Ask Paul: June 26 ⭐

Happy Friday! We're awash in a component crisis of confidence, given all the news this week. That makes sense, but there's good with the bad, and some terrific reader questions to wade through.
📉 Margin call
jrzoomer asks:

Do you think Valve is going for Apple-like margins with the new Steam Machine? Gabe Newell with his new $500 million yacht and $70 million mansion seems to be gunning for that premium brand. And maybe this is a great setup for the upcoming XBox Helix?

I can't imagine Valve would sell the Steam Machine under cost, since it's not going to drive game sales or whatever; the audience for Steam Machine is literally dedicated Steam customers. Plus, Valve is in a Microsoft-like buying position when it comes to component pricing and availability. This thing is low-volume by design.

But if this week taught us anything, it's that even the richest and most well-positioned hardware companies, like Apple, cannot escape the exploding costs of components during this crisis. Microsoft had already announced super-expensive new Surface laptops, and once Apple dropped its pricing bomb, XBOX quickly followed up with massive new price hikes of its own. The XBOX Helix will be even more expensive, I bet, unless some miracle happens.

(The Apple and XBOX price increases could help drive sales this summer. Apple didn't include the iPhone in the price hikes, so that will come in September, meaning the current iPhones are as cheap as they'll ever be. And the XBOX price hikes goes into effect in August.)

I mentioned this on Windows Weekly, but several friends reached out to me when Valve announced the Steam Machine pricing and availability, and each was shocked the price was so high. I can't explain this, but when I saw the $1050 starting price, I was surprisingly OK with it (aside from the lack of a controller, which I found out about later). Given the component crisis, Valve's lack of buying power, and that no one would have been surprised if Valve just canceled the thing and blamed the crisis, I'm surprised it happened when it did, let alone at all.

I do see the attraction here, but now that I've been gaming on laptops, I don't personally want a game console that can only be used on a single screen in a single room in a single house. It just feels old-fashioned to me (like "a computer on every desk" went from visionary to quaint), and while I understand that big boxes will deliver the best visuals and performance overall, this is the right compromise for me. The audience for a dedicated console is small compared to other personal computing devices, and this is a niche within a niche.

Gabe must be doing something right. But from the outside, I don't quite understand why Valve and Steam are so successful, and I don't see them as a top-tier game developer. The work they're doing on Proton and whatever else to make Linux play Windows games well is incredible, but it's also emulation and I sometimes wonder if the better effort...