Valve's 14-Year Journey To Make The Steam Machine

Hello, One Take Shrier here, and today I want to talk about the Steam Machine, Valve's new living room PC that has been more than 14 years in the making. Pretty wild. So, I got one. Valve sent me one to check out a couple of weeks ago. I've been playing it. Um it fits pretty nicely into my particular gaming setup because I have I'm mostly a PC gamer. My desktop PC is set up right here in my office. And uh I use I've been using the Steam Deck as like my number one gaming device for many years since it came out, really. Um all around the house, in my bedroom, in my in the living room, wherever, on the go, um trains, planes, automobiles. Well, not automobiles. Planes and trains. Um and uh the Steam Machine fits nicely. I stuck it in my bedroom. I've been kind of playing it in there. Um it doesn't like you're not going to get It's an entry-level PC. You're not going to get 007 running uh at 4K and 60 frames a second on that thing, but it is nice um to just plug in and pretty

seamlessly play a bunch of stuff. I've been getting my wife, who's not a big gamer, into Blueprints, which has been very fun. And she yells at me every time I try to give her a hint or tell her what to do next. So, that's been That's been fun to play around with. I really like it. Um if I hadn't gotten one from Valve, I don't think I would be paying more than a thousand dollars for this thing because that is one of the big stories of this device is that it happened to come out right in the thick of an AI-fueled memory crisis that has led to insane costs for both memory chips, RAM, and also storage. And so, the thing is starting at $1,050. Not what Valve intended, but still um I think this thing has proven to be a success for them. And that is because Valve's goal here is not necessarily to make this hardware that sells millions and millions of units and competes with the PlayStation and the Xbox. They have actually kind of different goals. And to understand that and kind of answer the

question of whether this is a success for them, you have to go way back in time. Way back to 2012. Um and I can speak a little bit firsthand to this and tell the story of Valve's 14-year attempt to make a living room PC. So, let's go back in time, right? Um people may not remember this and you may not might have be a little mind-boggling today, but back in the 2000s, there was this kind of belief that PC gaming was dead. That PC gaming was not what it once was back in the '90s. That consoles had really taken over. The Xbox and the PlayStation and Nintendo with the Wii had really dominated and um a lot of companies were not releasing proper PC versions of their games. Sometimes they would be late. Sometimes they wouldn't come out at all. Sometimes they would just be full of bugs and glitches and and optimized very poorly when they did actually come out. And there was really this kind of sentiment that PC gaming was not what it used to be. Um Around the same time, around 2011, 2012,

Microsoft was also making Windows much more of a closed restrictive system. Um to the point where Valve CEO and co-founder Gabe Newell came out and said, "This is a catastrophe for gamers." And he started preaching the kind of the the the merits of Linux as an operating system. 2012, September. I actually flew out to Seattle for a variety of things. Um had a a few different meetings and events that I was doing at the time. And I actually went to Valve's office offices where they wanted to show me something really cool that they were working on. They called it at the time Steam Big Picture Mode. 14 years later, still exists. Still still a cool interface. But what they the way they marketed it at the time was of course, "This is a controller-friendly interface that is going to be really helpful if you ever want to play games using Steam on a living room television or a television anywhere. You You use it with a controller and this makes things way easier for you. Um and obviously that

went through all sorts of iterations over the years after it launched. Um I think it it's gone gone through various kind of ups and downs over the years. But that was really the beginning of their initiative to kind of take over the living room. And around the same time, Newell and others were talking about making a console. I'll never forget um December 2012, as a Kotaku editor at the time, I was at the Spike Video Game Awards and I saw Gabe Newell. I think he might have been I might have been doing like red carpet interviews where I would just like stand there with my phone and like take short videos of people talking. Um and I spoke to Gabe Newell and uh I asked him, "What are you What's the plan here?" And he was like, "Yep, we're making We're going to make living room PCs. They're going to take on the next PlayStation and the next Xbox." At the time it was It would have been the PS4 and Xbox One that they were trying to take on. And we're going to We're going to We're going to make living room PCs. Valve is going to do this. We're going to call it the Steam Box at the time, but it would eventually be called the Steam Machine. Um fun little side note, by the way, during that Spike VGAs, I also um interviewed

