Steam Machines Will Not Be Major Profit Generators

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By Kevin Parrish
published

Alienware general manager Frank Azor recently told The Wall Street Journal that it's going to be a challenge to sell the company's Steam Machine, that it will "absolutely" be the least profitable machine the company will have ever built. Why? Because unlike console sales, the company won't make any royalties off the software that's sold on Steam, and because Steam Machine makers are encouraged to sell their solution at console-like prices.

So why make a machine that will bring in very little profit? PC makers like Maingear, Alienware and iBuyPower are following Valve Software's lead. Once merely a developer of Half-Life, the studio's Steam software has transformed from a method to patching games to the biggest game-related market on the Internet, complete with a built-in social network. Valve, so it seems, has an awesome track record.

"If anyone can do this, Valve can do it," said Kelt Reeves, president of PC maker Falcon Northwest Computer Systems Inc. He agrees with Alienware: Steam Machines won't bring in a lot of money, but they're putting their trust in Valve's success. If the studio can build the #1 gaming digital distribution platform, then there's no doubt that Valve can transform the PC industry with the Steam Machine initiative.

After lots of rumors and speculation, the Steam Machine initiative was officially announced last year along with Steam OS and the Steam controller. Valve is shooting for a console-like form factor, but there will be several that take the typical PC tower shape. A Steam Machine, it seems then, only requires Steam OS and support for the Steam controller. Unfortunately, because of the diversity, gamers will see a level of fragmentation.

Tuan Nguyen, director of products and marketing at iBuyPower Inc., compared the Steam Machine environment to Google's Android: one operating system, one source of software and a number of different hardware configurations. What Steam Machines needs is a "Nexus" device so that customers are less confused and more attracted to the gaming PCs.

The first wave of Steam Machines is expected to hit retail sometime before the 2014 holiday shopping season. However, given that these machines require the Steam controller, the final launch date is in Valve's hands.

Kevin Parrish
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14 Comments Comment from the forums
  • MANOFKRYPTONAK
    Alienware stuff is good, but honestly overpriced. I thought that they made a killing on hardware and warranties, not necessarily software. But Alienware will find a way to make a killing, like they do with everything... On another note I like Steam, I run it on windows. I am still not 100% convinced to run it as my OS though. Anyone like it? Do you see better game performance, can it run office and the like?
    Reply
  • godfather666
    Game performance is similar, or perhaps a bit worse on Steam OS, based on the benchmarks I've seen so far. But your mileage will vary from one game to another.

    I don't care much for Steam OS. If I want to play in my living room, I'd rather buy a console.
    Reply
  • godfather666
    Game performance is similar, or perhaps a bit worse on Steam OS, based on the benchmarks I've seen so far. But your mileage will vary from one game to another.

    I don't care much for Steam OS. If I want to play in my living room, I'd rather buy a console.
    Reply
  • MrGulio
    If I want to play in my living room, I'd rather buy a console.

    Considering issues that game devs are having with the current generation of consoles (PS4, Xbox One) to run games at higher than 30fps at 1080p, I think now is an excellent time for Valve to push Steam streaming.
    Reply
  • AgentBJ09
    Considering Valve receives a 30% cut of digital sales via Steam, these machines look more like loss leaders to bring in people unfamiliar with the Steam platform.

    Me, I'll bide my time for the day when Steam operates like Desura. Useful as a downloading client, but able to be shut off without stopping you from playing your games.
    Reply
  • ratchet256
    Yeah, no shit they won't be major profit generators. Steam Machines, in my honest opinion, are a complete and utter failure. The concept, before they were released, as I understood it at least, was great. Release a nice, simple, PC type system that that the average person can understand. So that PC gaming can expand to a more broad audience and etc. But the instant I saw videos and articles comparing them, I lost all hope. (for reference: http://kotaku.com/from-alienware-to-zotac-all-the-steam-machines-with-sp-1495960379)

    They are completely pointless. With the dozen or so different models by all the different computer tech companies, with different CPU's, different GPU's, different RAM types and amounts, vastly different price points, and etc and etc. It's no different, no less confusing than going out and buying a standard desktop computer. Hence they appeal to no one.

    The standard, stereotypical parent for example, is just to get confused and give up, say "fuck this shit" and get an Xbox or something. The tech geek (like most people on this site for example), is going to prefer building their own desktop gaming machines. There is almost no audience for these systems whatsoever. Only the hardest of the hardcore Steam enthusiasts will want one, because it's Steam, so they have to have one. Even then they'll probably just use for a day and go back to their desktops and forget it even existed.

