Fact is we don't know how many million sellers there are on PC and we can't just say they don't exist. ELSPA hope to bring out a download chart so we should have a better idea of digital download sales soon. Also, just because the number are hidden from view doesn't mean we can't infer profit:

http://steamreview.org/posts/finances/

Profit margins for developers are a major selling point for digital distribution, and Steam does not let the side down. I’m pleased to say that there are now figures as accurate as possible for each margin: 10%-20% for traditional retail/publisher deals; roughly 60% for Steam developers; and an incredible 86% for Valve themselves. Add to that the fact that Valve doesn’t take the developer’s IP and the effective margin becomes wider still.

These sorts of numbers aren’t easy to come by for distribution services, but it isn’t unreasonable to say that the 26% net margin difference between Valve and their Steam licensees is quite wide. Perhaps when xStream ramps up we’ll see some healthy competition.

We don't know the total sales numbers for digital download titles, but it seems pretty obvious that they don't actually need to be as high as typical retail sales for a developer to be profitable. In fact, a developer would only need a third of the sales from digital download vs retail sales to be profitable on Steam. EA seemed to have realised this as well as they have their own EA Store for their PC games now.

Fact is, all the financial reports of the big publishers have looked great in terms of sales numbers and revenue but poor in terms of profit. It would seem the cost developing and publishing HD console games isn't quite as profitable as many believe it to be. Take Activision (without PC based Blizzard) who were only in the black after CoD: MW2 released. Considerring how much revenue and sales that game made, I find it shocking their profitability was so low.

Lastly, Valve is a private company, so I'm pretty sure that Gabe effectively is the board of directors.

Valve should've known Microsoft's policies the moment they want to make a game for their console. Apparently, they either didn't, or did and failed to strongarm Microsoft into changing them. Valve not liking these policies is a fair point, but Gabe Newell's personal PR strategy seems to be making a legitimate complaint and then attacking what he has a complaint against with an over the top and eyeroll worthy exaggeration.

That being said, that does NOT explain why Valve hasn't bothered updating Team Fortress 2 since 2007.

It's clear from the context they did know, they just hoped to see the policies relaxed over time.  The lack of updates is directly tied to those policies.  Valve want to release content for free, MS want to charge, so Valve simply aren't releasing it.

I will be very curious, if PS3 versions of Valve titles keep in line with PC versions while 360  versions lag as this would all imply, to see if console interest in Valve titles switches from one platform to the other.  360 seems better suited for Valve in terms of US centric online community, but the lack of upgrades really kills Valve titles on the platform IMHO.

The difference between TF2 on PC vs 360 now is huge.  Even just little things like free DLC such as Crash Course vs using MS points could cummulatively change opinions.

Reading between the lines of their other comments, I'm very curious whether they'll go back and sort out the Orange Box or not on PS3.  They could, given with Portal 2 they'll have Source running properly on PS3 vs a port, and in the bigger picture getting all their titles on PS3 well supported would make the most sense.

It's more than just an implication at this point.  That's the whole reason they're implementing Steamworks - so they can keep the PC and ps3 versions updated simultaneously, something they will be unable to do on 360.  As a result of this, they'll able to implement cross platform play between the PC and ps3 versions.

@themanwithnoname:  They did know this was the case when they first began working on 360, but it wasn't something they hoped to strongarm MS into changing. They simply thought such a business model wasn't sustainable given the market, so they assumed Microsoft would change their policies over time.

From the original interview:

Gabe Newell: That’s why we’re really happy with the current situation with the PS3… We’re solving it now in a way that is going to work for our customers, rather than assuming something is going to emerge later that will allow us to fix this.

PC Gamer: Was the mistake on the Xbox side to think that Microsoft would let you update it more often?

Gabe Newell: We thought that there would be something that would emerge, because we figured it was a sort of untenable… “Oh yeah, we understand that these are the rules now, but it’s such a train wreck that something will have to change.”

Why would they think it was untenable? How was it a train wreck? Does he elaborate at all on that? Why did they think they would change something when there were no signs of that? Seems more like Gabe didn't think something that is different from how he does it would work at all, kind of arrogant. That is just bad planing on valves part.

They won't have anything to do with the Orange Box on the PS3 because they didn't develop it on the PS3. So you're saying that Valve decided not to support The Orange Box but then changed their mind on Microsoft's policies when it came to Left 4 Dead 1 and 2? If that's true, then Valve clearly doesn't give a hoot about anyone on the 360 because anybody with common sense would prefer to be offered something at a price rather than not offering it at all. My point is that people need to stop acting like Microsoft is the only reason that Team Fortress 2 is like it is on the 360 right now, when Valve clearly shares some of that responsibility.

LOL, Gobese Newell looks possessed, recently!

When Jesus exorcised that person possessed by a whole legion of demons, they must have remained homeless for 2000 years, until they saw Gabe, and he must have looked damn cozy to them...   

@reasonable  I love your part about people mistaking PC as a MS platform.  Ive been saying that for years but the fans think im crazy. If i was why would MS cancel PC versions of their games

Funnily enough, Valve don't want to charge using the MS model - strange but true.  Also, they may still pickup the Orange Box on PS3 - they don't have to, but despite all the grumbling you see in my experience Valve, when they do decide to back something, back it fully, and so I suspect they may either bring it under their wing or find another way to encourage PS3 owners to get onto their platform.

It's important when considering Valve's approach to understand that they try very hard to get players to embrace a broad number of their titles, by keeping them all on Steam and continuously upgrading them.  Getting Steamworks and Portal 2 properly on PS3 is a start, but for Valve I'd say getting their core Half Life franchise sorted out on the platform would be a priority afterwards, as well as getting L4D on the platform, too.

As for TF2 on the 360, I don't actually see Valve sharing any big responsibility other than, arguably, never releasing on the 360 platform at all given their desired approach was so completely at odds with MS.

Also, I'd bear in mind that the whole 'loving the PS3' approach is a very good way of putting presure on MS to relent - if Valve games become more popular on PS3 and better supported this will put a lot of pressure on MS to cave, particularly if they continue to sell so well.

One thing I love about Valve, no-matter their current console preference  is just how much value they see in community relations. Releasing free titles like Alien Swarm- a game that provides dozens of hours of enjoyment with top shelf FX, or Portal for all new Steam users  along with free entire levels to games like L4D 1 2 is just great. In an industry that seems hell bent on ever increasing DLC pricing and lameness, Valve stands literally alone. They don't hold back content for later DLC and release it a week after the game drops, they don't limit installs, they don't drop support for old titles....ever. Compared to a company like Activision they are just great at reminding us that gaming is about making a title perfect, evolving it over time. Not dropping a turd, charging for completed levels ripped out for profit, or in the case of MS and EA dropping multiplayer support for games that still have a large following. Heck Valve is currently releasing most of their back catalgue of games on Mac, and guess what? Those of us who bought titles like Half-Life 2 back in 2004 can no download them on either platform for no added charge. Thats amazing support, something no other company I know of provides.Now don't get me wrong I think it was stupid of them to expect MS to bend to their will, but I also think its silly not to wish MS had. If every developer treated their users like Valve does, gaming would be a lot better off.