My understanding is Steam machines weren't so much meant to be a console competitor or even a gaming PC competitor, they were meant to be a Windows competitor.

My understanding is Steam machines weren't so much meant to be a console competitor or even a gaming PC competitor, they were meant to be a Windows competitor. So that Valve could basically just say "we'll start releasing exclusives for this" if Microsoft pushed the Windows Store hard and tried to kick Valve out of their dominant market position. Steam machines bought them a bit of leverage when they needed it.