on the red carpet Samuel L. Jackson. Um and I think at the time, if I remember correctly, my editor Steven Steven Totilo, still a good friend of mine, he wanted us to do um these kind of running questions where we would ask a bunch of different people the same question. And I think uh I asked I asked uh Samuel Jackson, um "Do you prefer modern games or classic games?" And he like gives me this look. He's like like a like a what the [ __ ] are you talking about kind of look, where he's like, "You think You think Pong is better than Assassin's Creed? Come on, what you talking about?" Um that's my Samuel Jackson impression. As you can see, I have a future in uh impression impression comedy, so uh call me anytime if you want me to do a Comedy Central stand-up impression uh bit um segment. So anyway, so uh Gabe was talking about that. Newell is talking about making living room PCs. They start talking about it more and more. They start working on what they call Steam OS, which is their version of Linux, their operating system that is kind of like a gaming first Steam version that

that runs on Linux. And it takes a couple years. It takes a little longer than they expect, but by 2015 they have launched what they call the Steam Machines. But there are a couple of problems with this endeavor. Problem number one is that Valve doesn't actually make their own Steam Machine, like everybody thought they might have. Instead, they make a controller and they make hardware and they essentially lend their name to hardware that is made by other companies, like Alienware. I believe it's called OEM the way that they were doing this, where essentially they say you can make these machines, call them Steam Machines, run them on Steam OS, and sell them with our controller. Which meant that things were a little confusing. The messaging was a little inconsistent. It was a little confusing. Prices were all over the place. Specs were all over the place. It wasn't really clear what you were getting. But there was another problem, too, and this is the bigger one, which is that a lot of games at the time did not run on Linux. They were made for PC and while Valve helped some developers get their games running on Linux, it was not a consistent thing. When you got one

of these Steam Machines, you could not be guaranteed that all of your Steam games would play on this operating system because they were built for Windows. Within the next couple of years the Steam Machine just kind of faded out. By 2017 it was no more and um uh I believe that that press at the time were calling it dead on arrival.
[snorts]
Um by the way, this this story uh if you want to read this whole story, it's on Bloomberg and and I'll I'll cite a couple of quotes from that Bloomberg story, too. That link will be in the show notes. Um but now we get a little bit closer to the modern day, which is um round around that same time Valve's engineers decide, "Hey, if we're going to make this work, if we're going to reach customers in the living room with living room PCs, we need to create a mechanism, some sort of middleware, some sort of layer compatibility layer that makes it so games seamlessly work on Linux from PC without actually having to from Windows without actually having to

be ported. And so they start working on what they call Proton, which is essentially this, like I said, compatibility layer that operates on Linux and kind of automatically takes PC games and makes them work on Linux. And this is a very difficult thing to do. It's a years-long process. It requires a lot of iteration and work, but eventually they decide, "Okay, this is in good shape. SteamOS is in good shape. Let's make some hardware that works with this." And they decide to go, rather than trying the living room PC again, they decide to do a portable piece of hardware. And what emerges is what's called the Steam Deck, which launches in 2022. The Steam Deck is awesome. I freaking love it. I I got a review unit from Valve at the time. I was playing Elden Ring on it at the time, and I thought that was the coolest thing ever that I could play Elden Ring on the go. Um as someone who has small kids, I found it very useful to have something that I could just kind of take and put in sleep mode if if I the kids needed me. Could play in the living room while they were playing next to me. It was very, very useful. You can play game like Elden Ring without your small child watching and seeing all the blood and

violence and and asking, "Daddy, what's that? Why did your head get dismembered there?" Um really cool machine. Got an upgrade a year later in the Steam Deck OLED, ED, which is even cooler. That OLED screen is still my most used gaming device. Um really sharp and and works really well. And as they went, even though it started with a few launch hiccups, um they just kept working on Proton and making it so more and more games are just work on the thing to the point now where almost all games on Steam will work pretty well on SteamOS. Um a lot of them are verified. Um I can I can There are very few that I can think of that don't work and most of them are because of like anti-cheat DRMs, like multiplayer games that you can't play that that would be pretty tough to play on a handheld anyway. So, at that point Valve says, "Okay, it's time to start working on the Steam Machine." Um I actually I spoke to a couple of engineers a few weeks ago at Valve, Pierre-Loup Griffais and um and uh uh Yazan Aldehayyat. Um and the two of them were telling me a

