Steam Big Picture mode is only the beginning. While it doesn’t pose much of a threat to traditional consoles on its own, infusing it into proper hardware would be a game changer. Valve needs to sell affordable hardware in order to get Steam into the living rooms of all kinds of gamers. Valve is in a very good position to sell hardware. I liken Valve to Google and Amazon in this case. Both of these companies use hardware as a way to sell software and services. Google and Amazon sell its tablets for cheap because they can make up for the loss by selling apps and cloud services within their respective ecosystems. Valve can do the same thing.
I have my own ideas as to what the ideal Steam console should be like. Valve can either create everything itself, or outsource the creation of hardware to another company that already has the supply chains in place to gather components for a fair price. Valve can then sell its console at a very affordable price starting at around $299. The cheapest Steam console can have specs good enough to play most Steam games on a level comparable to the PS3 or Xbox 360. Valve can also sell better models for $399, $499 and $599.
Valve should also make customizing the Steam console an easy process. We should be able to swap out the hard drive, upgrade the graphics card and expand the RAM if we so choose. In other words, make it as customizable as a PC.
Should Valve make a console like this, Sony and Microsoft would be in real trouble. It can bring PC gaming to the top of the industry once again.