Valve just built the Xbox that Microsoft is dreaming of

Valve has created a PC-based game console that lives under your TV. The Steam Machine takes everything that’s great about the Steam Deck and adds the raw power to compete with the latest PlayStation and Xbox consoles. It also puts a huge amount of pressure on Microsoft to perfect its Windows and Xbox combination, as the Steam Machine brings Windows games to the living room in a way that Microsoft is dreaming up for its next-gen devices.

The Steam Machine looks like an Xbox Series X that has been cut in half into a miniature box. The 6-inch cube runs Windows PC games through Valve’s Linux-based SteamOS, and it should have enough power through its two AMD chips to deliver performance that’s close to an Xbox Series X or PS5. Inside, the Steam Machine’s components have all been compacted in a similar way to the Xbox Series X.

Beyond the hardware, it’s really SteamOS that makes the Steam Machine a viable Xbox and PS5 competitor. Valve failed to make Steam Machines a reality a decade ago, largely because developers had to port their games to Linux for them to run. Valve’s new Steam Machine utilizes its excellent Proton compatibility layer, which allows most Windows PC games to run seamlessly on the Steam Deck and often better than they do on equivalent Windows handhelds.

While the Steam Machine is a single device and Valve hasn’t announced OEM plans right now, I still think it represents a big threat to Microsoft’s next-gen Xbox plans — and even potentially to Windows PC gaming.

It’s no secret that Microsoft is working to combine the best bits of Xbox and Windows for its next-gen consoles, and that means more PC-like hardware and software, just like the Steam Machine. Asus’ Xbox Ally handhelds are an early look at the direction Microsoft is heading in for Xbox consoles, with Windows at the heart and an Xbox UI on top.

Microsoft’s combination of Windows and Xbox feels like a beta right now, though, and one that is shipping on a $1,000 device. Microsoft has effectively made the Xbox PC app into Steam’s Big Picture Mode and suppressed some of the annoying parts of Windows so they’re hidden away. It’s very early days for Microsoft’s vision here, and I personally feel it shipped far too early. The Windows and Xbox teams have a lot of work ahead to improve the Xbox full screen experience and hide the complexity of Windows away. Valve’s Steam Machine now heaps on the pressure for Microsoft to execute its vision perfectly.

That pressure will only increase if Valve can convince other PC OEMs to build Steam Machines in the future, just like it expanded SteamOS to Windows handhelds. While Microsoft is working on its own next-gen Xbox hardware, sources tell me it also wants OEMs to build future Xbox-branded hardware just like Asus has with the Xbox Ally. That puts Microsoft and Valve on an even bigger collision course.

Microsoft and Valve are both trying to attract similar audiences, gamers that are intrigued by PC gaming but want a simplified console-like experience, or those who are already PC gamers and want a reliable living room option that plays all the games they’ve already purchased.

The challenge for Microsoft is that Valve has already perfected SteamOS into a controller-friendly operating system, with a storefront that dominates PC gaming. All the pieces are ready to go for a Steam console, while Microsoft is building out its next-gen Xbox with a combination of Windows and Xbox and without being locked to a single store. The next Xbox now looks set to embrace rival stores like Steam to entice people in, but Microsoft still faces a massive hurdle of convincing people to actually buy games in its own PC store instead of just buying them on Steam.

Microsoft will undoubtedly lean on its impressive Xbox cloud saves and Xbox Play Anywhere support as parts of its strength to battle Valve’s Steam Machine, but with SteamOS now available across consoles and handhelds it diminishes Microsoft’s cross-device effort. PC Game Pass is still exclusive to Windows, though, so Microsoft’s subscription service will play a big role in helping its next-gen hardware stand apart. Microsoft also has the huge advantage of games like Fortnite, Valorant, Battlefield 6, and other multiplayer titles working seamlessly on Xbox, whereas they don’t run on SteamOS due to their complex anti-cheat systems.

