OnLive Delivers Through The Cloud. But Will It Succeed?

Recently, OnLive began offering their OnLive Game System for pre-orders online for a very attractive price of $99.  This game system features a revolutionary way of accessing games and content through the use of “The Cloud” as opposed to the more traditional physical media formats that you see in today’s consoles.

But what is OnLive?  What does it do?  How does it work?  And more importantly, what effects, if any, will it have on the gaming industry as a whole?

Announced in 2009 at the Game Developers Conference, OnLive was promised to be a service like no other, leaving the need to hardware specifications behind and instead handling the rendering and storage on a remote server, streaming only the image, delivered in 720p to your computer.  This method of delivery meant that no longer would you require an expensive game console or high end PC to play the latest video games.  As well, you would not have to continually upgrade your hardware in order to continue playing them.

In June of 2010, it was initially offered at a monthly service fee of $14.95 a month for the PC service, it is now offered free to use, with only the cost of purchasing the games that you wish to play.  Six months later, a new OnLive Gaming System is now being sold which will allow you to stream the game content direct to your TV, instead of through a personal computer.  This game system is small, portable, and allows you to take your collection wherever you go with just a small box and a controller, so long as you can access a high speed internet connection.

The system will support up to four wireless controllers, multiple Bluetooth headsets, as well as keyboards, mice, and additional devices through it’s two built in USB ports.  It sports support for component and HDMI video output, alongside fibre (S/PIDF) and a stereo minijack for audio output.

Many reviewers and bloggers have heralded this new technology as a direct competitor to the console makers, and even in some instances, a potential console killer.  With the support of popular game makers such as Eidos, Ubisoft, Sega, 2K Games, and Squenix, it is definitely a contender that could make a mark in the gaming industry.  But what effect exactly could it have on the industry and its consumers?

For one, being an online service definitely has some advantages for gamers with no longer having a need to pack a bulky console, plus whatever games you wish to take along with you.  But this can be a huge disadvantage as well.  Specifically, with the younger gaming generation that has yet to establish credit or have the ability to pay online.  This would require parental intervention as well as their financial support in order to purchase the video games for said child.

While requiring such intervention can be seen as a plus in the day and age where the gaming industry continuously falls under strict scrutiny by parents, members of the government and even the Supreme Court, I cannot see a parent who is already disconnected with what content that their child is exposed to adopting a system that will require more involvement than they already refuse to give.

As for the game publishers, I can see the potential cost reductions related to a lower cost of distribution, so it’s very obvious to me that there would be a weight of support from them for this new technology.  However, unless OnLive becomes a very quick hit, I don’t think you’ll see much support from the larger publishers such as Activision or Electronic Arts very soon.  After all, time spent on pushing a game to a new console, be it virtual or not, costs money, and the larger companies already have a nice cushion of cash flow from the existing consoles.

The worst effect that OnLive will have within the industry will be with the retailers.  Everyone knows of the razor and blade business model, and even with retailers, the blades (games) always bring in more money to them than the razors (consoles).  If cloud gaming were to take off, it would be a large hit to the retail industry.  And considering that the OnLive Gaming System isn’t even available at retailers currently, it could cause quite a bit of tension between them and the game makers who still rely heavily on their business to push physical media.

So as far as the business aspect of OnLive, it’s a viable market, but I don’t think that it will be as big as some people are saying it will be.  Yes, the hardware is cheap, which makes it very attractive to gamers that don’t have the dollars to continually purchase and upgrade their existing platforms in order to keep up with the requirements for games that only get bigger and better, but there are a couple of interesting tidbits regarding the technology that may turn a gamer off.

1) You must be within 1000 miles of an OnLive server farm to get what OnLive describes as “quality” service.

While they currently have server farms in Santa Clara, California, Virginia, Dallas, Texas, Illinois, and Georgia, I can see that there would be some huge gaps in different regions of the US.  Primarily in the Northwest Pacific, Upper Midwest, and possibly in the Upper Northeastern States.

2) A 5 MegaBit connection is required for this platform.

If you go through a cable internet service provider, you probably have at least a 3Mbit connection.  But you also are probably subjected to tiered service plans, which means that if you want to have the 5Mbit or up, you’ll have to pay more.  I know that Comcast’s initial service is about $40 per month for 1.5Mbits, and then charges an extra $20 a month for their next level of service which is 12Mbits.  So you’re already looking at annual cost increase of around $120.

3) It’s more than just $99

Take this into account along with the $99 for the gaming hardware, and you’re already up to $219 in the initial year cost for the OnLive service.  While still cheaper than current consoles, the pricing doesn’t look so attractive considering that the increased internet connection cost is accrued annually.

In Conclusion

I think the technology is very viable.  And I think that digital downloads of content is definitely becoming more mainstream.  However, digital streaming of content is a very costly venture with little possibility of monetary gain unless you have almost immediate widespread adoption.  And even then, the increasing cost of maintaining and upgrading data centers in order to keep up with the demand if it does take off will be problematic.  While I think that OnLive’s endeavor to introduce a new way of gaming is very revolutionary and provides a means for the gamer on the go, or the budget gamer, one thing that will not change anytime soon is the biggest requirement of all.  Money.

However, all this being said.  I still want one.

~W75