OnLive: The Future of Video Games? - Analysis

OnLive is a new gaming network coming out in the United States this June 17. What they have to offer to gamers is an on-demand HD gaming system that doesn't require a console. With an internet connection, you can connect your PC or Mac to OnLive. You can also connect to OnLive with your TV through a "MicroConsole", which is something like a modem. Because all of the processing is done at OnLive, you don't need any other hardware. What that means for computer users is that it doesn't matter what kind of specs you have. You can play the latest games even with an entry-level PC. No downloading or installation. The game just streams to your monitor.



Sounds mind boggling, doesn't it? How it works is kind of like this...

Let’s say you are playing Assassin's Creed 2. On your screen you see your character, Enzio. You press the attack button to make Enzio attack an enemy AI player. This command is sent to OnLive’s servers (they use cloud-computing), the reaction is processed, and your character then stabs the enemy. The image of your character attacking the enemy is then sent back to your monitor. In other words, it's like playing a video game from your home, but the “game machine” may be hundreds of miles away.

There's a reason why I used Assassin's Creed 2 in my example: it's one of the games that will definitely be coming out for OnLive at launch. Other featured games will be Mass Effect 2, Borderlands, Metro 2033, Dragon Age Origins, and Prince of Persia. I never would have imagined playing those games on something like a mini notebook computer.

And the cost? $14.95 a month. But that's just access to the network. You still have to buy games. Games will be available for purchase on OnLive's network store. Prices have not yet been released, but because developers can cut out the costs of retail distribution, expect prices to be significantly lower than disc-based games.

My guess is $40.00 to $45.00.

Like with everything new, there will always be skeptics. Some have said that streaming HD gaming smoothly without affecting gameplay will require an extremely fast and reliable Internet connection, the quality of which many households don't even have in the United States.

The subscription also isn't going to help OnLive. It's not going to be any cheaper to use their system instead of buying a console. $14.95 x 12 months is $179.40 a year. If the lifespan of a game system is roughly 5 years, then 5 years of gaming on OnLive would be $897.00. On the other hand, the Xbox 360 is about $300 (not taking into account the cheaper Xbox 360 Arcade system). Add 5 years worth of Xbox Live:

5 years x $50.00 = $250.00 + $300.00 (for the system) equals $550.00

So 5 years on a 360 with online gaming, is $550.00, while 5 years on OnLive is $897.00. That's paying $347.00 more. And what about the PS3? Online gaming is free, hence long term savings is bigger. You could say that the extra $347.00 can be made back from buying cheaper games (after buying over a dozen games, probably), but the point is, the price point isn't a competitive advantage.

So what would be the reasons to get OnLive? The best graphics? Probably not. Haven't we learned time and time again that game systems with the best technical specifications never win the console wars? One segment that OnLive will probably appeal to is the PC gaming segment, because the investment to setup a high-spec PC would definitely make subscribing to OnLive reasonable, not to mention removing all the hassle of having to tweak your system to make sure the game works properly.

(Nvidia is going to be SO pissed off.)

So yes, I think OnLive might have chance in the PC game segment, but if they are going to go after consoles (which they publicly say they aren't even though they have to - they are direct competitors), there is something they are missing: exclusive kick-ass games.

Gamers buy systems for games, not necessarily for the system, and OnLive won't have an exclusive game until they get a large enough base of subscribers for a third party developer to even think about going exclusive, or OnLive produces one themselves, or maybe heavily subsidize the production of one.

I suppose for the meantime, this may be the only way they can start - with a roster of excellent, but non-exclusive games. In this case, they're going to have to focus on the services they have that other systems don't, and make them compelling enough for gamers to migrate to OnLive. And as I mentioned earlier, they should focus on the PC gamer market, because this is where OnLive can truly compete. However, as soon as it is feasible, OnLive needs to bring exclusive games to their network, whether it be developed in-house, through OnLive-owned studios, or third-party developers. In this way it may even be able to compete with consoles.

Whatever comes of it, I think OnLive's system is very interesting. I would like to see how far they can take the business, and if it will eventually transform the face of the game industry. Maybe in the future, we will have on-demand Nintendo, Microsoft, and Sony networks.