Transgaming: OnLive business model is not sustainable

CEO says smart TVs aren't yet ready for AAA games

TransGaming CEO Vikas Gupta has cast doubt on the future of video game streaming service OnLive.

Speaking to from the company's Toronto offices, Gupta outlined the technical and economical problems with OnLive, and the way TransGaming's rival service, Game Tree TV, will be different.

"We've looked at OnLive's [business] model and we don't believe it's sustainable," he said. "We don't believe they can make money on it."

"We know what they're making from a distribution fee perspective, because that's their model... So EA says here's a game, and that game retails for $50. We know that they're only making x percent, and within that margin there's no way they can make money, given their operating expenditure, as well as the initial capital expenditure in order to get that data centre up and running."

Gupta describes the end-user experience in North America as "pretty good", but doubts that the AAA console audience OnLive is targeting will tolerate any noticable performance issues.

"The problem, I feel, is that if I'm playing Call Of Duty and I know that on my PlayStation 3 it's an amazing, uninterrupted experience, the minute I get jitters with OnLive, or any kind of stuttering, that's it, I'm going to stop. These aren't the sort of games where you can have that level of delay or unpredictable performance."

Game Tree TV, however, has been built "from the ground up" for smart TVs, with consistency of service and experience as the highest priority.

We've looked at OnLive's model and we don't believe it's sustainable. We don't believe they can make money on it

Vikas Gupta, CEO, TransGaming

"Think of us as the Netflix of videogames-on-demand," he says. "We've got a sophisticated infrastructure located in the cloud... but the one big difference is that we download the content directly to the device, and that allows us to run the content optimally, and not have to worry about bandwidth issues and so on, which, in certain territories, can be a big problem."

In Gupta's view, OnLive and other streaming services offering AAA console games haven't yet found a compelling solution, and Game Tree TV will be focused on a more inclusive, family-friendly experience comprising smaller games that can be downloaded quickly and played with a remote control - Plants Vs. Zombies, Peggle, World Of Goo, Osmos, Puzzle Quest.

"We're taking a very pragmatic approach. My operating expenditure is fixed. I know exactly what it is. We don't have to worry about scalability issues. We have scale in the cloud, but fundamentally, whether I've got one million users or 100,000 users or 100 users, it doesn't matter. We're dealing with a model where it's short bursts of bandwidth requirement."

Rather than produce its own set-top box, TransGaming is forming partnerships with cable operators and set-top box manufacturers to include Game Tree TV as a part of their services.

"We've publicly announced our first operator, Free, the second largest in France. Free will have 5 million subscribers on the Freebox by the end of next year, so that's a 5 million addressable market with a single operator. And we're expecting, by next year, in excess of half a dozen operators."

Game Tree TV is designed to fit seamlessly into the viewing experience by using broadcast television as its main point of inspiration. Indeed, almost the entire staff of Transgaming's Atlanta office was "scooped up" from Turner Broadcasting, including Blake Lewin, the creator of GameTap.

In the near future, Gupta intends to mimic broadcast television by dividing the service into channels. There will be channels devoted to specific companies like PopCap and Disney, or specific genres like puzzle and adventure, all of which will have tailored subscription packages.

"We have the ability to allow the consumer to go from watching TV to without the switching of hardware or remote controls or anything else playing games, and then back to watching TV."

"We [also] have the ability to use metadata tags, so if the user is watching a particular show and there's a corresponding game available on Game Tree TV, then at the end of the show, with the help of the operator, we can put up a little message that says play this game now, and with a single click we can transition that consumer directly to that product page."

Whether the AAA experience at the heart of OnLive plays a role in GameTree TV's future is still being decided, but right now Gupta believes it won't play a role in the near term, for both the company and gaming on smart TVs.

"We'll get higher end. Don't get me wrong there. But we don't want to look like we're competing with consoles, because we really believe that the console experience is a very different kind of experience... We're not taking a digital distribution property and now trying to bolt it on to the latest buzzword. We've thought about the televeision experience, we've thought about what the consumer wants."