Pricing will also be a big factor in Xbox + Windows vs. Steam Machine. Valve hasn’t finalized pricing yet, but it says “Steam Machine’s pricing is comparable to a PC with similar specs.” That sounds more pricey than a subsidized console, at a time when Microsoft and Sony are both bumping console prices beyond the norm. Microsoft is also hinting that its next-gen Xbox will be “a very premium, very high-end curated experience,” so expect more PC-like pricing for those consoles as well.

As the Steam Machine brings a simplified form of PC gaming to the living room, it also threatens to shine a bigger spotlight on Windows’ performance issues and the direction Microsoft is taking with its operating system. SteamOS has been outperforming Windows in a variety of titles already, leading some PC gamers to take a closer look at Linux for the first time. Combined with a simmering dislike of Microsoft’s direction with Windows from the PC gaming community, the Steam Machine should be a wake-up call for Microsoft to focus on performance and gaming instead of shoving Copilot buttons everywhere.

The Steam Machine now looks like a well-timed response to Microsoft’s Windows gaming struggles over the years, and an effort that has been in the works for a long time. Valve originally tried to put a box into everyone’s living room with its “Steam Box” effort more than a decade ago. I still remember encouraging my colleague T.C. Sottek to chase after Gabe Newell at CES in 2013. The Valve CEO sat down with us for a rare and wide-ranging interview about the future of Steam and Steam Machines. Much of what Valve was trying to do with the original Steam Box felt like a reaction to Windows 8, and Newell even described the decision to launch Valve games on Linux as a “hedging strategy” against Microsoft. He also described Windows 8 as a “giant sadness” at the time, showing that Valve was frustrated at Microsoft’s direction with Windows more than a decade ago.

Valve’s hedging strategy now looks like it could deliver the dream of a PC in the living room that Microsoft has been chasing for decades — from Windows Media Center to the Xbox One’s big push with Windows underneath. Except it’s not Windows in the living room, it’s Linux.

You’d think that would be setting off alarm bells over at Microsoft. Instead, Microsoft Gaming CEO Phil Spencer was positive about Valve’s announcement during an all-hands with Xbox employees yesterday. He also posted on X to congratulate Valve.

“Expanding access across PC, console, and handheld devices reflects a future built on choice, core values that have guided Xbox’s vision from the start,” said Spencer. “As one of the largest publishers on Steam, we welcome new options for players to access games everywhere.”

Microsoft is convinced its path for the next Xbox devices is the right one, but it now has to compete with Steam on its living room home turf to make a PC-like game console a reality. Game on.

What’s happening with the Windows Insider program?

In recent weeks the faces behind Microsoft’s Windows Insider program have all announced they’re moving on. Brandon LeBlanc, Amanda Langowski, and Jason Howard have all moved to separate roles inside Microsoft, and it’s not clear who will replace them yet.

Microsoft assures me that “there are no changes to the Windows Insider Program,” despite the trio all suddenly moving roles at the same time. “While we hire to backfill these roles, the Insider Program will be led by Alec Oot, Principal Group, Product Manager, Windows Servicing and Delivery,” says Chris Morrissey, senior director of communications for Windows servicing and delivery. “We remain committed to listening and learning from our Insiders, continuing our cadence of blog posts as we develop new experiences each week.”

The current Windows preview build blog posts are unnamed, and I do wonder if they’ll all just be written by AI agents in the future. Blog posts for new Windows features seem like an easy target for Microsoft’s AI push internally. Either way, I hope Microsoft continues to listen to Windows feedback through its Insider program, especially as it was introduced just as Windows 10 fixed Windows 8’s mistakes.

I’m always keen to hear from readers, so please drop a comment here, or you can reach me at notepad@theverge.com if you want to discuss anything else. If you’ve heard about any of Microsoft’s secret projects, you can reach me via email at notepad@theverge.com or speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram, if you’d prefer to chat there.

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