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Live From CES: Valve Slams Microsoft for Lack of 'Openness,' Then Barricades Its Booth

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This looks like a classic case of stone-throwing by an executive who lives in a glass house.

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Gabe Newell, head of PC gaming giant Valve, held a press conference on Monday at the Palms Hotel. He spoke of the openness of the computing world, and voiced his concerns about the "proprietary platforms in living rooms and in mobile." Newell has been a prominent critic of Microsoft's (NASDAQ:MSFT) Windows 8, first of all because it prioritized mobile devices over desktops – real gamers use real hardware – and secondly, because the Windows Store came into direct competition with Valve's Steam Store, which currently accounts for about three-quarters of the market for downloadable PC games.

And it's true: Microsoft has played fast and loose with the ecosystem that depends on it. The software company launched into PC hardware with its line of Surface tablets, and expanded that effort with the acquisition of Nokia's (NYSE:NOK) electronics division. Last year, Hewlett-Packard Company's (NYSE:HPQ) Meg Whitman called Microsoft an "outright competitor."

So Valve is launching its own proprietary platform called Steam OS. The hardware partnerships are already taking shape; there were a dozen PC makers on hand at the press conference, the most prominent being Dell's (NASDAQ:DELL) Alienware division. Its Steam Boxes are intended to sit in the living room, and bring PC gaming to the big screen. Newell only spoke for about eight minutes, and then handed the show over to the hardware makers, whose collaboration was the real theme of the evening. Score one for openness, right?

The problem I have with this narrative is that Valve has never been open. For starters, it develops games of its own – most notably the Half-Life series – and competes with partners in much the same way that Microsoft does. The Steam Store acts as a middleman, running behind downloaded applications and ensuring that the software hasn't been pirated. This tends to benefit large game-developers; when there's no easy way to test-drive a piece of software, customers will tend to stick to big names and known quantities (or freebies). Game consoles, on the other hand, have always benefited from rentals and disc-sharing – and both Sony (NYSE:SNY) and Microsoft faced uproars last year, when it was feared that their next-generation consoles would kill off the second-hand market.

Steam OS takes things a step further, by asking game developers to adapt their software for a new platform, whose focus on big-screen TVs and powerful gaming hardware will almost certainly favor big-budget titles. And yet, Valve's most popular game right now is Defense of the Ancients 2 (DOTA 2), a relatively undemanding piece of software that seems perfectly at home on a mouse and keyboard. Can Steam OS really be said to be open, if it disadvantages a game like DOTA 2?

Perhaps it's telling that Valve's CES booth consists of two enclosed rooms, a few couches, and a front desk. There's no hardware, and no games, just a handful of Valve employees surrounded by eager gamers. The couches aren't open to the general public, and there must have been some confusion about this, because by Wednesday afternoon, rope barriers had gone up.

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