Guest Editorial - OnLive Lives: What’s the Prognosis for the Cloud Gaming Giant?

April 5, 2013 - Zeke Iddon

Back when OnLive was launched in 2010, cloud gaming was seen as a leviathan rising from the deep. On paper, the concept was not only pretty watertight, but it was a strong contender to traditional gaming models (especially the console market).

Cloud gaming was going to happen. It was just a question of logistics.

OnLive seemed to have realized this right out of the gate and amicably managed to make it feasible for the mass market. The broadband requirements weren’t off-putting (2mb minimum when the US average was already over 5mb), the price wasn’t extortionate, and they had numerous big developers on board.

Alas, after only a few years of operation, the company went through a sudden - and rather unusual – crisis. The company founded a new company in the same name as the old company, entered a bizarre limbo in which shareholders got completely screwed over, the CEO jumped ship and the company was sold for less than 4% of what it was first valued.

But what went so terribly, terribly wrong at OnLive? What is the prognosis for the company going forward, and how will it impact on the market?

Death of a Giant

On the surface, OnLive was enjoying a successful launch and garnered a fairly positive reception for the first couple of years. It was awarded a US patent for the cloud gaming concept – a massive boon to the company’s net worth. It then rolled out its service internationally in 2011, as well as introducing the ‘OnLive Desktop’ in 2012.

The full-steam ahead pace of OnLive belied the messy internal politics and catastrophic finances on the inside. In a shock announcement in August 2012, the company laid off its entire staff. The CEO, Steve Perlman, then effectively laid himself off.

This was at a time when interest in cloud gaming was at a high – Sony had just paid a cool $380 million to acquire OnLive’s biggest rival, Gaikai, at around the same time, so very few could have predicted a company as massive as OnLive (once estimated to be valued at $1.8bn) falling so hard and so fast.

And very few people, other than its competitors, wanted OnLive to fail. For the most part, game journalists were curious at worst and rooting for the service at best; watching the giant fall was both a massive surprise as well as disappointment.

But if Engadget’s anonymous source is to be believed, the math was pretty simple. OnLive’s operating costs topped out at an eye-watering $5m per month, but subscriber numbers didn’t come anywhere close to meeting these costs – despite all the hype, only around 1,500 subscribers a month were active at any one time.

Contributing Service Qualms

Aside from the financial disparity, a few other factors relating to OnLive’s model came into play.

While the general consensus is that OnLive was way better than was previously expected, the aforementioned game journalists – the key demographic that could have potentially pushed the brand forward to consumers – weren’t fully on board at that stage... even if they wanted to be.

DigitalFoundry summed the situation up concisely by saying:

“...there are some games where the system works — by core gamer terms — tolerably. They are clearly playable... perhaps it is simply the case that OnLive isn't for us committed gamer types. A less discerning type of audience will probably be happy with the whole offering as it stands now."

It would have been interesting to see if gaming writers would have been more inclined to use the service if the streaming resolution was better. Not having to purchase full games from which to write would have been a great benefit to writers and site owners, but as it stood, the majority of users had a slight wash-out to the graphics; again, fine for the general user, but not great for capturing screen shots for use in reviews and articles.

In addition, it was a puzzling design choice that the OnLive console had no wireless support and relied solely on an Ethernet cable-based connection. This was something that was denigrated by reviewers rather heavily, as was the iOS release which was announced to great fanfare but never materialized.

The Rise of a Phoenix?

As mentioned, the company never quite died in the first place. It simply went through a tortuous transition between one company to brand new company, which looks (and is named) identical to the first. Around 70 of the original staff have been re-hired, and the new CEO (Gary Lauder) is quick to allay fears in his first ever public address:

“We’re expecting great things in 2013, and with Don’s [Gordon, SVP of Engineering] vision and expertise to fuel us, you can trust that it’s only the start.”

But is this all just rhetoric to assure what would be the most intrepid prospective shareholders on the planet? After all, in the same blog post quote above, Lauder called the prior disaster a “financial mishap”, and the former CEO also displayed an ability to understate by announcing “we’re just fine” right before the staff layoffs were confirmed.

Well, we can’t rule out it’s just a political ploy, and nor is there any reason – as of yet – to believe the bravado.

That said, the company is now owned by Lauder Partners. This is good news, not just because it’s a solid investment partner, but because they still control the original services and technology but with drastically reduced operating costs. What’s more, they have adamantly stated that Steve Perlman will not have anything to do with the company going forward.

If they pull it off, it could be a contributing force in pulling the industry out of its slump. Cloud gaming certainly has big implications not just for consumers, but also game design students, journalists and the wireless technology industry as a whole.

They’ve got the technology. They have proved it works. They even have consumer interest.

But one issue which may hamper OnLive is solid distribution partnerships.

Partner or Die

But even with the expenses covered and the technological kinks ironed out, the market is not as fertile for OnLive as it was in previous years.

2013 is the year of eighth generation console. Out of the PS4, Xbox 720 and OnLive, guess which product consumers are most anticipating?

In reality, the last card OnLive has to play in order to be a true contender to the market is partnership. Competition is not an option.

With incorporation into the Playstation 4 practically ruled out, unless the company strikes a deal with Microsoft to have OnLive included within the new Xbox, the prognosis looks pretty grim.

The only other alternative for a healthier-looking future would be a Google partnership, especially if OnLive gets on the Big G’s fiber network. The two have already flirted with partnership over Google TV, so it’s not an unrealistic projection for the company.

All things considered, it seems that cloud gaming still has a place in the market. The question is whether or not OnLive will be the service to deliver it…


About the author: Zeke Iddon is a prolific charity gamer and professional writer, currently serving as a lead consultant for the New York Film Academy’s game design school. He was also one of the first to review OnLive’s service when it was introduced in the UK and still pays the monthly subscription fee, despite rarely logging on.

[Disclaimer: the opinions in this article represent the author's views and not necessarily those of GamePolitics or the ECA.]

"8-bit clouds" image © 2013 William Robson / Shutterstock. OnLive images © 2012, 2013 OnLive Inc.. All other images are the property of their respective copyright holders.


Re: Guest Editorial - OnLive Lives: What’s the Prognosis for ...

Never got OnLive to work.


Also you are missing a console

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