The bulk of the media focus in the videogame world might be on the mobile and consoles, but Valve Software co-founder Gabe Newell thinks they’re looking at the wrong platform.

In his keynote address at the D.I.C.E. Summit in Las Vegas, Newell evangelized the potential of the PC ecosystem, noting that it would help revolutionize the living room.

“The PC is the center of innovation in videogames,” he said. “[And] there’s no evidence that innovation is slowing down.”

To help drive the platform, Valve has committed to helping the PC find a place in entertainment centers. It is in the process of developing a form factor PC that resembles a traditional console – and last year the company released a “big picture” mode for its Steam digital distribution system, allowing players to easily play games in their catalog on their living room TV.

Newell said he wasn’t worried that Microsoft and Sony’s expected introduction of new consoles might pose a challenge to those plans. But he did think Apple potentially presents a tremendous threat.

“It’s scary to think what Apple is going to do,” he said. “Apple has a natural progression to the living room. … Another great thing Apple does is they have a much [smoother] upgrade cycle. … That has been beneficial to both consumers and developers – and is a challenge to us in the game industry.”

Although Hollywood and many game companies are betting heavily on the cloud, Newell says he has doubts about the service’s ability to deliver a quality gaming experience.

“I have been and continue to be a skeptic about [cloud gaming],” he said. “I think there is a place for cloud gaming, but more for demos and spectating.”

The changes to gaming will come not just from the PC, said Newell, but also from the people who play them. User-generated content has progressed and matured to a point where professional designers are having a hard time keeping up.

“We can’t compete with our own customers,” he said. “Our customers have defeated us — not by a little, by a lot. … They’re building content that’s just as good — or better — than we’re building. And they’re building it at a spectacular rate.”

Some Valve customers, he says, are earning over $500,000 per year through the sale of virtual goods they have created, which has forced the company to rethink how it looks at games. Moving forward, said Newell, Valve plans to focus on providing opportunities for customers to help shape their own gaming experiences – and let them escape the major shakeups the industry has traditionally gone through every five or seven years with the launch of new console systems.

“We’re trying to get away from disruptive transitions,” said Newell. “I don’t think there’s a whole lot of value to that anymore.”