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I really like your take on this. I think they just make a seperate area in the store for movies and games, and keep it at that. But I do like the idea of using a Greenlight type system for indie movie producers. Steam could be looked at as akin to a global farmers market where you can support non-corporate "indie" companies/services. I really like it.
Right now, Steam's video service is not fit for purpose. It's limited to being played in the client, there have been many reports of performance issues and there's no offline playback.
Offline playback requires downloading, which would as you know be used as a way around and to copy and give files to friends., etc.
Valve is not the sort of company to push DRM that works to the detriment of functionality.
That media comes from ripped DVD and Blu-ray disks. We are not talking about illegal operations here. You still have the problem of storage space. Everyone I know has either dropped their cable service for Steaming or given up maintaining media libaries in favor of the Steaming service. Hell I ended my cable account and sold off over 300 DVDs when I could start watching Netflix and Amazon right on my TV. Blu-rays have failed because they came out at the same time Streaming services were starting to take off. Netflix, Amazon Prime, and Hulu keep gaining ground because people don't want to mess with downloads anymore. Why do you think the cable companies are killing off Net Neutrality Laws.
Without an unlimited Steaming Service (paid membership) and apps for more devices besides their consoles this movie service will never work. If its not going to work on a Smart TV or service like Roku their target audience will be very small. To be honest I doubt Steam's Console will make it very far anyway. Sony and X-Box take up too much of that market.
I suspect that Steam Machines will have a Netflix and Hulu app so as a result Valve is exploring providing movies that are not shown on those two, which I think is wise