There were a few rumors from earlier this year that Valve was building its own game console. It would be a big step for the company that made its fortune on its Steam digital distribution service. It was also exciting since nothing has really shaken up the console market since Microsoft entered into the equation in 2001 with the Xbox. At the time, however, Valve said its game console was just a rumor, but it appears that the rumor is finally graduating into a truth.

During an interview at the VGAs, Valve boss Gabe Newell told Kotaku’s Jason Schreier that the company plans on introducing a living room PC next year. First, however, the company is going to move Steam Linux out of beta and implement Big Picture mode on the OS. Then it would get to work on making its own hardware and the software that runs it.

Newell doesn’t think that his company will be the only releasing hardware either. He predicts that living room PCs will be in vogue next year as the industry moves towards unifying the PC and game console environment. These PCs would be more like game consoles that run Steam out of the box and offer support for all the major games coming out for the platform.

The interesting bit is that Newell said Valve’s living room PCs will not be open experiences. The hardware will be akin to a PC, but it will be a closed experience with a primary purpose of playing games. Such a move would probably make it easier to offer cheaper hardware that doesn’t sacrifice visual fidelity in PC games. Besides, a PC with a mouse and keyboard in the living room makes little sense. These living room PCs will have controllers and remotes optimized for the living room experience.

It will be interesting to see if these living room PCs are able to make a dent in the console market that’s dominated by the big three – Sony, Nintendo and Microsoft. PC gamers have enjoyed superior visuals and gameplay for years, but some gamers preferred consoles for ease of use and a cheaper price tag. The PC could become the next dominant platform if its able to address those concerns while providing the same experience that PC gamers enjoy today.