SteamOS is the great disruptor

Market analysis / Editorial review By GBAMFS Senior Market Contributor Martin Strnad

SteamDeck displaying a game

Two weeks ago Valve Corporation made some changes to the Steam branding guide¹, hinting on possible future devices running SteamOS as their pre-installed main operating system. This strongly portends that we are going to see more devices like SteamDeck emerging from different hardware manufacturers soon. We are already seeing the first, as confirmed by Lenovo–initial images leaked of the Lenovo Legion GO handheld showing a dedicated Steam icon button on it. Recently, the week after, Lenovo confirmed it.² As there are a number of other companies attempting to seize the opportunity in the handheld gaming market, it would be appropriate to anticipate something similar from Asus, Zotac or MSI as well. Valve is confirmed to be a participant in next year's CES held in January. Handheld gaming seems to be the next big area poised for disruption within the gaming industry. Valve is wasting no time becoming one of the leaders in this segment focusing quite heavily on the software side of things while letting mainstream hardware manufacturers help them with the heavy lifting of getting SteamOS-equipped devices into the hands of consumers. They have a ready model to provide from their experience developing the SteamDeck.

Now, what does this mean in broader context for the whole gaming market?

Looking at Valve’s Steam, which has been the single biggest distribution platform for PC games since the late-2000s, their most recent concurrent user number, nearly 40 million, seems to confirm it. By 2021 Valve announced they had 132 million active users and that number most likely has only grew since then, thanks not only to SteamDeck but to Valve’s widely-lauded pro-customer approach. The number could be estimated to be as high as 150 million users today. Comparing this number to the 34 million Microsoft Game Pass subscribers, with about 30 million Xbox Series S and X sold; 50 million PlayStation Plus subscribers and 65 million PlayStation 5s sold; 34 million of Nintendo Online subscriptions with 146 million Nintendo Switches sold. It shows us that the actual leaders of the contemporary gaming industry aren't Sony or Microsoft. The largest number of players are actually on Steam and Nintendo's Switch.

Both Valve and Nintendo show a deliberate lack of focus on cutting-edge hardware and very intense focus on bringing quality content to their users. This has proven to be a prudent business model for both companies. Where Valve makes 30% on each game purchase on Steam, with average Steam user owning 21-50 games, it easily makes them one of the most profitable companies in the industry. Nintendo meanwhile pulls in profit on every piece of hardware they sell since they never go for any top-shelf tech. Additionally their first-party games are designed with the broadest possible audience in mind. A model which has proven successful time and again as their games are enjoyable while being family-friendly, resulting in average of 9 games sold per every Switch unit.

With more SteamOS devices entering the market with the impending announcement and soon launch of Nintendo Switch 2 in 2025, we can expect growth in the userbases of both ecosystems. I predict this will leave both Sony and Microsoft even further behind due to the great convenience of handheld gaming, combined with price points of the units. Coupled to both companies' distinct customer-bases, where a child gamer is safe within the Nintendo ecosystem and gamer dads and moms feel comfortable with the convenience factor of SteamOS handhelds (due to their pre-existing game libraries, as well as the ability to put the device to sleep mid-game, seamlessly waking on-demand.)

The big question is: Will Valve try competing with Nintendo not only for the adult handheld gamer but also over the core couch-based gamers favored by Sony and Microsoft? Or even for the old-school PC gamer audience that has been propping up Microsoft Windows for decades?

Recent leaks would seem to indicate Valve's strategy leans toward another practical demonstration of prowess in disruption of the hardware market. While the release of the SteamDeck created inroads for Valve before, this time it looks as though they are poised to take a more sizable share of the traditional console-centric, couch-based gaming consumer market. This is supported by Valve's history—they operate iteratively. Bouncing back from prior setbacks with the failed Steam Machines that also led us to current Proton model in SteamOS (a variant of Linux now compatible with virtually Steam's entire marketplace of titles,) or the evolution of Steam Controller that eventually led to SteamDeck itself, it’s safe to assume that they are now preparing to take another step towards dominating the gaming market in a fashion only Microsoft and Sony have been comfortable doing in recent decades: Living Room gaming. Multimedia mini-PCs are nothing new; the difference today is how dominant chipmakers like AMD, nVidia and even Intel have pivoted into selling off-the-shelf high-performance and power-efficient APU solutions. This includes for the very popular mobile computing market of long-life laptops and gaming handhelds. These products were previously reserved only for the likes of Microsoft and Sony. The custom chips powering their consoles were viable owing to the bulk demand both companies made (especially given the long timespans between console generations.) Now, such chips are available to any hardware manufacturer. Newly available to build a device that would well-integrate into anyone's living room entertainment setup; all that is needed is good software to run it... and this is where SteamOS comes in.

Evaluating both the trajectory of the hardware market and how Valve has refined their software and player-facing hardware, we can clearly see these trends playing into Valve’s hands to be the first standardized living room PC gaming platform. I predict this will take a considerable part of the big console customer base, bringing it to PC gaming, all with conveniences and comforts of console gaming. In effect to become something of a Technologie de rigueur – the new standard in console gaming.

Where does this leave good old-fashioned desktop PC gaming, we may ask? From the momentum Valve is building with SteamOS, mainly within tightly-integrated PC handhelds (and potential future living room gaming mini-PCs,) it would be wise not to expect a sea-change here any too soon. The biggest roadblock in this case being driver support as the majority of hardware manufacturers keep their software teams' focus on Windows. Valve will take their time, grow their user base and eventually use it as the main argument in persuading hardware manufacturers to support Linux drivers. Evidence of this strategy is already visible in that we can already see Valve adding support for nVidia GPUs to SteamOS. This according to data-miners; despite nVidia not being known for supporting Linux well in the past. The tides certainly are turning, and we should expect some response from Microsoft to all the moves Valve is making right now, which have the potential to significantly disrupt Microsoft’s business model–not only within the gaming market but beyond.

¹https://www.gamingonlinux.com/2024/12/valves-new-branding-guidelines-hint-at-steam-decks-steamos-for-more-devices/ ²https://www.forbes.com/sites/jasonevangelho/2024/12/19/lenovo-all-but-confirms-new-steamos-handheld-with-surprise-event/ Martin Strnad is a game design, narrative and production consultant. A veteran of 16 years in game development, Martin has also served as editor and contributor to European game news sites. On LinkedIn: https://www.linkedin.com/in/martin-strnad-15309338/ Copyright GBAMFS 2024. All Rights Reserved.