Microsoft Warns Valve And Others: Entering Hardware Business Is Tough

Valve made quite the splash at this year's International CES, trashing Windows 8 and announcing its intentions to create and support new game hardware with online Steam functionality. Both NVIDIA and Xi3 revealed consoles that can run games on Steam, but Valve made it clear that it would be releasing its own Linux-based box as well.

While the big question is whether or not these new consoles can compete with next generation systems from Microsoft, Sony, and Nintendo, the buzz in general has been positive. Kotaku even declared that the traditional console makers should be very worried.

Speaking with Eurogamer on Thursday, however, Microsoft's Phil Harrison threw some expectedly cold water on Valve and its upstart brethren.

"Entering the hardware business is a really tough business," he said. "You have to have great fortitude to be in the hardware business and you have to have deep pockets and a very strong balance sheet. It's not possible for every new hardware entrant to get to scale."

He went on to say that although new hardware can be popular on a small scale, only a sliver of companies can actually shepherd their systems to the promised land of tens of millions in sales, citing supply chain management issues, distribution models, and manufacturing problems.

Considering that Microsoft's Xbox Live service has 10 million fewer subscribers than Steam, Harrison was asked if he would be happy to duplicate Valve's success in a couple of years.

"I admire Valve as a company and what they've achieved with Steam, so I wouldn't in any way criticize what they've achieved and the role they've played in the industry," said Harrison. "But I'm not sure we would choose Steam as a benchmark of success. We would always seek to innovate and push beyond."

Still, Harrison wasn't completely dismissive when it came to the potential for these new consoles.

"Any new entrant, without being specific to any company or brand or product, to the games industry is ultimately a good thing, because it helps validate, grow and enhance consumer excitement and consumer interest in our category. So, ultimately, it's a win for everybody."

In order to combat the danger of new hardware entrants, Microsoft is sure to have its own set of surprises to promote at this June's Electronic Entertainment Expo, where it's expected to unveil the successor to its popular Xbox 360 console.

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