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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.

Problems
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.

Income/Cost
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.

The Armchair
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?

I love reading the news. I’ve been doing that lately, and, I’d like to make some predictions about what I’ve seen. And chief among them was Gabe Newell, Valve co-founder and managing director. In a recent interview he stated that Windows 8 was a “catastrophe” for developers who didn’t want to be beholden to Microsoft. See, Microsoft, ever the schizophrenic company, now wants to own a storefront, like Apple with iOS/iTunes, Google with Android/Play Store(/and, well, ads), and Valve with games.

Comments from Valve co-founder and managing director Gabe Newell aren’t every day fare. He appeared at Sony’s 2010 E3 event where he stated that the PS3 version would be “THE best” console version. In an interview with the then-new Penny Arcade Report earlier this year in 2012 Newell famously said “Well, if we have to sell hardware we will” starting a flood of rumors about a possible Valve console (the “Steam Box”). The man is important in the industry, not only for the games he’s contributed, but the digital storefront his company has pioneered. When he appears, it’s important. Expect a rebuttal next week from Microsoft as Newell’s comment gains traction, as being too quick would lend it legitimacy, but I think there’s a bigger story than his slamming Win8. It’s his constant talk of fixing problems.

The Linux Success Story

I expect Valve to push a new Linux desktop. One of Steam’s freeform teams is spearheading Linux game development; their current project is Left 4 Dead 2, but I expect that to widen. Valve will push Linux for gamers by giving Linux copies of games when you purchase it, much how they currently give you both a Windows and Mac version of so many now. With more people familiar with smart phone interfaces, tablets, and even “smart TVs”, they’re just not as scared of new things as they once were. Families around the world will wake up with their Windows box gone, change by the IT guy of the family to something new. Linux will finally take the home. This will be the true “open source success“, not simply “no longer being taboo.”

But how to sell gamers on it? How about a free copy of Half-Life 3? Yup, I’m there. On top of that, they can make it easier for gamers by offering Linux copies of games you’ve already bought, like they’ve done with their push onto Mac. Gabe wants gamers to have an real choice. At least, he wants them to be able to install Steam. Doesn’t take a genius to see why. But if Macs go the way of iOS? If Windows does? Or if they both just have their store as the path of least resistance? Well, those “more closed” platforms hurt Steam’s ability to get their product in front of consumers, so, expect to see Valve push Linux. Hard. And to push into the living room on a console. And I don’t mean the “Steam Box”.

Kickstarting A Revolution

Speaking of consoles, I can think of one that’s got a lot of buzz these days, and it’s Linux-based…

I expect OUYA, developer of the self-titled Android console, has already gotten calls from Steam, just like they have OnLive, Square-Enix, and Vevo. If this product takes off, and I expect it to, then hardware design, manufacturing, marketing, and selling, is one less industry Valve has to do, and one more format to sell games on. Success for the OUYA can make Steam pivot back away from potential hardware seller and stick with what they know; selling software. Don’t expect any of the big 3 console manufacturers to do that.

“But the OUYA won’t install Left 4 Dead 2, even if it is for Linux!” you say? Sure. But expect buying Plants Versus Zombies to give you a Windows, Mac, Linux, AND Android version. (Well, bad example as EA bought PopCap, but you get the point.) Also, more importantly? In a long enough time span the truth is that it’s inevitable, you will be able to play L4D2 on OUYA. How? By streaming it.

The Steam Stream

I expect Valve already has a team on a streaming service for games owned through Steam. Like I said, it’s kind of inevitable. I genuinely expect customers to never have to install most games, just stream them from Valve’s servers, for a small monthly fee paid to Valve to account for server space, bandwidth, and related costs. They can go one of two ways with this. They can buy OnLive and fold it in, or go original.

Buying OnLive is probably easiest, but is probably bad for gamers, as owner-concentration usually is for any group. An interesting turn of events would see Steam doing their own thing, going against GameFly, and and OnLive partner with Good Old Games. (Not holding my breath, however. Everyone wants to sell or buy. No one wants to work together.) That’s the Nintendo v Sony v Microsoft (Ninty v Sega) of the future.

The First Step

Am I right? Who knows. Not I. I did email Gabe Newell a few peripherally related questions, but got no response. But it’s obvious Valve has something up their sleeve. Their recent blog lineup and the “leak” of their handbook? The best stealth recruitment campaign ever. For every top level developer in every field. Not against other game developers, or other digital storefronts… But against every other corporate giant out there.