In 1994 Microsoft didn't arbitrarily ban applications on their OS.

They had different knobs available to them, and it's not clear given the opportunity that they wouldn't try it. E.g. it was less common for PCs to be connected to the internet and receive OS updates, so they wouldn't have an effective way of using a policy like that.

They certainly did their best to prevent any other OS from being on your hardware.

They still are not doing it right? You just get the "downloaded from internet" warning.

I think you can argue that current day MS is a little more afraid of anti-trust action than 1990s MS. Game developers were legitimately scared that MS was going to do this for windows and start taking their own 30% cuts from all PC games. I'm not sure if Valve confirmed it, but it seems likely that SteamOS/Steam machines were at least partly a backup plan for ensuring there was a place to sell games without MS skimming off the top.

No, but there was that whole “Windows won’t run on DR-DOS” scandal. https://en.wikipedia.org/wiki/AARD_code

They made PC makers pay a license fee per computer even if the computer didn’t ship with Windows.

They coined the term embrace, extend, extinguish. See the history of Internet Explorer.

Also, as far as I know, even couldn't.

They would have loved that though!

I mean Steam was made as a panicked reaction when Microsoft announced its Windows store. People in the industry knew very well what they were trying to do.

Steam predates any windows app store stuff by almost a decade, it wasn't a "panicked reaction" to anything.

Yeah, grandparent is misremembering a real event. Steam did do a panicked reaction to Windows store: a hard pivot to Linux support and the linux-based SteamOS.

Steam was nowhere near the app store we know today when it was created. It was Valve's auto-updater and match-making service. They had a few partner games using it as well.

I may recall it badly but I am pretty sure they opened it to general companies and indie studios as a reaction to Windows 8 built-in app store:

https://www.bbc.com/news/technology-18996377

I've been on steam since a while after it's genesis. IIRC the store aspect of steam started in 2006-2007, which is way before even windows 8 which only came out after 2011-2012