Next-Gen and Steam Machines: What Does The Future of Video Game Distribution Look Like?

In the world of video games, 2013 has been a year nearly eight years in the making. After consecutive years of slumping sales, disappointing E3 expos that failed to deliver long overdue hardware announcements, and countless re-releases and rebrandings of consoles originally designed during the Bush administration; next-get has finally arrived. Some would debate whether that arrival began last fall with the release of Nintendo's Wii-U, its successor to the Wii, but with the release of the PlayStation 4 less than 30 days away and the release of the Xbox One just a few days after, the industry can unanimously agree that the next chapter in the world of video games has begun.

The way things played out this cycle has been wildly different from how it has gone in years past, and that says a great deal about how the industry has changed since 2005. The biggest of these changes, in my opinion, revolve around how game distribution works (i.e., how gamers are purchasing their games). Likewise, the most notable events surrounding the impending releases of the next-generation consoles have had the issue of distribution at their core. The event that everyone is aware of is the controversy surrounding Microsoft over their policies on the Xbox One. I'll return to this topic shortly, but I wanted to mention it because I think those policies were created in an attempt to fend off what Microsoft sees as it's biggest competitor in the space. And no, that competitor is not Sony, but the game studio Valve Software. Enter the Steam Machine.

Valve is, by far, the biggest catalyst for change in the video game industry over the last eight years. Once a simple development studio (well, simple isn't a great way to put it considering the quality of the work they produce and the influence that work has had on games that followed), Valve is now probably best known for their distribution platform, Steam. When Steam first launched for PCs in 2004, it was little more than "that software I have to install to play Half-Life 2." Now Steam quite literally is the PC gaming market, and has turned Valve into an industry juggernaut now valued into the billions of dollars. Valve and Steam made PC gaming about downloads, not about discs. It made retailers like GameStop and Best Buy irrelevant in the PC market, and it stole control of Windows as a video game platform right out from under Microsoft.

Valve's control of the PC market is worrying enough for Microsoft as well as brick and mortar retailers. But any of Microsoft's attempts to respond in the space have been half-assed and undetermined at best. That tone out of Redmont began to change when rumors began to surface a couple of years back that Valve was working on a product called the "Steam Box." Rumor had it that Valve was looking to enter the living room with a console of their own, backed by the massive catalog of titles and infrastructure that powered Steam on PC. The living room had always remained a safe haven for physical game discs, but with Steam Box Valve had other ideas in mind.

Just a few weeks ago, that rumor became a reality with the announcement of Steam OS and Steam Machines. Microsoft's worst fear (at least with regard to their game division) had been realized. And while the details of Steam OS and Steam Machine are at once incredibly interesting and exciting, they are not relevant to this discussion beyond the fact that Steam as a platform will be entering the living room to partake in the next-generation festivities. What is more interesting is whether or not Microsoft and Sony can survive the entrance of Valve's digital distribution platform into a space that has been reliant on physical media since it's inception.

And this now brings us back to the release of the Xbox One and the controversy surrounding it. That controversy revolved around a policy Microsoft was instituting that I would argue was a direct response to rumors about Valve making its own console. Basically, Microsoft was trying to create a distribution system that would transition the console market from physical to digital without drastically upsetting the status quo, at least not immediately. To this end, the Xbox One would allow users to download games to the console over the internet. But in addition, players that purchased the games in store would be able to register their physical copies with their console. This would install the disc to the console, letting a user take advantage of what digital releases offered (such as switching games instantly, not having to use a disc to switch, etc.) but still allow people to have a collection of games they actually owned.

To implement that system, the Xbox One would be required to check in with Microsoft's servers in order to play the game. Game developers would also have the option to lock games to a user's account. The implication of this was for used games. Players who purchased used Xbox One games may be required by the developer to purchase a key in order to play the game on a different console than the original owner. Despite the fact that Sony had given developers the exact same option on the PlayStation 4, the internet exploded against Microsoft. What followed would be a list of things companies should not do when launching a console, and ultimately Microsoft pulled a 180 on these features and returned to a more traditional model reliant on discs, just like Sony had opted to do.

Whether or not you agree with that decision on the part of Microsoft (I personally would have liked them not to reverse course), the reversal leaves them relatively defenceless as Valve enters the market in the months ahead. In an irrational attempt to hold onto their physical discs, Microsoft had to turn it's back on a plan that they hoped would help them transition into the future while simultaneously saving brick and mortar retailers. Now neither industry veteran has an answer to Steam, and I am willing to bet that by the time the next-next-generation of consoles hits store shelves, Valve will have once again turned the industry on its head.