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8th Generation Wars: A 'Console' Challenger Appears

Valve has recently announced their intention to enter the next console war with the Steam Box, a new custom PC designed to go head-to-head with next-gen consoles from Microsoft and Sony.

Valve has recently announced their intention to enter the next console war with the Steam Box, a new custom PC designed to go head-to-head with next-gen consoles from Microsoft and Sony.

A quick look at statistics on Steam’s Wikipedia page (Steam - Wikipedia) shows that as of November 2012, 1800+ games are available through Steam to an active 54+ million accounts. Concurrent users peaked at 6+ million on Nov 25th, 2012.  Now, Valve wants to enter the console market. To rephrase that:

Valve, the 1000 pound gorilla of digital distribution for PC games, has decided he wants a piece of the console pie. Maybe even all of it. Gorillas are not known for restraint. What implication’s does this hold for the future?

Mean Gorilla

1800+ gaming titles will presumably become available to the console market through the Steam Box. Although a percentage of these games are readily available on existing consoles, many however are not. This inevitably leads us to the next point,

Steam is known for holding regular sales which offer deeply discounted titles for direct download. The sheer size of the discount amount, upwards of 75% off, offered on both regular titles and packaged bundles of games, far exceeds anything you can find in a traditional brick and mortar store. 

This means on the Steam Box you, the consumer, the video game connoisseur, will potentially pay significantly less for video games than you currently do; and all from the comfort of your own home.

Of the 54+ million Steam accounts, there are undoubtedly a significant percentage of users that own at least one console. The Steam Box gives those users the option of playing their games on their TV, independent of their PC.  This begs another inevitable question,

The current console market is heavily saturated with titles with the majority breaking even on their production costs, or failing to achieve even that. This means that a small percentage of games are actually profitable, and a very, very small percentage of released games are actually sales blockbusters (i.e. Call of Duty: Black Ops, 25+ million copies sold worldwide for $1+ billion in sales).

So with those points in mind, what is going to happen when the Steam Box arrives as a console? It brings along easy access to 1800+ titles, many of which eventually become deeply discounted. Console games are already facing pricing pressure from the glut of social and mobile games which have flooded the market in recent years. 

This has created tremendous price pressure to offer premium games, with high production values, for only a few dollars. Steam will bring with them 54+ million active accounts, many of which have games already on their Steam account, which they will now be able to play on their TV with their existing social network of friends.

This begs the question: How will Microsoft and Sony react when a title is simultaneously released for all three consoles, but Steam offers you a discount since it is downloadable and does not have to deal with the physical distribution of the disc?  

This scenario does currently happen.  On Steam, the recent release of Hitman: Absolution saw users able to preorder the game for a 10% discount prior to release, however after the release date the game went back to its full retail value. 

Why stand in line for hours outside in the rain to purchase a game for full retail value at midnight (or later depending how far back in the line you are), when you can purchase the game at a discount, pre-install the game, and download a small patch at midnight and be playing by 12:05 all from the comfort of your own couch?  

There are signs that Microsoft and Sony want to raise the price of premium console games to help recover the ever increasing costs of AAA title development, however that could become difficult given Steam’s pricing models and the situation described above.

The confirmation of the Steam box entering the console market comes at a time when OUYA has received $8.5+ million dollars in funding from their Kickstarter campaign (OUYA), and amid constant speculation that Apple is thinking of joining the console wars in one form or another.

Who will reign supreme in the next-gen console war remains to be seen, however it is shaping up to be a hell of a fight for your entertainment dollars. One in which gamers’ are poised to be the clear winners.

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