Valve Entering the Console Market - How Will Microsoft and Sony Fare?

Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Valve may be a private gaming company, but they’re about to jump into the very publicly traded video game world with their Linux-based “Steam Box” console. The Steam Box will supposedly launch sometime in 2013 and it will no doubt be another competitor for the Nintendo (NASDAQOTH: NTDOY) Wii U, the expected Sony (NYSE: SNE) PlayStation 4, and Microsoft’s (NASDAQ: MSFT) next-generation Xbox.

The Game Companies Will Love It!

Steam has a big following. If this console manages to sell well it will likely take a chunk of sales from Sony and Microsoft when their new consoles are launched. While Sony and Microsoft may not be too happy, the game companies will be.

This may be a new system, but if developers were already bringing titles to Steam for the PC crowd then the only real additional effort will be to program for whatever controllers this Steam Box will use. Such a simple task will mean that Electronic Arts (NASDAQ: EA), Activision Blizzard, and others will be able to increase sales of their games without much additional effort or expenditure.

Nintendo Will Not Be Affected

If the Steam Box does eat into console sales, I don’t think that Nintendo will be affected in the slightest. They attract a different, usually younger audience, one that won’t necessarily be interested in such a new console. The Wii U will continue to sell as it was always destined to.

Microsoft and Sony Will Be

While Nintendo shouldn’t suffer any effects from the new console, I think that Microsoft and Sony will. If the Steam Box allows gamers to link up their accounts and play games on a desktop, a laptop, or the TV, then many gamers may consider not even buying one of the next-generation consoles.  Sony and Microsoft are huge technology conglomerates, though, and these consoles equate less than 10% of their respective businesses.

Irrespective of the percentages that these gaming segments make up, no one wants to lose money, and that could happen if Sony and Microsoft don’t step up to the plate and prove that their consoles are the best choices for consumers.

Sideline Gamers

There are plenty of other companies that a console from Valve will affect. GameStop (NYSE: GME) will see sales continue to drop, as gamers will be downloading more titles. In fact, even if the console isn’t released GameStop will still see sales decline as both Sony and Microsoft will no doubt be pushing the digital sales aspect even further into consumers’ homes.

What about Apple? There’s always some speculation that Apple may jump into the console market at some point, but they really have no need to. It is very likely that Apple will be releasing their own TV sets, and I’m willing to bet that these TV sets will allow gamers to play games through the iPad or iPhone and the TV. That sounds a little bit like the Wii U, right? It definitely could be, without even trying too much.


We have Microsoft, Nintendo, and Sony with their footholds in the console market. Valve will be jumping in soon with a Linux-based console and I think that by the end of 2013 Apple will definitely be touting the ability for gaming on their new TV. If you’re waiting to invest in gaming I think the best bet may be one of the major game makers. If they can capitalize on the growing gaming audience, then they will surely fare better than the console makers in what will likely be wavy waters next year.


Ash1402 has no positions in the stocks mentioned above. The Motley Fool owns shares of GameStop and Microsoft and is short Sony (ADR) and has the following options: long JAN 2013 $22.00 calls on Sony (ADR). Motley Fool newsletter services recommend GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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