I read a post from wyluzuj and it got me thinking.  How likely is a STEAM OS and how successful could it be. There are so many questions.  

Potential marketshare, 

How big a threat to Microsoft, 

Would people buy into it apart from about 10 million hardcore steam users? 

Do Microsoft even care?  

If they do how can they challenge them?  

Would they charge for the OS? 

How much if yes? 

Would Microsoft launch a rival steam on Windows?  

I can think of many more.  Give me your general thoughts on this and we'll see what everyone thinks.  

Steam OS is Valve's attempt to bring Linux to the gaming community, right?
First of all they have to establish a meaningful library on Steam OS which is impossible to do with games relying on DirectX so only OpenGL would work here. Thus devs would have to make games that use OpenGL as rendering back-end and for Steam OS to be successful make it the only back-end.
-> I don't see this happening soon if ever.

So Microsoft have steam cornered?

Potential marketshare: Small. Unless they start selling an already-made PC with the OS on it (or a SteamBox console), very few people is going to abandon Windows for it, specially if they use their PC to work.

How big a threat to Microsoft. None. Windows is still the most used OS by a lot. Big developers won't take their chances with a Steam OS.

Would people buy into it apart from about 10 million hardcore steam users? No.

Do Microsoft even care? No. People isn't going to suddenly abandon Windows.

Would they charge for the OS? They don't charge for Steam, why would they charge for the OS? If they charge for the OS, they wouldn't have any way to compete against Windows.

Would Microsoft launch a rival steam on Windows? No. There are already a lot of digital services on PC. They should have started years abo, before Steam was popular and Microsoft utterly dominated the technology world.

No, the market has. And the decision to go with Linux is complicated, too. The situation to use top-notch hardware on Linux (if you don't use Intel hardware) is still a mess. Buggy drivers, new kernels breaking functionality with drivers, performance of the drivers, competing systems to just put a pixel on screen... There is a reason Linux never made it on desktops in a successful way (while I use it regularly and put Windows in a vm...) is because of Linux itself. And I don't see this is going to be changed by Valve. MS, as far as I know, not forcing anyone to use DirectX - you are free to use whatever you like. But DirectX itself also isn't bad in any way and DX12 will improve on a lot of things. Add to this that the potential userbase is just insanely big for your game if you release it on Windows and given that MS is going to give people Windows 10 basically for free, why would anyone choose Steam OS?

Thanks for the detailed reply.  I guess entering the console market is there only hope of getting an of to more than a few million.  For it to take off I think they'd need Microsoft to drop out of the market.  Maybe buy them out?  Not sure if thats feasible for them and if Microsoft make a comeback they won't even consider it. 

The thing is that Micrososft had to make a choice. Microsoft released their consoles as a way to compete against Sony. The first XBox was utterly unable to hurt the giant that was the PS2, even though it beat the Gamecube by a few million. Up until that point, Mucrosoft invested a decent amount on PC gaming because they had total control on PC, but their consoles were beaten by the PS2. When their console started to get really popular, they moven most of their effords on consoles.

If they had started their digital distribution services on PC before, they could have created a very important lead, maybe combining the XBox live accounts to Windows Live, but giving to WLive way more features that it had. Now Microsoft has to fight on three fronts: Consoles, PC and Tablets, and it isn't dominating any of them. Nintendo has their handhelds, Sony has their home consoles, Apple has the tablet market cornered, Valve is the king of digital distribution on PC, Mac and Linux...

This was something similar to Nintendo with the N64: If they had used CDs instead of cartridges, and allowed more freedom to 3rd parties, PlayStation wouldn't have been suh a threat, and Nintendo would have kept their dominance over handheld and home console a decade more.

Also, Valve is too big and profitable. They won't be bought by Microsoft any time soon.

It's a bit like sony should have made the ps3 similar to the xbox 360. Or Nintendo should have been the ones who invented the iPhone or sony should have made iTunes and as you say Microsoft should have created steam and left consoles alone.  It's funny how lack of foresight and vision comes back to bite companies in the ass! 

I think the Steam Machines will bomb because there's no real market for them.

But dual-boot systems with both Windows and SteamOS could become popular among PC gamers because it's free.

It's not a real threat for Windows, especially because Win 10 is free for 7 and 8 owners.

Potential marketshare - less than OS X
How big a threat to Microsoft - HAHAAHAAHAHHA not even a thread
Would people buy into it apart from about 10 million hardcore steam users? NO
Do Microsoft even care? NO
If they do how can they challenge them? -
Would they charge for the OS? it's confirmed it's going to be free
How much if yes? -
Would Microsoft launch a rival steam on Windows? They tried with GFWL and was an epic fail.