SteamPal needs to do one thing to compete with Nintendo Switch, analysts say

Valve could enter the handheld console market very soon. But can the company behind Steam compete with the Nintendo Switch?

Update 7/15/21: Valve has officially announced the Steam Deck, a portable gaming device that can access your Steam library. You can currently reserve the 64 GB model for $400, the 256 GB model for $529, and the 512 GB model for $649 on Steam. It will be released in December 2021.

Original story follows...

On May 25, SteamDB creator Pavel Djundik noticed a device called "SteamPal" showed up in the latest Steam Client Beta, along with a SteamPal game list, quick access menu, and power menu. Ars Technica then published an exclusive report confirming that Valve is developing a portable gaming PC that functions similarly to Nintendo Switch.

It remains unknown whether the SteamPal moniker is final or just an internal title for the project. Regardless of the name, it will go toe-to-toe with the Nintendo Switch, giving Nintendo their first handheld competitor since the PlayStation Vita.

But how much of a splash can the SteamPal make against the Nintendo Switch, which has sold nearly 80 million units, in North America and abroad?

Valve vs. Nintendo

Valve will have to find a way to distinguish the SteamPal, and one of the ways analysts think that could happen is through its game library.

There are over 50,000 games on Steam that a device like the SteamPal could already support, so it wouldn't run into a "lack of games" problem that is a struggle for many new platforms like Google Stadia. Kantan Games CEO Dr. Serkan Toto tells Inverse that Steam’s large library could give the system an edge, even if it doesn’t feature any other huge innovations.

“Thousands of games would be available to players instantly on SteamPal."

"Can Steam really reinvent the wheel and come up with a spectacular innovation for the hardware? I don't think so," he says. "In my view, it's all about the games, and there are tons on Steam that are not available on the Nintendo Switch."

The Switch struggles with higher-end games, exposing a possible niche for SteamPal to fill. Niko Partners Senior Analyst Daniel Ahmad says that SteamPal would have the advantage of a PC game library readymade for the console, without the need for ports.

"The Nintendo Switch has shown that there is high demand for AAA games that can be played on the go," he tells Inverse. "A key difference here is that SteamPal would be able to run any AAA or indie PC game without the developer needing to optimize or port the game to the device. Thousands of games would be available to players instantly on SteamPal."

For players with large Steam libraries but not the time to sit at their PC and play them all, the SteamPal certainly sounds like a helpful complementary device. It's similar to the niche the Switch fills with various multiplatform games. That said, Ampere Analysis Senior Analyst Louise Shorthouse doesn't see it as much of a competition.

"I think it is inherently different: Switch offers a catalog of content which caters to a very specific audience: families, kids, fans of the Nintendo aesthetic," she says. "Broadly speaking, Switch users are not primarily driven by graphical quality or core, competitive gaming. A handheld PC created by Valve will be appealing more to the PC gamer, who is typically a far cry from the Switch gamer."

Nintendo Switch does have its fair share of M-rated games like Doom Eternal, Wolfenstein: The New Colossus, and The Witcher 3: Wild Hunt. SteamPal could appeal to a more hardcore gamer base by featuring games you can’t find on the Switch in North America.

Inverse reached out to Valve but did not receive a response in time for publishing.

Worldwide Appeal

Outside of North America, the SteamPal seems like a device that could do well in Japan and China because of how well the Switch and mobile games do in those regions. But according to analysts, its prospects in those regions aren’t actually that promising. Dr. Serkan Toto highlights that PC gaming isn’t that big in Japan, so audiences there likely won’t take notice of the SteamPal.

"PC gaming only has a tiny market share in Japan, which is dominated by mobile and the 3x smaller console space," he says. "As such, not many people outside of the hardcore gamer community in Japan are familiar with Steam or have ever used the platform. The SteamPal might be appealing to some local users who have been playing games on Steam before, but it will not really make a significant impact at launch just because it is a portable system."

When it comes to China, the SteamPal could complement Steam China, an exclusive storefront for that region that came out earlier this year. According to Niko Partners, China's domestic PC game revenue was $13.9 billion in 2020, and there are over 325.4 million PC gamers in China, so that's a massive potential market.

Despite that, Ahmad isn't convinced that it would catch on.

"Gamers in China are demanding more high-end experiences, and gaming smartphone manufacturers have started to tap into this space by creating devices with dedicated gaming features," Ahmad says. "The Nintendo Switch has also become fairly popular due to its hybrid nature, social gaming features, and high-end games. A dedicated device like SteamPal could find some success, but this would depend on whether it could also play popular Chinese PC and mobile games too."

Valve has a lot of work to do if they want to get out of their niche and impact regions like China and Japan. One other major factor could also hold it back: its price.

The Price Isn't Right

The handheld's pricing will be critical to its potential mass appeal, and being too expensive could prevent its success. Other devices trying to do the same thing as SteamPal, like the onexplayer, are close to $1000, so they can't compete with cheaper platforms like Switch.

The SteamPal could be expensive, like the $749 Valve Index VR headset that the company made, depending on the technology involved. Toto guesses that the device could be in the "high three-digit to low four-digit price range." This price range makes sense compared to the onexplayer but is too expensive to be anything but niche.

Shorthouse didn't guess a specific price range but isn't optimistic about SteamPal’s affordability.

"I think we can assume it will be quite expensive given the task at hand: squeezing a powerful PC into a handheld device," she says. "Given Valve is also not primarily hardware manufacturers, they may have to outsource or partner if they wanted to attain any sort of scale, and this could impact price too."

Suppose the Nintendo Switch, or even the more powerful rumored Nintendo Switch Pro upgrade, are significantly cheaper than the SteamPal. In that case, the device won't appeal to that many casual players. SteamPal could be the first handheld system to give the Switch some real competition. Still, it needs an approachable price point to capitalize on existing demand and be taken seriously.

Ultimately, SteamPal has some significant challenges to overcome if it doesn't want to be the next high-profile video game platform failure.