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OnLive Is Not The Future

A story at The Verge offers up some surprise over the recent demise-reorganization of OnLive, most of which I can't tell if it's sincere or not.

"I was, as many others, quite shocked by the last news on OnLive."

You were shocked? You're the first person I've heard of who was. For my own part, I'm shocked this hasn't happened sooner. Is this sarcasm? I'm having trouble telling for sure.

"When it was first announced I was shocked that such a technical achievement was accomplished and I was waiting so long for having it available in the country I'm living (Ireland)"

You might have waited for them to actually accomplish something before being shocked. As for the idea of being able to deliver streamed gaming with reasonable quality and latency from the US to Ireland... never going to happen. The technology is barely usable at all, is never going to be usable intercontinentally, and would require local servers all over the world to be deployed outside the US. It was never going to happen.

"Yet, it's business model failed, and you wonder how is that possible, this man saw the future!"

He didn't see the future. He saw an opportunity for arbitrage and either misjudged, or didn't care that much whether the numbers worked out because he figured he could have a nice ride on venture capital funds until the cash ran out, and then walk away.

The appeal of this business model depends on users who have low latency, high bandwidth Internet, connections, but can't afford subsidized consoles that cost only a few hundred dollars. So in order to appeal to this market, you offer recurring charges and low (or no) up-front costs. It's like music subscriptions, or Rent-A-Center furniture.

The problem is that the appeal is too narrow, the implementation is still too far from "good enough" for most users, and the quality of the service delivered is now and probably forever will be at the mercy of the telecommunication industry.

The bottom line is that in order to have appeal, the service has to offer a wide array of games, which means cutting in a lot of different publishers for a lot of different titles. The cut they get for each monthly instance of one player having access to one game is going to be a lot less than what they get out of a retail sale or a download, because there's a lot less revenue to split, and because a single fee is used to gain access to the entire library, not a-la-carte titles.

So in order to make the same money, OnLive would have to serve many, many more users than competing services like Xbox Live and PSN that require console and game purchases (and, in XBL's case, also a membership fee).

"The future of games is the streaming, but this is not the future of the gaming business model, the future on gaming business is still in the hands of Sony, Nintendo and Microsoft."

No, it isn't. There is no experience that can be offered on OnLive that is better, or even the same, as what can be offered on a dedicated PC, console, or even mobile or handheld device. While computing power and storage capacity continue to increase and hardware costs continue to drop, latency is more or less constant. The streaming model's need to serve more users with a lower margin than traditional online gaming means either decreasing capacity and quality issues, or expensive infrastructure build-outs that cannot be sustained by low monthly fees.

Simply put, the Venn diagram that shows where "people with high speed, low latency broadband" intersects "people who can't afford a PC, tablet, or console with games" does not include the millions needed to generate revenue comparable to traditional gaming. It probably doesn't even contain enough to make it sustainable. Saying that streaming is the future of gaming denies most of what we know about trends in telecommunications and computing, and is about as nonsensical as saying that Rent-A-Center is the future of furniture.