Microsoft will eventuallly force software applications only to be downloaded from their app store. Valve could circumvent this by releasing a FREE app without a storefront (in-app payments). Users will be forced to buy games through their browsers (FREE and open internet). It's not very user friendly but it's a way of avoiding a 'Microsoft haircut'on every item sold through Steam. It's the main reason why Valve is moving to Linux . Steam on Windows will become what Humble Bundle is on Android. Just download and play (no buy option). And then it becoms the question when not if Valve totally migrates to Linux.

In 2020 Windows 7 security updates won't be supported anymore by Microsoft. I believe this is when Microsoft will force their app store. You could say that Windows has been an open platform and is becoming a closed platform.

Steam on Windows Buy/Download/Play until 2020 Microsoft forces their app store
Steam on Windows Download and Play until 2025 Valve pulls their app form the store due to switchers to SteamOS and Gamers leaving Steam.

Why would Sony share the software sales revenue, that right now is exclusive to them, with Steam for no reason? They would be losing money, losing controle over their own product and gaining absolutely nothing.

Well it sounds like this is one interesting battle to watch over the coming years 

Oh you mean like Civ V, Europa Universalis series, Crusader Kings series, football manager, counter strike, dying light, Dota 2, borderlands 2 + pre sequal, the witcher, half life 1 + 2, xcom, total war series, Metro series, tropico series and over 1,000 other games most of which are not on consoles but are all available on Steam OS. I enjoy my consoles, but if we look at what steam os has that consoles don't and compare it to what any single console doesn't have that steam os has, there is no argument that steam OS is far superior to any single console.

And for the few games like COD, battlefield and GTA, there are comparable games on steamOS. And with the likes of garry's mod.... stating things like  saying "nobody cares" are just silly. People do care. Consoles have a place, but for how much longer? If the handful of so called AAA titles, which are riddled with bugs and rather than making a good game are just backed by massive amounts of cash, decide to make their handful of games on linux, then really consoles are just a cheaper option to play these games on.

I would also further add, that all of the above games you mentioned are already available on windows. One can play them on steam, and simply switch to running windows to do so.

http://store.steampowered.com/search/?term=&sort_by=_ASC&os=linux&page=1

One of the biggest reasons for success of windows is open software distribution and if ms decides to limit software distribution to windows store they are going to kill nearly so many applications millions I mean and I am sure it is not going to happen until and unless the CEO at MS goes crazy and becomes mad and decides to kill ms in every possible way.

You do understand that Steam OS is Debian with Steam running in Big Picture mode? 

I think valve should have focused on improving drivers and middle-ware environment on Linux in general rather than starting their own variant OS.

Steam OS well I have mixed thoughts about it Valve missed the opportunity if they would have released steam machines before the launch of Xbox One and Ps4, Windows 10 DirectX 12 they could have made an impact but now it seems less relevant.

First lets have a look at PC gaming.

Gaming on PC is different from consoles while we know a size able amount of people who use PC as their daily gaming machine but the true audience of Pc gaming is scattered among different services. If you go and look at top games played on steam most of the game are made by valve or at least valve is the dominating publisher in that arena. http://store.steampowered.com/stats/. If you start exploring beyond steam pc gamers also use other clients such as uplay (which is not a good gaming client) but if you want to play ubi games or only choice, moving on we have origin for ea games. Agree or not Battlefield has a very dedicated Pc fanbase and they are not going anywhere since they barely have any option except origin if they want to play battlefield. Battle.net is again a popular client used for blizzard which has some of the best selling pc games Diablo, Starcraft, Warcraft and highly addictive Hearthstone.
It is very clear that hardcore pc gamers are fragmented among different clients and if you like to play games on multiple clients windows will remain best option unless the above stated clients make their make on steam os.
We all are aware about how triple-A games sell on PC majority of them barely crack 1-2m mark I am not talking about ips like AC, Watch Dogs, COD, FIFA and many more this further puts question on how many big games will make debut on steam os. Valve will have to sell bunch of steam machines to get them on board. Thousands of games are already available on steam and yes popular games among pc community like CS go, Dota 2 are available but are these 10m hardcore steam users willing to buy a dedicated machine for gaming which will cost them the same price as the consoles. On most part answer is no.
Yes Valve can succeed if they have planned some killer app. If next cs goes exclusive to steam os yes they will attract gamers but many will abandon as well and others will simply dual boot windows with linux os like ubuntu and play it on linux if possible.

The dent by Directx 12
The biggest damage to steam os is dx 12 the API is going to allow dev's to code to metal and developers are already showing excitement around it. Dx12 impact would have been way less if W10 was not a free upgrade since it is a free upgrade dx 12 is going to become a development standard for PC soon or most dev's will support if not a standard.

I believe steam os won't be a massive success as Valve hoped it to be until they go ahead and make dota 3, half life 3, team fortress 3 all only on steam machines.

But know what else is free? Singularly booting windows and playing the Steam games that way. As someone with over 500 games on Steam I don't see any reason to.

Yes, and because it's Linux based, devs will have to use OpenGL, which means you can basically throw it onto the Mac/Linux steam store.