The OnLive Paradigm: The Second Piece of the Puzzle

This entry is part 5 of David’s series on The Future of Gaming. Click for parts 1, 2, 3 or 4.

To briefly recap, the first three articles of this series focused on how the iPhone has changed the gaming industry, and how the concepts introduced by the iPhone will perpetuate into the future of the gaming industry. I spent some extra time on those because they covered the bulk of the ‘content’ in terms of developers, gaming culture, and business models. The general takeaways: (a) were that the App Store paradigm of a closed, vetted, centralized online store with developer control over individual app prices would replace the current dominant “big-budget games only” model (and already has started to, given the Xbox Live Arcade, PSN, Wii Shop, etc.), and (b) that gaming will have to exist on a medium, in some way portable, that is not reserved solely to gaming. The iPhone (and for the latter point, smartphones in general) matches this idea perfectly.

Of the articles in this series, this is the one I’m most nervous about writing. Why? Because one could easily misinterpret my case here as hyping up something that was already hyped, and subsequently basically fell flat on its face. That’s right, I’m talking about OnLive. Hyped by many as the console killer, OnLive has not even come close to delivering on that hype. However, I’m going to make the case that OnLive really is the console killer… kind of. Probably not by that brand name, and definitely not with their current business model, but that the “OnLive Paradigm” of streaming your screen rather than owning all the processing power in your own house is here to stay.

In order to try to make this case convincing, I’m going to frame it a bit differently. Rather than just espouse the glory of OnLive itself, I’m going to frame this according to the question, “What benefits does the OnLive Paradigm give us over traditional console gaming and present smartphone gaming?”

Lightened Device Demands

The most obvious response to my articles about the iPhone and smartphone gaming is a hardware argument: the iPhone hardware cannot run top-of-the-line games. Even though technology is always improving, you’re still not going to run Call of Duty 4 on the iPhone hardware any time soon. Most smartphones run on roughly a 1 GHz processor — by comparison, PCs hit the 1 GHz processor mark ten years ago. The Xbox 360 presently has three 3.2 GHz processors. But the OnLive paradigm blows away the demands on the hardware within the actual device. The hardware required to stream from OnLive is just the hardware one would require to stream a high-resolution movie, and as we’ve seen, the iPhone already contains that level of power. The hardware restrictions plummet, with the main requirement becoming an ultra-fast and preferably-wireless connection: 4G is right on the lower cusp of what will work with live streaming, but needless to say, wireless speeds are continually getting even faster. Not only that, but an iPhone version of OnLive was recorded working on even a 3G connection — not perfectly, but well enough as a proof of concept that with sufficient faith in ever-increasing wireless data speeds, one can easily see how smartphones will soon be able to stream games over the internet. Not only that, but this paradigm completely removes the need for device upgrades: for better graphics, faster processing, or more memory, the upgrade only needs to be done on the server side, not on your actual device. That leads us to the next point…

Significant Device Benefits — To You and Them

I don’t need to tell you that upgrading hardware in a centralized server farm is significantly easier and cheaper than rolling out an all-new console for consumers to buy. But just to make it perfectly clear how the OnLive model is preferable to both users and developers (depending on the business model, which is a key factor), let’s mention all the ways in which both sides benefit. On the user side, you no longer have to actually buy a physical console. All you need is the device that can receive the signal, and as seen from the $70 price tag on an OnLive receiver, those certainly are not expensive — and, according to our previous articles, they’re likely to be merged with devices you already own anyway. For the developer, they no longer have to manufacturer, sell, and warranty a device they were nearly taking a loss on anyway: the present console business paradigm is that money is made on game sales, and companies have been reported (though it hasn’t been confirmed) to actually take a loss on console sales in order to get buyers “in the door” for game sales. Now, rather than selling you the product, they just put it in their server farm. When one goes down, they can replace it in-house rather than having to deal with complicated returns and warranties. More importantly, fewer consoles are needed: when John is done playing and Peter logs on, Peter can immediately start using the “console” in the server that John was using. The user saves money because they don’t have to buy all the expensive hardware that usually will end up sitting on their floor unused for 20+ hours a day, while the company saves money by producing fewer consoles in the first place. And, as mentioned previously, upgrading become much easier: instead of rolling out an all-new console, upgrades can be handled in-house, with no hassle or extra cost to the player.

Accessibility, Accessibility, Accessibility

One of OnLive’s advertising points is the ability to play your games everywhere. While technically true, it hasn’t really manifested itself, and I’ll cover why later; but just because the ability to access your game everywhere hasn’t yet been leveraged, let’s not make the mistake of dismissing it as a desirable feature. Imagine, for a moment: you’re playing your game at home, like normal. Then, you go over to a friend’s house and want to play with him; rather than bring your console (or just the game, if they have the same console), it’s already accessible at his house. Now you’re going on a business trip — remember, the App Store paradigm helped gaming appeal to non-stereotypical gamers, so now gaming on a business trip is actually a legitimate notion. No need to bring your console, though — it followed you here as well. This isn’t the way it presently works on OnLive, of course, because OnLive requires either a dedicated device for streaming or simply uses your computer. But imagine if instead of being a dedicated device, it was instead run through a device that you already reliably have on you, that doesn’t require an extra effort solely for gaming? That’s the ultimate in accessibility, for the cultural reasons mentioned in the previous article. On top of that, it wouldn’t just be the accessibility of your literal games: it’d be your player profile, saved games, achievements, networking accessibility. If the screen contents are streamed straight to your device, then anywhere you have wireless, you have your entire set up, not just the games.

