Meet Facebook's new virtual reality competitor

An image from Valve Software's Team Fortress 2
Source: Valve Software

The competition is getting more intense for Facebook's Oculus Rift.

Valve Software, the videogame developer and creator/operator of the industry's largest PC game digital distribution platform, will unveil its own virtual reality hardware next week at the Game Developer's Conference in San Francisco. The company has not yet announced whether the system will see a commercial release, but it is actively meeting with content partners at the show, generally an indicator that it does plan to do so.

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While several VR systems have emerged since the Rift made waves first on Kickstarter and then with Facebook's $2 billion acquisition of the company, most have been viewed as relatively minor threats to Oculus. Valve's could be an exception, thanks to the Steam digital distribution service.

Steam boasts more than 125 million active accounts—50 million joined in just the past year—and hosts 4,500 games. That's a huge potential audience, one that Oculus is likely to envy, seeing as both devices will target PC gamers.

Gaming an emotional experience: TTWO CEO
Gaming an emotional experience: TTWO CEO

(Virtual reality on consoles, at present, is only being publicly explored by Sony, whose Project Morpheus is exclusive to the PlayStation 4.)

VR is a still a nascent business. While Oculus has generated lots of buzz, it has only shipped one product—the Gear VR with Samsung. The Rift, its premier device, still does not have a firm ship date, though many industry insiders expect it could make its debut this holiday period.

The excitement is expected to translate into significant spending. And consulting firm KZero predicts the consumer market for virtual reality will hit $5.2 billion by 2018.

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Valve, which got its start as the developer of the acclaimed "Half-Life" games, has been focusing more on Steam and the hardware businesses in recent years. In addition to the VR system, the company will unveil new Steam Machines, a living room PC system that's designed to help move the PC games on Steam from the desktop to the living room, as well as the final design for that system's controller and other "new living room devices."

Valve, traditionally, has not manufactured hardware itself, instead setting specifications for its PC partners and encouraging an open market. It's unclear at this point if the company plans to build the VR headset in house or rely on partners.

The company has been experimenting with VR for some time now, though. In 2013, engineers hacked together an idea for an augmented reality headset that Valve ultimately scuttled. (It went on to become the castAR headset, which raised over $1 million on Kickstarter.)

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Developers who have seen what Valve is working on have been extremely bullish on the device. Despite these accolades, Valve has previously said it did not have plans to ship its own headset.

Instead, it has been working with other VR industry players, including Oculus, to help them build out competing products. (The Rift, for example, will be compatible with Steam.)

That might seem curious to investors, but Valve has historically welcomed and encouraged competition, believing it is more beneficial to the gaming ecosphere.