little bit about their initiative and how they started working on the current iteration of the Steam Machines after the OLED shipped. And basically, they said, "Hey, we're ready now. Uh Proton has gotten to the point where we can actually make this initiative that we started to do all those years ago and do it right this time." Um and so, I'm going to read a couple of quotes from them that I think are really interesting, which is that um uh uh here's a quote from Aldehayyat. Like I said, "I think the Steam Deck proved that yes, it's finally ready, Proton SteamOS to be good experience in the living room. And as soon as we realized that, we accelerated the Steam Machine development." But then, they ran into a problem, which is that they were pricing this thing as an entry-level PC, but cut to November 2025, which is when they announced the thing and maybe a week or two later, they realized, "Oh, yes. Okay, we are in the thick of an AI-driven memory crisis where all these AI companies are buying up memory chips and and graphics cards and storage units

and all this stuff to um to run their data centers and therefore, everything is more expensive and harder to find. So, it took them months more than they thought it would to actually get these things in production. It was much more expensive and they wound up launching the machine for much more than they thought they would. Um a couple of other things in development. First of all, they decided they did not want to subsidize the Steam Machine the way that other console makers do. PlayStation, Microsoft, they subsidize their consoles, they sell them for less than they cost to make because they want to get you in their ecosystem and get you buying games on their platform, paying for services on their platform. Um PlayStation and Xbox, they both benefit a great deal for everybody who uses their system um because if you're buying games on their system digitally, if you're paying for Xbox Game Pass or PlayStation Plus, you are paying a lot of money to them and they are making profits off of you even if they are taking a hit on the hardware itself. Valve decided not to do that because they, according to the engineers that I spoke to, want uh don't want to just

kind of like set a market where they are essentially dominating it and nobody wants to buy other Steam Machines because they want it to be kind of an open-source thing where other hardware manufacturers um find it viable to offer their own versions with different performance levels, different feature sets, etc. Um To be clear, not a purely altruistic move here because of course Valve benefits with anything that runs SteamOS because if you're buying games on Steam, Valve takes a nice healthy cut of every single one of those games. So Valve is making a lot of money on any any sort of living room PC, no matter who's making it. But still, it's not part of their ethos to be like, "We want to make a closed system." Similarly, I asked them, I said, "Hey, did you ever consider making like the new a new Half-Life game, maybe making it exclusive to Steam Machine to sell this thing?" were like, "No, that's not something we would ever consider. That's not how we operate. Like we don't think that exclusivity works for us." Um of course for them, they'll benefit again just from having more PCs in the wild, more people playing on PC. But their mission here is not necessarily to just make a console

that sells tens of millions of units. It's to create more of an ecosystem where people can just like play games on the go, play games however they want, play games in the living room, etc. Um I'm going to read another quote. This is from Pierre Lou, who said, "We look at it from a long-term perspective. Someone that is creating one of those PCs might actually create some meaningful innovation that is really important for things to come on PC that become so universal and brings the experience forward by that much that now the experience is better for everyone and then people might buy more games. Um Again, find all these quotes and you can read the whole story in my Bloomberg article, which will be linked in the show notes. So, yeah, I mean, from their perspective, this the idea of this thing is not again, not necessarily to sell a bunch of consoles, but like to solve this problem that people have where they they want a game in their living room, but they don't have a very seamless way to do it. And that is the idea of this box. Um here's the other interesting thing, by the way, this thing is still selling out every single one they produce. I mean, they're producing way less units than they thought they would

because of this memory crisis, but it is still selling out despite the price tag. Um By the way, they uh they said this is Al Mir Hyatt said, "Honestly, it's still getting worse. Just in case people are not aware, what people are seeing on retail shelves right now from our observation is lagging what we're seeing from a bulk supply by at least 3 to 6 months. So, that chip crisis, I mean, not going away anytime soon." So, here we are. I asked them, I said, "Hey guys, like is this is your road map is your kind of future plans are they being derailed by what has happened here and like maybe getting to sell way less Steam Machines at a way higher price than you thought you would be able to." And they said, "No, because again, this is just kind of part of our ongoing plan for getting more people on PC no matter what that looks like. Could be other people making living room PCs, could be us doing future iterations of our own hardware, whatever it looks like, um that's what we want." And again, Valve benefits from that because they own

