind of wish they did this year decades ago building their own thing like reinforcing the PC architecture and the PC platform as a whole. I mean, I think they kept it open for a long time. But I think what you're saying about the specs are actually the right approach to thinking about it. But from my perspective, I think the specs are actually really bad. Like it's not good, right? Like the CPU is actually quite good, but the GPU is [ __ ] terrible. It's not future proof at all. Like the 8 GB of RAM is a problem.
They're going to have to rely heavily on what is it like frame generation and all that stuff.
Yeah. It's like indie games at best. like things like, you know, CD projects,

games, and stuff like that's going to be really hard to run on this device, you know, which it's okay in a small device like the Steam handheld, but when you're talking about a [ __ ] 65 in like, you know, 4K television, it's going to be [ __ ] horrific, you know? So, there's some issues there that I don't know if they're going to be able to optimize and fix. And then again, you know, back to what I was saying earlier, it's like, you know, with this anti-che thing and stuff that's not running on it, right, natively, it's like, dude, like 90% of the market is kind of eliminated by or at least 90% of the revenue and maybe 10% of the hype, you know, it's like what all that matters. But the big thing here is the price point. So, the bill of materials kind of suggests a $700 price point. And I really have a hard time believing that Steam or Valve is going to subsidize this in any meaningful way. I mean, it's possible. It's possible, but a $700 price point is just a non-starter. I mean, that is a niche device at best, right? And frankly, the PS5 is just a

better overall device and overall ecosystem, you know,
Chris, is it a niche device for a niche market? Like, that's what I don't understand. It's like, if the idea is that the play pattern is, hey, it's going to be more indie games. We get that you're going to play your big games on your PC that you probably have. Why would you want to spend that much money for that small amount of content? That's what I don't get from like a market fit perspective.
Sometimes I think people assume that people are either PC gamers or console gamers.
Yeah.
But there's enough market data there to suggest that there's a lot of people that have like a good high-end PC and then have that secondary console device and like have a TV and want to play some of those games on PC. So like right now if I'm an Xbox player, I don't own that many games because I have Game Pass for a long ass time, right? I want to have access to my Steam library on my TV, right? Like there's a pretty compelling part of that. The problem is for PS6 and

like PS5 players right now, right? Like there's a ton of content that I want day one already on console and then when PS6 come out, it's going to come out with a significantly better spec and be more future facing. So I think for PS5 players, it's a significantly weaker argument. But like I'm saying this as somebody who currently has a PC connected to my TV because I want to be able to play higher spec games and be closer to the Steam ecosystem on my TV.
When GTA 6 comes out, it's only on console. Like I mean, you can't even buy it on this machine, right? This machine's not contemporary in that way. It's
Yeah, I didn't have GTA 6 on my list, but it's a really good good call.
What really bothers me about this is not necessarily what it is, because I do support it. I think it's a great idea. I think they're basically going to eat some of the Xbox's share. But I'm spending way too much time at the actual coverage of the story as opposed to covering the story myself. I want to be crystal clear on this point cuz Yoast was driving me insane with this [ __ ] This is not innovation on distribution.

This is a [ __ ] console. Okay? Like we've been doing console for like 30 [ __ ] years, right? This is not innovation at all. Right? They should have done this ages ago, right? Like it doesn't even make any sense, you know? But the reason they don't do it is because the hardware business sucks. It's a low margin business that you have to subsidize to make it work, right? And that's why Xbox is losing right now. So it's like people like think like this is the second coming, dude. The Steam handheld has sold 6 million in three years. That's [ __ ] nothing. That is nothing. That is not an even an install base that you can sell into. That is a secondary device for the super hardcore, right? So stop listening to Kotaku. Stop listening to IGN. Like those guys like this [ __ ] is small. Like the all the markets on the PS5.
The real takeaway is just spend less time on LinkedIn.
I think I got to shut it down. I got to shut it down. It's too much.
Crash. The X Xbox ROG Ally is exceeding its expectation sales for the high-end

[clears throat] unit of 20. Well, I mean they of course they don't.
They sold in like a half a million units.
Exactly. Right. [laughter] I mean, I we should just get like a betting pool on how many units they're going to announce, and it's going to be under a million, I would have to imagine.
Press, you know, Xbox is maybe going to do 4.5 million hardware units this year. Steam Deck is doing 2 million. When I start to look at these numbers, first of all, I think that tells you more about Xbox than it does about, you know, where Steam
that's also like tail end generation sales versus like when we're talking about the first spike of sales for Steam Deck, first spike of sales for this machine. Unfortunately, it does not mean like it's gonna, you know, flatline at 4.5 or
five million unit.
I think that's all fair. And to your point, you know, PS5 is doing 18.5 million units in FY24. So, we're not going to get close to that,
but still like, okay, Steam Deck plus this box. Okay, you're starting to add what if you add another three maybe 5 million units on top of that. It's looking really competitive to Xbox just

in terms of getting an install base out there. I would say that the mystery to me is where's China? I mean that's been a huge part of the growth of the Steam platform as we've talked about quite a bit and Eric you like to tell us that it's been responsible for basically all of the growth. So where is the Chinese distribution plan? Because if you remember like consoles were banned in China which is why they relied so heavily on PC. So I'd love to see if Valve has a strategy to put this in the hands of Chinese gamers. And then I think to everyone's point like who is this for? Like who is this for? And just like the Nintendo Switch, the problem is that Switch goes out and sells a [ __ ] ton of units and then what it does is it clicks dust on everyone's TV console, which is the same thing that's happened to my Steam Deck and also to my Switch. And so even if you're selling hardware units, the question I have is, are these going to translate to new monthly active users? Is this going to translate to marginal incremental play time and increase sales for all the games we're talking about? And that's to me where this falls apart, even if they're able to sell units, is it doesn't help the ecosystem or the platform. It just helps Valve get some extra dollars and cents for the hardware

enthusiasts.
To your point, the one thing I was thinking of is could the Steam Machine be the gateway drug for younger console kids to bridge to PC?
$800 at $700.
Well, it's cheaper than a gaming PC. You know, gaming price point. Yeah, we don't know the price point.
Okay, we don't know the price point, but Okay, but a gaming PC, a really solid one, is what? Two grand, three grand. I mean, Phil, you were talking about your motherboard or something cracking.
I'm a little bit different. It's a There's different price points for gaming [laughter] rigs. You can still get one for one kid.
Yeah,
sure. But so this is less than that. And so maybe this is like a great gateway drug for younger kids or it's a gateway drug for older Gen X players like you know, Adam, you were saying, "Hey, I just want a like a low friction way to game on my big computer in the TV room. I want to utilize my 2,00 games in my Steam library. I just want to sit on my couch. It's ease of use. I don't have to

sit at my desk. So maybe there's like a play pattern or a use case that we're not thinking of where this could be kind of interesting. I also think it fills the gap of the Xbox identity crisis that Xbox is going through right now. I think this is going to be an Xbox, right? Like they have that campaign, this is an Xbox, you know, with sales declining and people not really knowing what it is. Steam is becoming the third console. Just that idea of taking your library to your couch with this device could be interesting. That being said, it's priced the same as those other consoles. So, I I'm not quite sure, but I also applaud the effort and like let's see if we can get in there.
I am 100% supportive of this. I think it's a great idea. I think they should iterate on this and make a get put together a hardware strategy, use all their gajillions and invest in the hardware stuff. We need someone to replace Xbox as the second console as they, you know, continue to fail. So, more power to them. I hope I hope they're successful. [music]

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