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mechmouse: had SteamOS taken off, you would be swapping an unregulated monopoly (VALVe) that is dependant of a more regulated monopoly (microsoft) for an unregulated monopoly (VALVe) with absolute control over its platform.
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adamhm: They wouldn't be able to have absolute control, as the license requires that the source code be provided (the only closed source parts are the Steam client itself and some proprietary drivers). It's much less locked down than Windows - SteamOS is basically just a customised version of Debian with the Steam client preinstalled & configured to autostart in Big Picture mode. Plus they actually encourage modifying/customising it.
By control, I didn't mean they owned all the source. I mean that if a change happened they didn't like they could fork it.
It is also perfectly in their ability to add propriety modules at kernel level.

They had control over the OS.

Had the steam machine took of, it would not have been linux gaming it would have been Steam OS gaming.