Valve is coming to the living room


Gabe confirms.

I wish I hadn’t made my post on the future of the living room so huge, burying Valve on page 4. I suddenly have the desire to update the picture with a companion cube submarine emerging from the depths between the Apple and Google ships. Here’s why we should all take Valve seriously: They are insanely efficient at leveraging their small size.

Valve has the sharpest outlook on how a software/services platform should be run in the game industry. Despite being a small company at around 300 employees, Steam is dominant on the PC. Michael Abrash’s recent post illuminates how Valve is optimized around delivering maximum value per employee. Valve’s 300 is more directly effective than, say 300 of the people working on the next Xbox (efficiency #1).

They also fly the flag of open platforms and direct access to customers. They believe (as I do) that connecting developers to customers as seamlessly as possible will create the best experiences and ultimately the best platform. Oppressive certification is a waste and a platform hindrance. TF2 is a massively better business on Steam than it ever was on the 360. That direct connection creates an efficient platform, which requires less scale on Valve’s part (efficiency #2).

An open platform device doesn’t have to be as complex and monolithic as an Xbox or an iPad. The graphics hardware race is largely irrelevant on anything that’s not mobile these days. Valve is capable of taking PC components, putting them in a box, and using Steam as an OS* (efficiency #3).

An open platform device doesn’t need a huge launch with a massive marketing push. Forget retail. Valve is big on market experiments and I can see them putting out a Steam box in a bare-bones version 1.0. From there they will learn, iterate and scale up (if the market supports it). It’s an antithetical strategy for a hardware platform launch, but it’s gospel for a software platform launch (efficiency #4).

The thing about the next generation is, it’s going to be much more about software and services than hardware. Valve is in a great position to disrupt the big players purely by virtue of their dedication to open platforms. Not to mention, they understand the importance of a good controller to the living room experience, something I’m not sure even Apple gets, what with their undying devotion to the all-powerful touchscreen.

I once made the mistake of expecting Steam to take over and disrupt the PC market overnight. I was right in my predictions but utterly wrong on the time scale. If anyone can do this, it’s Valve. Just understand, it’s going to happen on Valve Time.


* Most games currently on Steam use DirectX, which is part of Windows. Valve (including Gabe himself) are working on a Linux port of Steam – Why? There is probably a solution to the DirectX issue either by either launching their Steam Box without the DirectX titles, or by using a networked Windows PC (already running Steam) to render those games over the network back to the Steam Box.

Next Gen is Terrifying?


I don’t think Naugty Dog has anything to worry about. Next gen will be less about a graphical leap than ever before. Sure, the hardware will be much better, but the initial graphical leap in game tech and art will be imperceptible next to current PC games like Battlefield 3.

So what’s the selling point? Certainly Sony can’t put out a $900 PS4 and expect anybody to buy it on the back of “MOAR GRAPHICS.”

Next Gen will be defined by the declining retail market more than anything else. MS/Apple/Sony understand that they are making a platform for digital content delivery, not just big AAA games, but also small XBLA games, free to play games, social games, but potentially more importantly: TV and Movies. A new way of interacting with your tv and games, that’s the selling point.

Apple is doing this which means MS and Sony need to strike preemptively or be disrupted. Believe it or not, there are lots of people that would happily never own another “game box” if their TV played Wii Sports and Just Dance. The PS2/Wii era market penetration is the realm of iTV.

I work on AAA games so please don’t remind me that AAA blockbusters aren’t going away. I know, I know. I like those games too. Yes, we will always have them and they will get more uber in the future. It’s great.

But that’s not the highest end of the market. The highest end is $100/month TV & Movie subscriptions that people currently pay to the likes of Comcast and Verizon. The highest end of the games market is not even Mondern Warfare 3’s Billion Dollars, it’s WoW’s Several Billion Dollars.

The next gen is about making and owning the living room software & services platform. Look at how well Apple and Google have done on the backs of iOS and Android. Everybody wants to do that in the living room. The competition is not between Xbox 720 and PS4, the competition is between:

– iTV
– Xbox Live
– Google TV
– Steam (which is remarkably well positioned to be relevant in the living room)

Platforms. That is what matters and is what will define the next gen. The level of uncertainty around the future of those platforms is far more terrifying to me than “how much RAM will the box have?”

