OnLive's Potential

During 2009 after a game developers conference in San Francisco, OnLive was announced. OnLive is a service that allows users to stream games remotely. The games are installed and run on powerful remote servers, and then a compressed video stream would be sent back to the user's PC or Mac. It boasted the ability to play high end games like Crysis on any device with a good internet connection that is capable of streaming video.



OnLive boasted about how it could cut costs for publishers by offering game titles completely online, eliminating the need for retailers, allowing the savings to be passed onto consumers. OnLive also brought a way to eliminate piracy, since the games were being streamed remotely. OnLive also offers a service that allows players to easily watch other players.



"More people searched for 'OnLive' during the Game Developers Conference than for the phrase 'video games," bragged Tiffany Spencer, an employee of OnLive who handled PR. More than 100,000 people signed up for OnLive's beta. During 2010, an expert evaluated OnLive and determined that it was worth 1.1 billion dollars. OnLive also became compatible with smart phones in 2011. Allowing you to play games like Batman: Arkham City, and LA: Noire right from your phone. OnLive bragged about having more than a 2.5 million users, and 1.5 million active users. OnLive also offered games with 60 FPS.



Bankruptcy and lack of customers

Then, in 2012, a little over two years after launching, OnLive filed for bankruptcy, fired about half of their staff, and was sold to an investor named Gary Lauder only 4.8 million dollars. Which in retrospect makes the evaluation of OnLive's value at over a billion dollars look ridiculous. While OnLive's competitor Gaikai was sold to Sony for $380 million dollars in 2012. Where did OnLive go wrong? How did an idea that seemed so promising fail?



What OnLive didn't mention is that those 2.5 million users included every person who ever signed up for an account, including beta and free accounts. Active users include ever user who tried the service in the past year. A big appeal to OnLive was their demo service. Many of the people being counted in OnLive's official user figure never paid anything.



During a meeting, OnLive founder and former CEO Steve Perlman explained that there were approximately 1,600 users online with OnLive at any given time, while OnLive had more than 8,000 servers available. Each user required a physical machine, and OnLive overestimated the amount of customers it would have. The majority of servers remained sitting there unused. Due to the lack of paying subscribers, OnLive was losing approximately 5 million dollars every month.



When you consider that games like Call of Duty frequently have hundreds of thousands of people online at any given time, and Team Fortress 2 frequently has tens of thousands of users online, that 1,600 figure seems incredibly low.



CEO's Mistakes

According to theverge, the first problems can be traced back to the launch. Activision, and EA were not in OnLive's launch. EA and Ubisoft were originally on board and both parties planned to work together. Mass Effect 2 and Dragon Age were modified for OnLive and ready to launch. However, on June 17th, right before Onlive launched, Gaikai, OnLive's competitor announced a deal with EA, and later announced a deal with Ubisoft. OnLive CEO Steve Perlman "went ballistic". According to an unnamed witness, "We had to slam the conference room shut and crank up the music so people wouldn't hear him". Even though Gaikai only offered demos, not full games, Steve Perlman demanded EA remove the titles from Gaikai. When EA refused, Perlman instructed his staff to remove EA's games from the lineup. Mike McGarvey, who was Chief Operating Officer at the time highly advised against the decision, but Perlman wouldn't hear it. McGarvey was fired shortly afterwards.



Afterwards, Perlman rejected any game that also appeared on Gaikai, including games that they'd already invested money to test and develop on their system. Such as the Witcher 2, and Bulletstorm. Perlman also threatened to stop doing business with Ubisoft when they had their demos up on Gaikai. Steve Perlman also supposedly scared off Valve by giving them an "all or nothing" deal, when Valve merely wanted to try a few games out. As the majority shareholder, Perlman didn't have to answer to anyone, and outvoted the board of directors on multiple occasions.



Over promised, Under delivered

One of the problems with cloud gaming is that it demands at least a decent internet connection, especially if you intend to play the games on a high quality setting. OnLive claimed it would be able to play PC games on the highest setting on any device with a decent internet connection, yet the reality fell short of that. OnLive's quality was frequently outmatched by their competitor, Gaikai. Though both services typically fell short of max settings on either a PC or a console. On slow connections, something as simple as another family member streaming a YouTube video could cause your game to lag.





Real Cost of the "PlayPass"

Another issue that worried gamers is OnLive's statement that gamer's might lose access to their games within 3 years of purchasing them. In essence, rather than buying the game, they were just getting a temporary license to rent them. With OnLive's uncertain future, some gamers worried that they might lose their games even sooner if the company goes out of business.



Another problem is the cost of the games. Even though OnLive didn't charge the subscription fee like they originally planned to, it still costs around full price, generally around $40-$50 to "purchase" a game from OnLive, or get what they call a "PlayPass". While services like Steam are offering the sames games for a fraction, sometimes less than a tenth of the cost.



Lack of exclusives

Perhaps the most damaging aspect of OnLive was not the chance to lose your game after 3 years, the cost, or the CEO, or even chance of getting lag or reduced quality, but the actual content.



One problem is that every single game that is available on OnLive is also available on PC. No publisher wanted to take the risk of making a game exclusively for OnLive due to the limited userbase. Most of the big games available on OnLive were also available on consoles as well.



Conclusion:

With their "hardcore" games, and full prices, the service does not appeal to casual gamers. Yet at the same time, due to the reduced graphics, lag, lack of exclusive content, and potential to lose your game after 3 years, it didn't appeal to hardcore gamers either. With constantly improving connection speeds, and constantly decreasing hardware costs, it could be argued that OnLive was a service ahead of its time. One can't help but be curious if OnLive will head in a new direction after being sold, but at the moment, the future for OnLive is looking grim.



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