Steam Machine Pricing Explained: Why Valve Won't Sell at a Loss

The cost of gaming gear has always been linked to the game's business model. Traditional consoles are usually sold at a loss, with companies profiting only from sales, subscriptions, and digital storefronts. Valve has gone another route with Steam, and that illustrates a bit of where the company's heading with PC gaming in the future.

One of the main reasons there has been so much discussion about the Steam Machine is Valve's lack of hardware subsidies. With the high cost of modern parts, it seemed clear that the only way to offset the loss from selling the system was to sell the Steam games. After all, that's the way nearly every console has worked for decades!

Valves Choosing Openness over Hardware Subsidies

But according to Valve, that isn't in the company's spirit. The company says open systems provide a better long-term environment for developers and customers. Because it's an open platform, new ideas for hardware and software can thrive, as anyone can create them. Meanwhile, companies selling hardware at a loss or buying exclusive content are typically trying to create a closed ecosystem in which users can no longer choose their preferred software, Valve says. This is an anti–PC platform strategy.

There are key differences between Steam and traditional consoles. There are differences between Steam and traditional consoles. It's easier to see the business model when considering platforms like the PlayStation. The console is sold at a discount when compared to its production costs. The platform holder gets it back in no time with digital game sales and subscriptions, online memberships, downloadable content, microtransactions, and first-party games.

The players are also stuck in that storefront, which means the console's owner can cash in on virtually any purchase there. After a time, a new generation is born, and the cycle repeats. Xbox's online services and subscription are similar in this regard. Nintendo also uses exclusive titles and online memberships to bolster its ecosystem.

It's a Closed Way of Playing Games, According to Valve

Therefore, Steam cannot guarantee the revenue of any hardware. So, Steam cannot guarantee the revenue of any hardware. It's a totally different story on PC. If people do purchase a Steam Machine, there's little reason to believe Valve will recoup any of its losses if the hardware is sold at a loss. 

An owner of a Steam Machine can add other game launchers, play games from other stores, use classic games via emulation, or simply play all of the games he already has without buying anything new. Steam is one of the options on an open platform, unlike traditional consoles. The implication is that if Valve runs on the assumption that every Steam Machine owner will spend enough to cover the cost of the machines themselves, that’s not going to be true. Subsidizing the system would introduce new financial risks not present in the console market.

The situation is worsened by the rising component prices. But component prices are rising, worsening the situation. Today's hardware prices make it even more difficult. Memory and storage prices have gone up dramatically – and there is no sign of a return to lower prices any time soon. While supply may improve, it may take months or even years for the market to stabilize.

Some time ago, it was relatively inexpensive to recommend the 64GB RAM over the 32GB RAM and the 4TB SSD over the 2TB SSD, but that's no longer the case. That's no longer recommended. 512GB is now the minimum required to keep the total system price around $400. It will be even harder to create a low-cost gaming PC in the future, as hardware costs continue to rise.

Valve is Pushing to Make the Steam Machine One Option

The company doesn't want to make customers feel compelled to buy Valve hardware. Rather, it wishes the Steam Machine to be available alongside all other systems, so gamers can select the system that best suits their needs.

If these priorities involve price, performance, size, peripheral compatibility, or any other attribute, it's up to the customer to make the choice. One of the strongest things about the PC platform is the freedom people have to play their games, something the PC gaming industry does not want hardware subsidies to undermine.

The Trade-off is a Good One!

While it would be nice if it were cheaper, it appears that any solution poses another issue. It's possible that selling hardware at a loss might lead Valve to go exclusive with games, subscription services, or other platform restrictions, just to make up the losses. Consequently, many people opted to leave the console game market due to its limitations. This would alter the experience, which is what makes PC gaming so different, if it were to come to Steam.

The higher price is a hard pill to swallow, but it is necessary to keep the platform open. Creating a cheaper alternative is not always just. It's not always fair to build a cheaper alternative. Many people say they can build an equivalent system for less money. If you examine many of those parts lists, you will find a different story.

Some builds use much cheaper power supplies or older graphics cards that don't deliver the same quality of experience that Valve aims for. It is particularly dangerous to save money on a power supply. One of the most critical parts of any computer is the power supply, and it's worth buying a little extra to ensure it's reliable and help safeguard the other components in your system.

This also affects the decision to choose an older Nvidia graphics card.

Valve is working on all of this Nvidia support, and SteamOS is at its finest with AMD. For some people, the XP version of Steam might be a good option, but it's not the original Steam Machine concept. The SteamOS experience is at the heart of this. At the core of this is the SteamOS experience.

Steam Machine isn't simply another small gaming PC. It's meant to merge a PC-like experience with a SteamOS, a compact console-sized build, quiet operation, and Valve's PC-only controller. This is the unique mix that sets it apart. Yes, the system is priced a bit higher than some may have hoped, but it seems Valve is willing to accept the higher cost to avoid compromising its long-term vision for the PC ecosystem.