The introduction of a revised Steam Deck sees device maker Valve reinforce its leadership in the handheld gaming PC market. This follows the emergence of competing options throughout 2023 as handheld gaming is utilized as a means of extending engagement with existing platforms.
Steam Deck OLED will reinvigorate flagging Steam Deck sales
While Steam Deck was not the first portable gaming PC, it was the first device to take what defines PC gaming and make it approachable in a handheld form factor. The utility provided by its bespoke SteamOS operating system helped device maker Valve establish a new and growing category of portable gaming PCs.
Traditional PC OEMs have since entered the market in 2023 with their own devices that run Windows, a competing operating system. Both Lenovo’s Legion Go and ASUS’s ROG Ally borrow heavily from the Steam Deck in their approach to hardware design while attempting to improve upon some of its weaknesses.
It follows that some of the luster has been taken away from Steam Deck as it no longer has the market to itself. Indeed, there are signs that Steam Deck sales have slowed year-on-year. Omdia analysis of Steam’s global revenue charts suggests that Steam Deck hardware sales in 2023 are not generating the same amount of revenue compared with the year prior (see Figure 1).
Figure 1: Steam Deck sales have been slowing YoY since the beginning of 2H23
Valve attempted to reverse this situation with a number of price cuts during Steam sales – the most effective was Steam’s 20th anniversary sale during week 30, where Valve cut the price of the Steam Deck by up to 20%. Yet this had a short-lived impact on sales revenues. Steam Deck’s global sales ranking throughout 2H23 so far has consistently fallen behind the equivalent weeks in 2H22.
The introduction of a new OLED model should help reverse this trend long-term. By addressing the original model’s biggest deficiency, it refocuses attention back on Steam Deck as the gold standard for playing PC games portably. The device becomes more appealing to potential Steam users who are still on the fence about purchasing one, while the faster hardware upgrade cycle associated with PC gaming could spur upgrades despite the relatively young age of the hardware platform.
In March 2023, Omdia’s Steam Deck Forecast Report estimated 1.85 million Steam Decks will be sold in 2023, a year-on-year increase of 14% (see Figure 2), while anticipating that Valve will release a revised model “by early 2024” in order to gain sales momentum.
Nintendo Switch sell-through this year suggests that there is market appetite for a revised device primarily headlined by a tangible improvement to its screen. According to Omdia’s Console Report – 2H23, sales of the Nintendo Switch OLED model in 2023 will account for over half (53%) of Nintendo Switch hardware sell-through for the first time.
Valve is confident that it has built up significant stock of Steam Deck OLED to avoid the fulfillment delays that plagued the original model’s launch window. That Valve is sourcing its OLED panel from multiple suppliers suggests it has built up a degree of economies of scale in its production.
The device is also launching in 4Q23, giving Valve an opportunity to leverage what is the busiest holiday sales period of the year in the markets that it offers Steam Deck in. For instance, Nintendo shipped 44% of annual Switch hardware units through to retail in 4Q19, a pre-COVID year uninterrupted by supply chain disruption.
Meanwhile, Steam Deck’s tight integration with Steam, the world’s largest PC games distribution platform, allows Valve to offer a more frictionless console-like experience than competing Windows-powered alternatives. It also enables it to remove interoperability with Xbox Game Pass which it directly competes with on Windows.
Figure 2: Short-term outlook for Steam Deck hardware sales volume
Steam Deck remains a value add to Steam
Valve still faces a number of hurdles if it wishes to grow Steam Deck’s installed base long-term. Steam Deck is still being primarily sold directly via Steam, to users who already own and play PC games, which limits hands-on opportunities and reach through retail stores.
Steam Deck, then, is ultimately a value add to an existing software distribution platform, rather than a dedicated games platform like the Nintendo Switch.
Like Steam Deck, handhelds are increasingly being used to extend an existing ecosystem of games, and other options have emerged throughout 2023 beyond Windows-powered handheld gaming PCs.
At Gamescom in August, Qualcomm revealed plans to power a range of Android-powered gaming handhelds with its Snapdragon G Series silicon. A month later in September, Omdia examined Apple’s attempt to bring console and PC triple-A games to its ecosystem of devices. Meanwhile, this November, Sony Interactive Entertainment recently released PlayStation Portal, a handheld that streams games from a PlayStation 5.
Omdia believes PlayStation Portal exists to retain Sony’s most valuable users on PS5. This is ultimately the same reason Valve’s Steam Deck exists – Steam users with the device will increase their engagement and spend with Steam content. As such, adjacent devices like Steam Deck and PlayStation Portal don’t necessarily need to sell in console volumes to be useful to their platform holders.
Steam Deck OLED is important, then, because it ensures Valve remains competitive with existing and emerging portable gaming options from competing games platforms, while arriving on the market ahead of the anticipated reveal of Nintendo’s next-generation hardware in 2024.
Steam Deck Forecast Report (April 2023)
Console Report – 2H23 (November 2023)
James McWhirter, Senior Analyst, Games
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