    Christ, what a disappointment. What a fucking pointless failure.
    Reply
  • Dirk_Funk
    I don't understand what why people are so disappointed. Did everyone expect a $1000 worth of parts for $400? Does nobody understand that consoles are sold below cost and then profits come from game licensing? Does nobody understand that these are supposed to be just botique pc's made more fitting for the living room? Does nobody understand that its not meant to be direct competition with consoles, but rather a console for those that want a console-like machine but arent satisfied with the major consoles? It's hard to understand anyones disappointment. If valve had said something like "you will never need another piece of hardware again" or in any way implying that it was supposed to replace desktops AND consoles maybe everyone's disdain would make sense, but its just a hybrid for those who want a hybrid. I will agree alot of these steam boxes are just humongous pc's for valve fanboys, and I don't see the point in that, but neither do i see the point in spending more than 1000 dollars on a pc anyway. However, I've had my eye on these 500 dollar models and they are damn close to what you would pay to build it yourself; factor in the fact that its in a sleek, slim case and pre-built, and I'd say you at least get your moneys worth. Also without licensing fees on games, you get games consistently cheaper than with on consoles and you don't have to pay for online play. Also, a controller is included so you save on that. These machines, I feel, hit the perfect middle ground.
    Reply
  • ratchet256
    "Did everyone expect a $1000 worth of parts for $400?"
    No.

    "Does nobody understand that consoles are sold below cost and then profits come from game licensing?"
    Okay??? And??? What???

    "Does nobody understand that these are supposed to be just botique pc's made more fitting for the living room?"
    Like I said, tech enthusiasts would very highly prefer to build a machine like that themselves. Instead of an overpriced pre-built system. Because buying parts yourself and building the system yourself is a vast majority of the fun. Buying a pre-built "Steam Machine" is boring as hell for anyone who cares about tech, and anyone who doesn't care about tech is going to get confused because all the random specs and price points, and give up.

    "Does nobody understand that its not meant to be direct competition with consoles, but rather a console for those that want a console-like machine but arent satisfied with the major consoles?"
    Again, we can build a machine like that ourselves.

    If Steam Machines were just 1, or possibly 2 or 3 different models, with **very** distinct differences in performance, and price points. Then, maybe they would have some kind of purpose. That would make it easier for people who who don't care about tech, or don't understand specs and such, to get into PC gaming.

    "These machines, I feel, hit the perfect middle ground."
    Bullshit, the only new ground these things break, is now you can get a pre-built desktop with Steam logo on it. Which, some of them don't even have that. Fucking goody.
    Reply
  • Alec Mowat
    The standard, stereotypical parent for example, is just to get confused and give up, say "fuck this shit" and get an Xbox or something. The tech geek (like most people on this site for example), is going to prefer building their own desktop gaming machines. There is almost no audience for these systems whatsoever. Only the hardest of the hardcore Steam enthusiasts will want one, because it's Steam, so they have to have one. Even then they'll probably just use for a day and go back to their desktops and forget it even existed.

    Christ, what a disappointment. What a fucking pointless failure.

    You are missing the main point here. The target market is Gen X and Gen Y. We are the parents, and we are more tech savvy than baby boomers who purchased consoles for us. Toss in Netflicks and a few other apps, and Steam OS will be as good as Android over time. It will take some patches to repair some major bugs and keep the system more restricted than Ubuntu in time.

    A modern console is no more/no less complicated than a Steam machine. In Big Picture mode, Steam OS is not much different. Smart parents are ALREADY buying their kids computers because it's an excellent career path. Learning some simple Linux commands by using SteamOS daily will get you far in a tech career.
    Reply
  • Dirk_Funk
    13376798 said:
    "Did everyone expect a $1000 worth of parts for $400?"
    No.

    "Does nobody understand that consoles are sold below cost and then profits come from game licensing?"
    Okay??? And??? What???

    "Does nobody understand that these are supposed to be just botique pc's made more fitting for the living room?"
    Like I said, tech enthusiasts would very highly prefer to build a machine like that themselves. Instead of an overpriced pre-built system. Because buying parts yourself and building the system yourself is a vast majority of the fun. Buying a pre-built "Steam Machine" is boring as hell for anyone who cares about tech, and anyone who doesn't care about tech is going to get confused because all the random specs and price points, and give up.

    "Does nobody understand that its not meant to be direct competition with consoles, but rather a console for those that want a console-like machine but arent satisfied with the major consoles?"
    Again, we can build a machine like that ourselves.

    If Steam Machines were just 1, or possibly 2 or 3 different models, with **very** distinct differences in performance, and price points. Then, maybe they would have some kind of purpose. That would make it easier for people who who don't care about tech, or don't understand specs and such, to get into PC gaming.

    "These machines, I feel, hit the perfect middle ground."
    Bullshit, the only new ground these things break, is now you can get a pre-built desktop with Steam logo on it. Which, some of them don't even have that. Fucking goody.

    I mean, people already buy Alienware and Cyberpower PC desktops, but they can build those themselves. The market for the inbetween is there, Steam machines are for that crowd. You're pretending that the only people that buy pc's are relatively ignorant moms and techies who build their own. Enough people buy these botique pc's, otherwise there wouldn't be so many companies selling them, and I wouldn't see ads for the companies all over sites such as this one. I'm just confused about the fact that if you think building a pc is the best way to go, what did you expect steam machines to do that would change your opinion?
    Reply