Valve's Steam Machine has one major advantage over the next PC hybrid Xbox
Microsoft's taking a different tack with its next-generation of Xbox hardware, and it seems this might be putting it on a collision course with Valve and its Steam platform.
With new hardware from Valve coming in 2026, and an approach that (superficially) looks similar to what Microsoft has intimated, there's an interesting lever Valve can pull to make life rather hard for the next Xbox.
The Steam Machine is back and means business
In case you haven't heard, Valve has announced the Steam Machine . This is a custom small form-factor PC preloaded with SteamOS. It has specifications that put it roughly on par with the base model PlayStation 5 in terms of performance.
Valve
We know from the Steam Deck that the software and interface are pretty much sorted, and now it's just a matter of systematically making more and more games from the Steam library compatible with SteamOS. It seems that Valve feels that things are going well enough to compete directly in the living room with current-generation consoles.
The next Xbox is rumored to be an expensive PC hybrid
Which brings us to the next-generation Xbox, if you can even call it that. I've written before the Steam Machine was announced that Microsoft's new strategy would only work if it could take on Steam . That's because, according Xbox President Sarah Bond (via Pure Xbox ), the next Xbox will be a "premium" and "curated" device in the vein of the ASUS ROG Xbox Ally .
Most people interpret that as saying the next Xbox will be, at best, some sort of PC-console hybrid, or just a straight-up PC like the Steam Machine. The implication being that you could run games from any store, including Steam. Not just the Xbox or Windows stores.
So, regardless of how they got there, we might have an end result where both Microsoft and Valve are selling a box that goes under your TV where you can buy Steam games.
The rumored Xbox, apparently codenamed "Magnus" is supposedly a high-spec machine that will cost a lot. We don't know how much, but I've seen speculation that it will be over $1000, which, given the PlayStation 5 Pro's $700+ price tag, isn't far-fetched.
We also don't know how much the Steam Machine will be, but (as an example) Moore's Law Is Dead estimated the BOM or "Bill of Materials" for the Steam Machine at around $425. Which would exclude assembly, packaging and a few other things, but it gives us an idea of what it costs Valve to make one of these.
The Steam Deck is much better value than the Xbox Ally
I bring the comparative potential costs of these two devices up, because we already have a situation where Valve has a cheap and lower-spec device in competition with a powerful and expensive equivalent from Microsoft. Well, it's from ASUS, but Microsoft has some share in its marketing and design.
Although the Steam Deck is not a locked-down console, Valve can be pretty sure that if someone buys one, they'll be buying games through Steam. Even if someone were to, for some unfathomable reason, switch out SteamOS for Windows, they'd still be buying most of their games through Steam. Simply because it's the PC market's largest gaming platform. So as long as Valve isn't actually losing any money on the Steam Deck hardware per unit, it's still a net benefit to the bottom line when it comes to long-term software sales.
With the ASUS ROG Xbox Ally, ASUS and Microsoft have to make their margin on top of the cost of the hardware. They can't rely on software sales like with a true console. They can't sell the device at cost, and certainly not at a loss. Compare that to how Microsoft lost between $100 and $200 ( as per Eurogamer ) for each Xbox Series console it sold, and you can see the issue.
Valve can afford to sell the Steam Machine at cost—Microsoft can't follow
Which brings me to the point—the Steam Machine could be sold at cost just like the Steam Deck, so Valve has the option to undercut Microsoft by so much, that no difference in specifications will matter much.
Now, I have to be crystal clear that Valve has explicitly stated the Steam Machine will be priced like a PC and not a console. Which is to say the company doesn't intend to sell it at or below cost. However, what matters is that this is a lever Valve can pull that is simply unavailable to Microsoft, assuming the PC hybrid rumors turn out to be true.
