Can OnLive’s Gaming Service Ever Find Success?

There hasn’t been a new contender in the gaming console market in a long time. It’s a tough market to break into with the likes of Microsoft, Nintendo and Sony dominating the market for years. But recently a new company has emerged with a home console that takes a vastly different approach than the big three.

This company is OnLive and they made a pretty big splash with their idea back at the 2009 Game Developer Conference. They have already released their gaming service on the PC and Mac, but does their home console strategy have what it takes to succeed? Click the link to read what I think OnLive needs to do in order for their home console to be a success.

First, a little bit of background

OnLive is actually a gaming service more than it is any kind of hardware platform. Some have referred to it as a cloud gaming service or gaming on demand. The reason why is because OnLive actually performs all of the game processing on their remote servers scattered across the country. These servers perform all the processing and then compress the video and audio and stream it to a users machine.

The user has OnLive’s software loaded onto their machine that then decodes the video and audio stream into a high definition video. All the user needs is a PC or Mac that is able to process HD video and an Internet connection that is higher than 3 MBits/sec.

Onlive’s selling point to the user is that they will never have to worry about buying new hardware or upgrading hardware again. If they want to play the latest game all they have to do is sign into the software and purchase the game from OnLive’s game store.

This service launched on the PC and Mac back in June 2010 and OnLive has also just released a home micro console that sells for $99. The console is a small box that is able to decode the audio and video stream, and also comes with a wireless controller.

OnLive’s biggest problem

OnLive has a couple of issues. Many folks have already pointed out that a lot of people do not have 3 Mbit/sec internet connections, let alone the 5 MBit/sec connection that OnLive recommends. Also their current game library is pretty sparse. As of today OnLive’s game library is only showing 40 titles, and 7 of those are different Borderlands editions and downloadable content.

But OnLive’s biggest problem is the model it uses for purchasing games. User’s can either purchase games for a little bit under PC retail price or rent the game for 3 or 5 days for $5.99 and $8.99 respectively. This pricing does not apply to every single game, but it does represent the majority and highest price points someone will pay for the games listed.

Those prices are pretty high for purchasing something you never truly own. Even when you purchase the full game, your copy of the game resides on OnLive’s servers. OnLive hasn’t exactly been forthcoming with details of what happens to a user’s purchased games should they stop using OnLive or if they go out of business. But the general consensus is that you will not be able to get a digital or physical copy of the games you have purchased.

This purchase method never sits well with consumers. People just don’t like paying close to full price for something that they never truly own. In order for OnLive to make any sort of headway they are going to have to ditch this model.

Someone has already figured out the solution

The good news for OnLive is that a company has already figured out a solution to this problem. All OnLive has to do is follow Netflix.

OnLive needs to move to a subscription based streaming model like Netflix. By setting up a tiered subscription model for OnLive, they will be able to attract more users. Users as a whole are already used to a model like this thanks to Netflix, and many folks are begging Apple to move to this kind of model with iTunes music and video content.

Here is what I think OnLive’s subscription based model should look like:

  • $4.99 – 1 game a month
  • $9.99 – 3 games a month
  • $14.99 – unlimited games a month

I think those a pretty good price points for OnLive to start reaching mass market penetration. I also think that the price point is low enough that it will quell the fear of the consumer with the whole never actually owning the game problem.

Also, ditch the hardware

Another thing that OnLive can lift from Netflix is to stick with software and forget about hardware. Instead of Netflix making their own media streaming box, they decided to partner with folks like Roku, Sony, Samsung, Boxee, Google, Apple and others.

Netflix makes a media streaming app that they can install on a variety of hardware platforms from various vendors. This enables Netflix to get more of the market then they ever could if they decided to make their own hardware and sell it.

OnLive should do the same thing. They should get their software installed on the same type of hardware platforms as Netflix. Their software already has built in support for the Xbox 360 controller for Windows and if they really wanted to they could still produce their own controller as an accessory.

By doing this users will be able to play their games on their TVs and PCs/Macs without having to buy any extra hardware besides a controller. The great thing about this for gamers is they will be able to access and play their games across multiple types of hardware.

Imagine starting to play a game at home on your TV, but then finishing the game later in the week on your laptop while you are on a business trip. That is a service I could see myself subscribing to for a very long time.

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