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Just like that, Valve is challenging Microsoft and other console makers on a host of fronts in the gaming business with the announcement of  SteamOS, a Linux-based operating system focused on games and entertainment.

While Valve is known as both the creator of Steam digital distribution platform and the maker of blockbuster games like Portal and Half-Life, it has also staked out its claim as the steward for a community of hardcore game fans who want openness. As such, it represents a very credible threat to Microsoft, which is often viewed with suspicion in that community for having corporate interests at its heart. If Valve can marshal community support for the SteamOS, through the grassroots from the bottom up, it could loosen the grip that Microsoft and other console makers have on hardcore game fans in the living room. And if Valve gets gamers, it could very well get fans of TV and music as well.

“With SteamOS, ‘openness’ means that the hardware industry can iterate in the living room at a much faster pace than they’ve been able to,” Valve said today. “Content creators can connect directly to their customers. Users can alter or replace any part of the software or hardware they want. Gamers are empowered to join in the creation of the games they love. SteamOS will continue to evolve, but will remain an environment designed to foster these kinds of innovation.”

These issues are up for discussion at our GamesBeat 2013 conference coming on Oct. 29-30 under the theme, “The Battle Royal.” We’d love to get Valve at the event.

Valve is using its position as the king of digital game distribution on the PC to expand its reach into operating systems and console games in the living room. Steam is already available in 185 countries for digital game downloading. In effect, the SteamOS will enable gamers to play their PC games in the living room and for Valve to create a Linux-based OS as a rival to Microsoft’s Windows 8 platform. But Valve has not yet said if the SteamOS is going to be open source. It simply looks like it will be more open than its rivals’ platforms.

Microsoft angered Valve last year be creating a store for its Windows 8 platform that served as the default store for Windows products, much like Apple does with the iTunes App Store. The problem was that Valve had a perfectly good store for games with Steam, running on the Windows PC. Gabe Newell, the managing director at Valve, called that move a “catastrophe” for openness in games.

And as a result, Valve decided it needed to create a Linux-based rival operating system to Windows for games built for big screen entertainment. Valve says hundreds of games are already running natively on SteamOS. Valve said the SteamOS supports in-home streaming, which enables any SteamOS machine to stream PC and Mac games from any computer to a big screen. Since Steam already has a huge following, the OS can have immediate traction. Players won’t have to give up their lists of favorite games, online friends, and other Steam features.

With Linux, Valve can tailor an OS for gaming, adding features such as better audio, Valve said. For hardware manufacturers, this means anyone else will be able to field a “SteamBox” console that can run Steam games on a television. For game makers, it means they will have another game platform to support, but one that takes their interests at heart, in contrast to larger companies that have other concerns besides games. Valve could also position itself as the game console that is friendliest to “indie” game makers.

Valve said the announcement is one of three coming soon. Based on the timer on the Valve site, the next one is coming Wednesday. Newell said last week that Linux is the future of gaming despite its tiny share of the market today. That led to speculation that Valve would do a “Steam box” based on PC hardware and the Linux operating system. The idea is to make Valve’s PC-focused Steam system easier to use and display on TVs and to head off attempts by Microsoft to make Windows and Xbox into the kings of the living room.

Newell and Mike Harrington founded Valve Software in 1996. The software company went on to produce beloved games like first-person shooters Half-Life and Half-Life 2 for the PC. In 2003, Valve released its Steam digital-distribution store. Today it is one of the biggest online retailers for PC games. In doing so, Valve moved beyond being just a game maker to being a platform owner, and that has made it much more powerful as a player in the game industry.

In 2012, Valve introduced the Big Picture mode for its Steam software. This optimizes Steam for use on HD televisions. It has big text and a controller-optimized user interface. At the time, Newell claimed this was the first step in getting Steam into the living room.

Newell fueled speculation in January about using the Xi3 gamer PC as the basis for a possible Steam box, but then he went quiet. Valve also had a number of layoffs, and Xi3 tried to dispel wrong assumptions people made about whether its Xi3 Piston was itself the Steam box. But now it seems clear it could be one of many different SteamBox consoles.

But the ambition with the SteamOS is clear. Valve is will target fans of TV, music, and movies with the SteamOS.

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