BELLEVUE, Wash. — This is no Xbox 360 or PlayStation 3.
Every way I look, the scene shifts, the battle unfolds. I have a crazy contraption strapped to my head: a boxy set of goggles that looks like a 22nd-century version of a View-Master. It immerses me in a virtual world. I whirl one way and see zombies preparing to snack on my flesh. I turn another and wonder what fresh hell awaits.
Behold the future of video games. Or at least the future as envisioned by a bunch of gamers, programmers, tinkers and dreamers at the Valve Corp. This is the “uncorporate" company that brought us the Half-Life series, the hugely influential first-person shooter game.
The Valve guys aren't done yet. Founded 16 years ago by a couple of refugees from Microsoft, Valve makes games that wild-eyed fans play until their thumbs hurt and dawn jabs through the curtains. But what really makes Valve stand out is its foresight on technology.
Taking a risk
A decade ago, long before every media executive figured out that downloading was the future, Valve started an online service, Steam. It has since become for games what iTunes is to music — a huge online distributor, in its case one with more than 40 million active users and that, by some estimates, accounts for about 70 percent of the PC games bought and downloaded from the Web. Through Steam, Valve effectively collects a toll on other companies' online game sales, in addition to making money from selling its own products.
On Monday, the company began a public test of a new television-friendly interface, Big Picture, for buying Steam games and playing them on computers in the living room.
“They're on the cutting edge of the future of this industry," says Peter Moore, the chief operating officer of Electronic Arts, a big games publisher that is both a Valve competitor and partner.
Now Valve executives think they may be onto the next big thing in games: wearable computing. The goggles I'm wearing could unlock new game-playing opportunities. This technology could let players lose themselves inside a virtual reality and, eventually, blend games with their views of the physical world.
It's one thing if a bottomless money well like Google wants to sink its profits into Project Glass, its own wearable-computing initiative. But for a 300-person software company like Valve, developing eyeball computers seems an absurdly ambitious enterprise.
Valve's exploration of new forms of game hardware comes as the PC is changing in ways that could undermine its business. With a new PC operating system, Windows 8, coming out in October, Microsoft will start its own online marketplace for distributing software, including games.
A 'boss-less' workplace
Valve fosters unorthodox thinking through a corporate culture unusual even by the quirky standards of technology companies. While many startups pay lip service to flat organizational structures, Valve emphasizes that its workplace is truly “boss-less."
“We don't have any management, and nobody 'reports to' anybody else," reads Valve's handbook for new employees.
Valve has no formal titles. The few employees who've put titles on business cards do so to satisfy outsiders apprehensive about working with people without labels. The same applies to Gabe Newell, one of Valve's founders.
“I think he's technically the CEO, but it's funny that I'm not even sure of that," says Greg Coomer, a designer and artist who was one of Valve's first employees. (For the record, Newell is Valve's chief executive.)
To spur creativity, Google management created the concept of “20 percent time," the portion of employees' schedules that they could commit to entirely self-directed projects. At Valve, it's more like 100 percent time. New employees aren't even told where to work in the company. Instead, they are expected to decide on their own where they can contribute most. Many desks at Valve are on wheels. After figuring out what they want to do, workers simply push their desks over to the group they want to join.
Focusing on hardware
Valve has an eclectic workforce. The company became interested in hiring one artist only after learning that his pastime was spray-painting graffiti art in Britain. It recently hired Leslie Redd, a school administrator, to lead an effort to use “Portal" to teach physics and other subjects in schools.
Valve's most striking recruiting campaign is a recent move to establish a hardware group to develop technologies that can enhance gameplay. The company posted a job listing for an industrial designer, hinting that it planned to get into the computer business itself.
“We're frustrated by the lack of innovation in the computer hardware space, though, so we're jumping in," the listing read. “Even basic input, the keyboard and mouse, haven't really changed in any meaningful way over the years."
Valve also recruited Jeri Ellsworth, an inventor and self-taught chip designer, whose pinball machines decorate Valve's offices. Ellsworth recently gave a tour of Valve's hardware laboratory, proudly showing off 3-D printers, a laser cutter and other industrial tools used to cobble together hardware prototypes. While interviewing for the job, she said, she was dubious about Valve's interest in hardware.
“At one point, I said a hardware lab could be very expensive, it could be like a million dollars," she recalled. “Gabe said, 'That's it?'"
A new (and virtual) reality
A driving force behind Valve's most far-out hardware project, wearable computing, is being led by Michael Abrash, a veteran of technology and game companies who helped Valve get off the ground in the 1990s by licensing its important game software from his employer at the time, Id Software. To Abrash, glasses that project games in front of players' eyes are an obvious next step from today's versions of wearable computers, smartphones and tablets.
While Google's glasses will display texts and video conferences, Valve has greater technical challenges to overcome with augmented-reality games. It has to figure out how to keep stable an image of a virtual object (say, a billboard) that is meant to be attached to a real-world object (the side of a building) while a player moves around. Otherwise, the illusion would be shattered.
Abrash said glasses capable of credible augmented-reality games could be three to five years away, though he said virtual reality glasses would arrive sooner. He said Valve hadn't decided whether it would make glasses itself. But its ultimate goal is to share its designs freely so other hardware companies can make glasses, too.
“Gabe has a saying, which is, 'We will do what we need to do,'" Abrash says. “We don't particularly want to be a company that makes hardware in large quantities. It's not what we do."
Moore of Electronic Arts doubts that wearable-computing projects championed by the likes of Newell and Sergey Brin of Google will connect with the mainstream. “It's appealing to them because they live in that outer fringe of IQ and money," he says.
Keeping things private
Valve can do without many formalities of a traditional company because it's privately held and controlled by Newell. He and Mike Harrington, who is no longer with the company, founded Valve in 1996 with the wealth they accumulated in Microsoft's early days.
Not that Newell hasn't had opportunities to sell out. Valve has been pursued over the years by EA, which would likely have valued Valve at well over $1 billion had the talks progressed that far, said two people with knowledge of the discussion who spoke on condition of anonymity because the talks were private.
Michael Pachter, an analyst at Wedbush Securities, estimates that the company could be worth around $2.5 billion today.
Newell said that there was a better chance that Valve would “disintegrate," its independent-minded workers scattering, than that it would ever be sold.
“It's way more likely we would head in that direction than say, 'Let's find some giant company that wants to cash us out and wait two or three years to have our employment agreements terminate,'" he says.