Smart TV at GDC 2011


There have been three bits of news from GDC so far that paint a better picture of how Smart TV will disrupt the AAA game industry in the living room. Once again, Valve is ahead of everybody else in their thinking:

  1. Iwata’s Keynote was about a crisis for Game Developers. My Translation: Nintendo is the one in crisis. Everybody on Facebook and iOS is doing just fine. Yet, Nintendo can’t follow up the blue ocean strategy of the Wii with another Wii – it’s a red ocean now with Kinect, Move on the motion control side and lots of new competitors (Smart TV, cloud gaming, iOS) coming on the cheap disruptive side. Still, they clearly recognize the problem and that’s the first step towards finding a way to make a Nintendo machine part of the future living room.
  2. Google recognizes the fact that control and therefore UX is a big problem in the living room. Well Done! Then, they point to tablet and smartphone touchscreens as the solution. Oops! As I mentioned in the bigger article, touchscreens lack tactile feedback, and so they can’t be eyes-off controllers. I don’t think people want to give up on-the-big-screen UI’s and spend all of their time looking down instead of actually watching a show while they surf for something else. Plus, the larger market of apps (as a device selling point) is only enabled by a controller that can navigate on the big screen. Despite being first to market with the most fully featured Smart TV platform, Google is leaving the door open for somebody else to build the great controller experience. This puts Microsoft in a great position. A “Kinect TV” product (cheap, focused on great TV UX and an open app market) could be huge. That is, if Microsoft can bring themselves to put up an open app store.
  3. With my favorite bit of news, Valve announced “Big Screen Mode” for Steam, which makes my longshot scenario of a Steam-enabled Boxee 2 much less of a longshot. Big Screen Mode also features a controller-enabled UI. Very soon you’ll be able to hook a cheap PC up to your TV, buy Modern Warfare 2 for less than it costs on any console and play nearly the exact same experience. Steam has more disruptive potential than anybody is giving them credit for. Already, Super Meat Boy, a game designed for controllers, sold more on Steam than Xbox Live Arcade. I tweeted Boxee telling them to hook up with Steam, so we’ll see if they can recognize their leverage to crush Google, Apple and Microsoft, and dominate the living room.

AAA Games versus Smart TV

Art, Default, Text

DISCLAIMER: This is a speculative opinion piece based on public information. These opinions are my own and do not represent my employer.

The game industry is about to get flipped. The console in the living room has long been the king platform for games, but these days the living room is different. Only blockbusters like Call of Duty or breakout indies profit in the arms race of the AAA. The traditional games business as a whole is shrinking.

The old console cycle of simply iterating on graphics hardware is dead, and it’s never coming back. Nobody is sure what the next game box will look like. What’s more, Apple TV and GoogleTV are trying to bring some of the magic of Android, iOS, and the Web into the living room and are threatening to upend the PS3 and Xbox 360 in the process.

Game consoles are primed to be disrupted, and the next generation of Smart TV might just be the new champion.

Where We Stand

There is massive growth happening in the games industry on smartphones, Facebook, the Web, and Steam. That style of game product – digitally distributed, service oriented, focused on ongoing revenue – is bound for the living room.

Enter Google and Apple

When they get there, an app store will meet the realities of couches and big screen TVs and a very peculiar new box will be born. This new box will have a fancy controller, sort of like a game controller, and it will happen to play games, but it won’t be an Xbox or a Playstation.

It’s not just games that are in for a shakeup, there is a full on war brewing in the living room around access to video content. There are Smart TVs like those from Samsung, there’s Roku and Boxee, and the old giants like Comcast and Verizon are getting smarter about the services they offer. The Web and services like Hulu and Netflix are changing TV behavior forever.

Google and Apple that are the most interesting contenders because they are big and don’t keep content out like the game console manufacturers. In this respect they are open. What also makes them interesting is that games will be important part of their arsenal in this battle and that will pit them against Microsoft and Sony’s AAA firepower.

It certainly doesn’t look good for games in the short term – the traditional business is in decline. But, once the dust settles and the new living room app store reigns supreme, this new box could be incredible for the game industry. Read on for the full analysis: