Is armchair quarterbacking useful? I don’t know. Probably not. But it’s fun. So I wrote this long expansive article that I’m not going to bother publishing here because it’s cumbersome. Let me hit the bullet points.
OnLive’s business plan emphasized streaming, which was an open-ended cost, but did not actively make money after a game’s purchase. Their CEO Steve Perlman? He was human, and seems to have made some really bad decisions, like kicking EA’s games off the service before launch, and others. Virtualization was not uniform, meaning some games actually requires one real GPU for each instance generated by a player. Finally, latency was a threefold problem: The perception that the Internet was too slow for this, the reality of broadband penetration, and then monitor/kbm/gamepad latency, which people generally don’t acknowledge, and assume it’s your service. That part really sucks. But the key in latency is that it’s not as bad as you think. It’s actually playable.
I’m not even going to factor in set-top boxes. I’m focusing on PC here, so let me state that now. Retailers generally make about $12.00 per game, but the average gamer, if they did all their gaming on OnLive, would cost about $33.80 annually for streaming. ($0.10 for two hours of HD footage for Netflix as a baseline. Then figure 13 hours a week gaming.) So you’d need to sell three games per year at $60.00, and then you’d only make $2.20 per year per gamer. What does this mean? Streaming will not be a top priority out of the gates.
Controllers can be found for a buck each on Alibaba.com, but we want a good one, so, let’s throw $8.00 at each one. (They cost Microsoft $11.00 in 2006, and I assume the price has gone down. But we don’t want shit controllers, and we want our own brand, so let’s say $8.00. If you can find a hardware manufacturer that wants in with you, then you can save money and feature their brand.
Then you have to worry about salaries, hardware, rent, and other costs of business. I have no idea what that’s going to cost, but, it’ll be a lot.
I like the idea of OnLive. Very much. No more upgrading your PC, no more buying console after console, any device, just games. Let me repeat that. Just games. But we have to build to that. I think the (a?) problem is that they pushed themselves as a console competitor first, with a set top box, when they should have framed themselves as a Steam competitor and expanded from there. GOG launched to much fanfare when they came out, and they had an angle, “Good, old games, DRM free!” Simple and great!
No streaming. Not at first. First I launch as a store with easily navigable social features (Steam hasn’t done that yet) and integration to FB, Twitter, G+, whatever. The client should offer screenshots, an integrated XMPP IM client (Jabber, Google Talk/gchat), and the ability to record videos. Try to be lightweight as much as possible. But the key is to be the Apple to Valve’s Linux. Be stylish.
My OnLive’s sales angle? A free controller with your first $60.00 purchase. Given the $12.00 profit from the purchase, and the $8.00 controller cost, that gives us $4.00 for shipping (which is a little over $1.00, but we’ll call it $2.00). So, on our first sale to each address/credit card/email we make roughly $2.00.
With each controller, pack in a coupon for a free indie game that makes good use of the controller, and has DLC available now, and more coming soon in the pipeline. For each copy you give away, pay the developer $3.00. They make less on each copy, but likely get a lot of interested parties to try to sell DLC to. It’s probably worth it for them. (And it’s definitely cheaper than my other idea for a controller pack-in, a $5.00 coupon on your next $60.00 purchase. A free game with DLC has the opportunity to net you extra cash that way.) So with our second purchase we make $9.00, plus a cut of DLC.
So now gamers have two games in your client, and a spiffy controller. At least one game has DLC on the regular. How do you keep that going?
Cloud gaming, and Mac/Linux/iOS/Android clients. For $10.00 a month, you offer a cloud streaming of any game you own through the client for any platform. Click purchase and play. For $15.00 you get a digital locker too. For $25.00, add a cloud server for any game you want. It doesn’t even have to be one you own with the service. We install it for you.
Maybe, a year into it, we move to the TV with a set top box. Six months maybe, but that’s only if we’re a success. Until then, open a community to help people best make their own TV media servers.
And if you ran OnLive?