Hardware - Initial specs and upgradeable components
Valve's Steam Box is rumored to sport an Intel Core i7 processor, 8GB of RAM and a yet-announced NVIDIA GPU. Let's go along the lines with the Kepler-based 28nm-built $300 GPU for the baseline. Everyone complains this unit would be $600+, but if Valve are buying enough components, and sign long-term contracts, this price would come down considerably.
Valve could also use their very important stats and show just how important they are to these companies (Intel, NVIDIA, and others) at pushing people to buy more games, and thus, hardware. Valve is instrumental in these markets we live in, and they know it.
A baseline Core i7/NVIDIA combo would propel the Steam Box to 1080p@60fps, which is perfect. Enough to smash the current consoles, and at least keep up with next-gen consoles. But, Microsoft and Sony want 10-year life cycles, I see Valve having 3-year life cycles, personally.
This is where upgradeable components could be a huge market for Valve. If this box is made from off-the-shelf components, and is user-upgradeable (just a GPU upgrade would be fine, maybe storage, too), then it would be an absolute killer box. Two years from now, when games are pushed up to DirectX 12, Valve could just let users play on DX11, and have an upgrade option (with required hardware) to play DX12 titles.
You can be sure this is something Valve is thinking of, as this market is changing too much with system-on-a-chip (SoC) designs leap-frogging each other every 6-12 months.
So, we'd be looking at a 1080p-capable, 60fps-pumping beast of a box, at a minimum. On top of this, we're also talking of mouse and keyboard input, traditional console-like controller input, as well as Razer Hydra-based controller input. Valve would have gamers eating out of their hands. People like options, where they could buy a single PC box (Steam Box), but have a range of input options to use, based on the games they're playing.
Upgradeable components would allow Valve to throw in a mid-range Graphics CoreNext GPU from AMD, which is a low-powered solution, and could drive 4K TV's when they debut this year. Keeping up with the market is something Microsoft and Sony just don't do. Valve can't risk launching a console and it not slapping the current consoles across the face.
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