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So... Netflix on the Steam Box?

Oh absolutely. You can fire up a web browser, you can do whatever you want.

What about Xbox and Apple TV? How are you going to compete on the multimedia side?

So there are these $50 sort of things that output [media] from a PC somewhere in your house. There’s Miracast, and Shield from Nvidia, and so on. Those will be the cheap way to do it, and they’ll be high quality in the home. I spent a bunch of time when [OnLive] first started coming out, saying at the end of the day that trying to do that over [the internet] is the wrong idea. It’s the nature of how you build distributed applications; it’s why AT&T lost and the internet won. AT&T said "let's put all the intelligence into the network and at the center of the network." This is a battle that’s been fought many times.

What do you think about Shield?

I think at home it’s possible. The thing we’re working on with [Nvidia] is that you’ll be in your living room and your TV will potentially be connected either through wireless or ethernet. You’ll pick up a controller and Big Picture will come on. It’ll be integrated into all the TVs after a certain point, it’s like HDMI+. The problem to solve is how to interact with a web browser, how to get all the games to support controllers, and how to make it all seamless. If you want to play a casual game you just run Chrome and you have an infinte number of casual games. As months go by there will be more and more casual games available on the open platforms so we’re not super worried about that. The next step, the better side, is to get the most CPU and GPU you can fit into a box.

The next step above that is whatever we want. One of the things that’s interesting is that the PC has always had a huge amount of scalability. It was sort of the wild dog that moved into Australia and killed all the local life because it could just adapt. There used to be these dedicated devices, like dedicated word processors. We think that right now the PC scales from laptops up to mainframe.

Do you envision a Steam Box connecting to other screens outside the living room?

The Steam Box will also be a server. Any PC can serve multiple monitors, so over time, the next-generation (post-Kepler) you can have one GPU that’s serving up eight simultaeneous game calls. So you could have one PC and eight televisions and eight controllers and everybody getting great performance out of it. We’re used to having one monitor, or two monitors — now we’re saying let's expand that a little bit.

So how does mobile fit into your plans?

So this [Steam Box] is called "Bigfoot" internally, and we also have "Littlefoot." [Littlefoot] says "what do we need to do to extend this to the mobile space?" Our approach will be pretty similar. We also think there’s a lot that needs to be done in the tablet and mobile space to improve input for games. I understand Apple's [approach]; all the way back in '83 when I met Jobs for the first time, he’s was so super anti-gaming.

In one of the designs that we’re building on the controller side, it has this touchpad and we’re trying to figure out where that’s useful. We don’t want to waste people’s money by just throwing in a touchpad. Once we understand what the role is of multitouch in these kind of applications then it’s easy to say you can use your phone for it.

"We need to have a theory of fun."

Will this hardware push affect what Valve can do with games?

When we started off with Half-Life, it was like "I work on operating systems right?" [Editor's note: Gabe Newell spent over a decade at Microsoft building Windows before co-founding Valve.] There are a bunch of ideas, there’s a bunch of craft knowledge about how to make operating systems, and when I got into reading it I was like "how do we make decisions, how do we make trade-offs?" In a kind of desperation we said "we need to have a theory of fun," like what is fun? How do we decide that expanding three menus on this is better or worse? So we came up with this rule, which is the more ways in which the game responds to a player's state or player action is more fun. In Quake, you shot a wall and the wall basically ignored you. You saw a little puff, and then there’s no record of your actions. So we said using this simple rule, just one rule, if you shoot a wall it should change.

One of the things that started to drive me crazy in video games is that when I walk into a room, I’m covered with the gore and ichor of a thousand creatures that I have slayed, and the monster in there reacts to me exactly the same. So in Half-Life there’s this whole progression depending upon what you do and how scary you are [to enemies]. Eventually they start running away from you, they start talking about you, and that was just another example of having the world respond to you rather than the world kind of being autistic and ignoring everything you’ve done. So then we did Counter-Strike, [and found] the rule we used for Half-Life doesn’t work in a multiplayer game. We got all this weird data, like you put riot shields in and player numbers go up. Then you take riot shields out and player numbers go up. Fuck! It’s supposed to go the opposite [direction], right? So we had to come up with a different way.

"There's this notion that user-generated content has to be an important part of our thinking."

Entertainment as a service was a guiding design principle for us in Counter-Strike. So now we’re in this strange world where we have people who are using the Steam workshop who are making $500,000 per year building items for other customers. In other words, there’s this notion that user-generated content has to be an important part of our thinking. We know of other game developers making more money building content for the workshop than what they get in their day job. One of the things we found is that this notion of a workshop needs to span multiple games. If we’re connecting Skyrimand other games... it’s like this notion that there’s just a game seems to be going away; games are starting to look like an instance of some larger experience.

We’re writing a platform, so you’ll hear us talk about "how do we make the pro players more valuable?" For us that's a real issue, we actually have to go off and solve engineering problems, because rather than just thinking of them as a pro player, we think of them as a user-generated content person with a particular kind of content that they’re generating. How do we help them reach an audience?

Do you think you can really disrupt the home entertainment space and compete with Microsoft and Sony?

The internet is super smart. If you do something that is cool, that's actually worth people's time, then they'll adopt it. If you do something that's not cool and sucks, you can spend as many marketing dollars as you want, [they] just won't.

http://www.theverge.com/2013/1/8/3852144/gabe-newell-interview-steam-box-future-of-gaming