Steam. They essentially have a Monopoly is a loaded word, but they essentially have control over the PC market and they take a cut of every single game that's sold. So, to them it's very beneficial to have more people playing on PC, but they also have this ethos of open source, of being on Linux instead of Windows because Linux is open. Um and one of one of things about the Steam Machine and the Steam Deck is that you can really use them any way you want. If you are if you are more of kind of like I don't know, a casual player or a player doesn't want to think about this stuff, you can just download it and play games pretty seamlessly on Steam OS without a problem. Um but if you are a hacker, a tinkerer, you can really get in there. You can download Windows, you can download emulators, you can get all sorts of thing running things running on this thing. You could even if you really wanted to use it as like a work computer. Although it's hard to imagine the Steam Machine or Steam Deck being that effective for that purpose, but it is a computer. You can use it how you want. In contrast to PlayStation, Xbox, Nintendo, other um kind of locked system consoles, which

again is part of Valve's ethos. So it's been 14 years. We're here. I think if you had asked Valve a few years ago, they might have said, "No, this is a hopefully we were we were hoping that it would be cheaper and reach more people and not face this kind of crazy memory crisis." But I think they actually do see this thing as a success because they're continuing to learn from it and use it to iterate on Proton, iterate on Steam OS. That is kind of the the broader goal here. The bigger mission here is like get more people playing on PC, no matter where they want to do it, no matter how they want to do it, kind of solve that problem for people. Um which I think is really interesting. Um I think it's it's kind of it's it's very different from a traditional console maker and they have very different set of goals. Um one important factor here, it's worth noting. I've talked on this channel before about the incentives that you have when you're at a publicly traded company and your your guiding light is

to raise your stock price by showing growth every quarter. Valve well Valve is still still has to grow, still has to face financial pressures like everyone else does. Valve is a privately owned company and so they do not have the same sort of financial incentives that a publicly a company does. They can keep their numbers opaque, they can be quiet about it. Um they just don't have to um face the the kind of demands of quarterly earnings and growth and showing year-over-year growth every single quarter and every single year. Very different set of incentives. So, they can be a little bit more closed off when it comes to their numbers and their goals and stuff, but they can also um afford to get away with saying things like, "Yeah, we just want more open systems for everybody. We want other competitors or other hardware manufacturers to be making their own versions of the Steam Machine, too, even if it competes with ours." So, very different set of incentives there. But, it's wild that this thing has been in development for essentially 14 years. As for what's next, um Valve's engineers told me that they're going to be looking

at how players are using this thing, um seeing if it solves problems for them. They're going to keep working on Proton. They said that even the process of making Steam Machine has led to a lot of improvements that will be felt by anyone who uses Steam OS, whether it's on the Steam Deck or other devices, um stuff like ray tracing and other kind of big benefits are coming out of that, more compatibility, etc., etc. And um Valve is also they told me a few years ago that they're working on a a Steam Deck 2, so so to speak, um kind of a new uh more powerful iteration of the Steam Deck um that they said they told me in 2023 that it's still a few years out. So, I imagine we're still looking at some time to come. And I mean, who knows how this memory crisis is going to impact any of that stuff. But, um for now, um as far as the Steam Machine, it's hard for me um as someone who got it for free from Valve, who got it for review purposes, for coverage purposes, it's hard for me to say this thing is worth a thousand plus dollars, um especially because uh it it's always been impossible. I've always found it really difficult to say like what is worth X amount of money because that can

mean so many different things to so many different people. There are a lot of people who are closer to my age and maybe have a little bit more financial security and feel like time is is a lot more than money, whereas there are a lot of people who are low income. Um maybe they're younger, maybe they just haven't had like um financially uh kind of careers where they've been able to make a lot of money. They're in lower income brackets for whatever reason. Um or they're being hit by this incredible like cost of living crisis that a lot of people are facing right now. And so for them, price is more of a factor than time is. And so I as a reviewer and as a reporter, as a critic, have always found it difficult to say like this is worth X value because that means so many different things to so many different people. Um that said, uh I can't tell you if this thing is worth a thousand thousand dollars and and a thousand fifty dollars minimum. Um I certainly would not have paid that just to kind of have that in my life. But I also have a desktop PC that is pretty powerful that I use for most of my gaming. Um so it

doesn't it's not like a hundred percent exactly what I needed this kind of entry-level PC. That said, it's pretty cool, pretty slick, pretty snazzy. It almost feels like an Apple piece of hardware. A lot of Valve's hardware has feel very inspired by Apple. The packaging, the slickness, the sleekness of it all. Except the biggest difference is that unlike Apple, it's all an open system, so you can kind of hack it and modify it and use it in whatever ways you want. Um that said, I think anyone in the market for a console or a PC or any sort of hardware involving computers right now is just in for a shock um thanks to our benevolent AI overlords. So um I guess big thanks to ChatGPT and Claude for um the sending hardware prices everywhere skyrocketing. All right, the 14-year saga behind Valve's Steam Machine is is over. Um and maybe it's still going. All right, have a good weekend everybody and I'll see you all next time.