Follows Modern Business Trends

Rarely does a device single-handedly completely revolutionize an industry. The iPhone, for example, didn’t do that. It’s credited with revolutionizing the smartphone industry, but it exists in the contexts of an existing trend toward smartphones. Usually, the devices that we credit for changing the world are devices that come along at the right time, match the business trends, and meet a present need. This was the problem with such failed devices as the Gizmondo and N-Gage; the business trend at the time wasn’t toward merging phones and gaming. This is also partially what doomed OnLive: it was a couple years ahead of its time. But now that paradigm is gaining traction. Netflix recently upped their prices by 60% solely because they understand the demand for streaming movies. Music services like Pandora, GrooveShark and Spotify are beginning to significantly cut into the revenue of iTunes and Amazon’s mp3 service. Not only does ESPN already have, its live sports streaming channel, but it’s moving toward streaming the main channel itself all the time. The present business model is simply toward streaming content. The OnLive paradigm is about streaming. It matches current trends, and will find success because of that.

Follows Modern Technology Trends

In addition to following the modern business model set forth by Netflix, ESPN, GrooveShark, and others, the OnLive paradigm also follows modern technological trends as well. OnLive describes itself as “cloud gaming”, and if you’ve used a computer anytime in the past six months, you know that cloud computing is the current trend. IBM has been trumpeting cloud computing for years, and Apple has recently started its own cloud file storage system. Cloud computing is, in many ways, the next pinnacle for the computing age; a world where all data is accessible from anywhere at any time by being stored in the same ubiquitous cloud. The OnLive paradigm is closely aligned with this cloud computing paradigm. Remember what I mentioned about consoles being shared between users? In many ways, that’s an example of cloud computing. You connect to the cloud and access a console in the server. That console connects to the cloud and accesses the game, as well as your player data. Chances are, you’ll never technically play on the same console twice. On top of this technical trend, one of the major knocks against OnLive so far has been the experience; that’s a fair criticism. A computer lacks the immersiveness of a console for many gamers, and few are willing to pay for OnLive’s dedicated streaming device for the TV when the business plan backing the games leaves so much to be desired. But the line between television and computers is blurring every day. Cable boxes are essentially computers running simplistic operating systems. Both Comcast and AT&T technically stream their television over the internet rather than through the older models. Soon, it won’t be a question of plugging your computer into a TV — it’ll already be plugged into one.

In case I didn’t make it clear enough at the beginning, I’m not saying that OnLive itself is the console killer. The paradigm that OnLive introduces, of doing the computing in the cloud and streaming the contents of the screen to your device, is what I’m focusing on. But if OnLive’s paradigm is so awesome, why has it failed? There’s several reasons, but the biggest one is the business model. OnLive’s business model, whether it’s their own fault or the fault of the publishers’ demands for licensing their products to OnLive, is awful. As it it currently presented, OnLive pales in comparison to consoles. No online multiplayer. No player profiles. No achievements. And perhaps most importantly, you don’t own the disc, yet you still pay the same amount for the game. You get less for the same money with OnLive, and the lack of need for buying an expensive physical console doesn’t make up for it.

But note that nothing I just said is an inherent problem with the OnLive paradigm. It’s just a problem with OnLive’s business model. Imagine, for instance, a version of the paradigm that supplied a player dashboard that rivaled Xbox’s. Imagine the presence of online multiplayer (an exceedingly stupid exclusion, given that the games are already instantiated in the same cloud that’s doing the processing). And imagine that the prices of the games actually reflected the lack of physical distribution. Imagine the prices reflecting the fact that it’s cheaper for a company to stream a game than it is for the company to sell physical copies. And imagine, just imagine for one second, that the developers one day and woke up and realized that the OnLive paradigm is virtually piracy-proof. How do you pirate a game that no one physically owns a copy of? Not to mention it diminishes that pesky GameStop-enabled resale market. OnLive might be a failure as a company (unless it reinvents itself), but the paradigm it introduced is here to stay.

If you’re looking ahead and merging my comments on the iPhone with my thoughts here about OnLive, I know what you’re thinking — even if you can stream the best games straight to your iPhone, and iPhone is still never going to be able to mimic the experience of a controller in your hand, the game on the big TV, and surround sound all around you. You’re right. But we’re not done here yet. Next week, the third piece of the puzzle: the Wii U.

(Image credit OnLive.)

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