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Valve Lines Up Console Partners in Challenge to Microsoft, Sony

Valve Corp., the largest online retailer of games downloaded to PCs, is working with “more than a dozen” partners, including computer makers, to begin selling consoles that take on Microsoft Corp. (MSFT) and Sony Corp.

The closely held company, maker of the “Half-Life” titles, will introduce the companies in early January at the Consumer Electronics Show in Las Vegas, said Greg Coomer, one of the lead designers. They plan to produce and sell the consoles next year using variations of Valve’s prototype design, controller and Steam operating system.

“There’s different categories of partner,” Coomer said in an interview. “Some of them will be able to serve millions of Steam customers, some of them are boutique shops.”

Valve is taking the offensive as its own market is invaded by Microsoft, Sony and others, banking on global base of personal-computer gamers to seize some of the $15 billion market for home consoles. Microsoft and Sony (6758), which are introducing new machines for the holidays, have started their own Internet portals to duplicate Steam’s success selling games, as have Wii U maker Nintendo (7974) and Electronic Arts Inc. (EA)

The SteamOS machines will sell for different prices and configurations, the Bellevue, Washington-based company said. Depending on those, some Steam games may not play on each device. This month, the company plans to test the devices with 300 users to polish features before next year.

Valve also is working with music and movie services to deliver streamed entertainment to the machines, Coomer said. With Internet access, game consoles have evolved into entertainment hubs, providing movies, TV shows and music from Netflix Inc. (NFLX) and Pandora Media Inc. (P)

Market Share

Valve captures 75 percent of the global market for digital PC games through its Steam store, researcher IHS Screen Digest has estimated. While the company doesn’t disclose sales, digital distribution of PC games this year will comprise $5.5 billion of the $21.4 billion computer games market, according to DFC Intelligence, another researcher. IHS estimates Valve generated $1.1 billion in 2012 from full-game downloads.

To get developers to go along, Valve is passing up the licensing fees that competitors charge for access to their systems. Valve plans to hold a developers conference in January, according to company officials.

“The main goal of Steam has always been to increase the quality of the user’s experience by reducing the distance between content creators and their audience,” Gabe Newell, Valve’s co-founder, said in an Oct. 30 statement. “In the coming year, we plan to make perhaps our most significant collaborations with both communities through the Steam Dev Days and the Steam Machines beta.”

Wooing Developers

Steam’s business is also threatened by the console makers’ plans to include games compatible with Unity Technologies, which offers a game-development engine to create products for different platforms. Valve is trying to woo the same developers by promising they can post updates and fixes immediately, without waiting for the usual approvals required by big brands.

SteamOS adds features to the Steam service across all platforms, including family sharing, and in-home streaming. Because it’s based on the Linux operating system, developers must create games using that software.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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