Valve, Microsoft, and the Future of Gaming

To the raft of speculation on Valve and hardware, the New York Times added some solid reporting this week. (Hat tip to VentureBeat for spotting the profile.) “[W]hat really makes Valve stand out,” writes the Times’s Nick Wingfield, “is its foresight on technology.”

On Monday, Valve reportedly began publicly testing out a new interface it’s calling “Big Picture.” Customized for use on the television, it enables gamers to conveniently download games from Valve’s distribution platform, Steam. This could be interpreted as an assault on the Xbox 360 and PS3, which already have a beachhead in your living room.

And while there were rumors in the past of a so-called “Steam Box,” the Times profile makes no mention of such a thing. Instead, and as a recent job posting at Valve has suggested, it would appear that Valve is much more interested in interfacing with consoles than it is transforming the consoles themselves. To that end, it has developed a prototype of VR goggles, which have much more in common with Sergey Brin’s eyewear than with anything Microsoft, Sony, or Nintendo has on the market.

Wingfield’s profile notes that for a small software company like Valve to sink investment in developing hardware is perhaps “absurdly ambitious–some say foolish.” Though Microsoft has pivoted into hardware with its Surface tablet, it’s obviously a much larger company than Valve, with more money and resources to work with. (Though Valve is no pipsqueak, with an estimated value of $2.5 billion.)

The profile also casts more light on Valve’s feud with Microsoft over Windows 8, whose requirements around its Windows app store would essentially cut out Steam from having a big role in downloads on the new OS. Valve argues that Microsoft is merely aping Apple, and that closing off its ecosystem will cause Microsoft to decline. Of course, impartial observers can also note that Valve has a clear financial stake in all this.

But as with every glimpse inside Valve, I’m left most impressed with the organizational structure of the place more than its commitment to any one hardware or software venture. The Times describes how CEO Gabe Newell hired, for instance, a Greek economist with no gaming experience after reading the economist’s blog posts on the European debt crisis; he’ll be studying the virtual economies of Valve games. Another hire got the gig because of his hobby as a graffiti artist.

Valve’s hardware ambitions are to be taken seriously. When Newell hired a self-taught chip designer to work on hardware projects at the company, she cautioned Newell that it could take a million bucks to start up a hardware lab. “That’s it?” he said.