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Alienware’s Steam Machine To Be Company's ‘Least Profitable System’ Ever

by Mike Futter on May 19, 2014 at 02:05 PM

In September 2013, Valve revealed its three-pronged plan to take over the living rooms. At CES in January, we got our first look at over a dozen different custom PCs carrying the “Steam Machine” label. Now, some manufacturers are expressing concern about the endeavor.

Steam Machines and the controller are currently in beta, and Valve expects that some of the different models from a variety of manufacturers will be in stores this holiday. Profit expectations aren’t terribly high though, and there is some trepidation about the market.

“This will absolutely be the least profitable system we ever sell,” Alienware general manager Frank Azor told the Wall Street Journal. He isn’t the only one expressing concern. Tuan Nguyen of iBuyPower, Inc. has compared the Steam Machine market to the fragmentation of Android devices.

Some manufacturers have more faith in the initiative, including Falcon Northwest. Kelt Reeves, president of that company, believes that Valve can bring the customers. Whether that faith is warranted or not will likely be a big part of whether Steam Machines hold shelf space at brick and mortar retailers or become an Etail-only curiosity. 

[Source: Wall Street Journal]


Our Take
I’ve gone ‘round and ‘round with some of my peers about the role Steam Machines will play in the gaming landscape, and I still haven’t heard a good reason for them. In marketing, we talk about products as solutions to “problems,” and I don’t see what “problem” Steam Machines solve.

I think it’s also bad business to be diving into a new segment on faith. Over a dozen companies are going to be vying for shelf space, and that means retailers will need to find a way to educate consumers on the features.

Azor’s statements are particularly concerning, as it’s hard to feel compelled by a product when the company selling them isn’t enthusiastic. I’m interested to learn more about Steam Machines, mostly because I have no idea who they are for yet.