Microsoft is taking a different approach with its next-gen Xbox hardware, and it looks like it could put it on a collision course with Valve and its Steam platform.
With new hardware from Valve arriving in 2026 and an approach that (at first glance) is similar to what Microsoft is hinting at, there's an interesting lever that Valve could use to make life quite difficult for the next Xbox.
The Steam Machine is back and that means business
If you haven't heard yet, Valve has announced Steam engine. This is a small form factor personal computer with SteamOS pre-installed. Its specs are roughly on par with the base PlayStation 5 in terms of performance.
We know from the Steam Deck that the software and interface have been largely tidied up, and now all that remains is to systematically make more and more games from the Steam library compatible with SteamOS. Valve seems to think it's doing well enough to compete directly in the living room with current-gen consoles.
Next Xbox Rumored to Be an Expensive PC Hybrid
This brings us to the next generation Xbox, if you can even call it that. Even before the announcement of the Steam Machine, I wrote that Microsoft's new strategy will only work if it can get it on Steam. That's because, according to Xbox President Sarah Bond (via Blank Xbox), the next Xbox will be a “premium” and “curated” device in the spirit of ASUS ROG Xbox Ally.
Most people interpret this as saying that the next Xbox will, at best, be some sort of PC/console hybrid, or just a PC like a Steam Machine. This assumes you can launch games from any store, including Steam. Not just the Xbox or Windows stores.
So, regardless of how they got there, we may end up with both Microsoft and Valve selling a box that you can put under your TV in which you can buy Steam games.
The Xbox, codenamed “Magnus”, is rumored to be a high-tech machine that will cost a lot. We don't know how much exactly, but I've seen speculation that it will be over $1,000, which considering the PlayStation 5 Pro's $700-plus price tag isn't far-fetched.
7/10
- 4K capabilities
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HDR, up to 8K
- Game support
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PS5, PS4
- Computing power
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16.7 teraflops, AMD Radeon RDNA GPU
- Storage
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Custom 2TB SSD
We Also I don’t know how much a Steam Machine will cost, but (as an example) Moore's Law is Dead priced the BOM or “Bill of Materials” for the Steam Machine at approximately $425. This excludes assembly, packaging and a few other things, but it gives us an idea of ​​how much it costs Valve to make one of these.
Steam Deck is a much better deal than Xbox Ally.
I'm bringing up the comparative potential cost of these two devices because we already have a situation where Valve has a cheap device with lower specs competing with a powerful and expensive one from Microsoft. Well, it's from ASUS, but Microsoft has some say in its marketing and design.
While the Steam Deck isn't a proprietary console, Valve can be pretty sure that if anyone buys it, they'll be buying games through Steam. Even if someone were to replace SteamOS with Windows for some unfathomable reason, they would still be purchasing most of their games through Steam. Simply because it is the largest gaming platform on the PC market. So while Valve isn't actually losing money on the Steam Deck hardware per unit, it's still a net profit when it comes to long-term software sales.
With ASUS ROG Xbox Ally, ASUS and Microsoft have to make a profit above the cost of the equipment. They can't rely on software sales like they can with a real console. They will not be able to sell the device at cost, much less at a loss. Compare that to how Microsoft lost $100 to $200 (according to Eurogamer) for every Xbox Series console sold, and you can see the problem.
Valve can afford to sell the Steam Machine at cost, and Microsoft can't follow suit.
This brings me to the point: the Steam Machine can sell for the same price as the Steam Deck, so Valve has the opportunity to undercut Microsoft so much that no difference in specs will matter much.
Now, I should make it abundantly clear that Valve has explicitly stated that the Steam Machine will be priced like a PC, not a console. That is, the company does not intend to sell it at or below cost. What's important, however, is that this is a lever that Valve can use that Microsoft simply doesn't have, assuming the hybrid PC rumors turn out to be true.
