But steam box isn't dead. It's not like a console where the platform IS the hardware. Steam's platform is... Steam. Valve can keep at this. Steam compatible games are on the increase.
I think this is still toe in the water stuff for Valve.
Wait till Half Life 3 is a steam box exclusive. ;)
The lack of marketing and immaturity of platform and user experience mean the most viable demographic is existing PC gamers. However, existing PC gamers are adverse to markups for what are basically SFF PCs, and are much more inclined to build their own (or buy a lower markup, non-Steam branded PC) to fill that niche. More affluent parts of the demographic less concerned about markup also tend to be older and prefer something more subtle than the gaming glitz styling and branding of most of the premium Steam machines.
There's also self-cannibalism in this demo. Few of the Steam machines are top-tier components for the sake of heat and noise, so it's easy for most existing PC owners to fill this niche by simply replacing their current PC (as most do every few years) and demoting the old box to the TV room. As you mentioned, Steam link or NVIDIA's in-home streaming on Shield TV can also fill most use cases (at least they do for me).
Valve could have leveraged the initial hype and novelty of Big Picture and the Steam machine concept to drive an initial wave of sales, but the delay between those announcements and a consequential number of actual machines being ready to buy outlasted the initial hype.
Slightly off-topic: the Steam Link is currently 30% off[0].