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Latest comments (11)

Andrew Goodchild Studying development, Train2Game8 years ago
Whilst that was also my first thought, if he isn't aiming at the same market he's not really a rival. I think perhaps the comment is more to distance his company to what some percieve as a sinking ship, in the eyes of potential investors.

Popcap channel, that makes me smile:)

Edited 1 times. Last edit by Andrew Goodchild on 4th July 2011 7:15pm

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Nate Ramos Editor / Content Manager 8 years ago
This looks more like positioning and pandering for attention than a legitimate and knowledgeable critique of OnLive. For instance, "So EA says here's a game, and that game retails for $50." While EA is a partner with OnLive they don't currently offer any games on the service.

By making the above comparison I can assume either of two statements: Gupta is namedropping by implying his company is in talks with EA to distribute games, or Gupta is ignorant to the company he is criticizing. Sure it's just a comparison, but a poor one to make at best.

From the description I get in this article of TransGaming (or Game Tree TV?), their service sounds better suited to be compared against a Steam-for-TVs model than OnLive. More of an uphill battle to be sure.

Edited 1 times. Last edit by Nate Ramos on 5th July 2011 4:10am

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David Spender Lead Programmer 8 years ago
So according to him the one big difference is that they download content directly to the device and run it from there. That doesn't even make any sense - then what they're doing isn't anything like onlive. It makes them basically like steam except just for flash and smaller indie games.... i don't get it.
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Show all comments (11)
Shane Sweeney Academic 8 years ago
I still worry about how we will preserve all video games using this method?

If it wasn't for the work of many activities of illegal ROM dumpers of the 1990's many Unlicensed unpopular NES games would of been lost to time since the cartridges no longer work. Many PC games have no known copy in existence anymore.

Its bad enough that many unpopular multiplayer only games have been lost to time but what about unpopular single player cloud based only games? From a games historian perspective OnLive and its ilk worry me.
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@ Shane - start a retro games steam archive. Kind of the way oldies and 60s are seen in a nostaligc way, there is always a way for the retro gamer.
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Tobias Burandt8 years ago
Through all this number crunching and muscle flexing, I see a very concerned CEO who is afraid that he will have to face a new challenger in his market sector. If OnLive doesn't succeed with Triple A games they will surly try to break into social- and casual games because their equipment was way to expensive to let it go to waste. Even if that will be hard to do with the current industry wide orientation for casual- and socialgames, OnLive will give Game Tree TV a hard time if they start to bite off their part of the market cake.
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Andrew Goodchild Studying development, Train2Game8 years ago
@David, if I understand correctly, unlike steam where you download once (not including updates down the line), here every time you use the game you download fresh every time, which sounds innefficient for PCs, but I assume smart TVs won't have massive HDD storage.

I agree that it has little to do with OnLive, but I think that that is the point, there are a lot of critics of OnLive, so when he looks for investment he doesn't want to be lumped in with them.

There is the issue that if I want to play a popcap game, I can store maybe 30-100Mb downloading once, or I can keep downloading, and so whilst not large in the scheme of things, I have to wait for enough to download to play, and if I have a data cap it is eating away at it. If I play a 50Mb game every night, that's 1.5Gb a month if it downloads each session, which isn't that bad for someone with no cap or a high cap, but someone with a 20Gb limit may find it's significant and unneccesary.
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in addition, OnLive has a different proprietary wireless technology called DIDO, which if its works changes how we perceive wireless/cloud computation to work. it doesnt use wi fi, and how its wireless technology can go through/around solid walls is something to pique ones interest.

[link url=
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Luke Child8 years ago
@Shane That's the first time I've ever seen someone make an argument in regards to Onlive over that and never really considered that side to it, thanks for sharing. ;)
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Mike Wells Writer 8 years ago
This isn't news - it's advertising.
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Jeffrey Kesselman CTO, Nphos8 years ago
His economic point though is legitimate and what I've been saying since this thing began... moving the cost of game execution from the consumer to the provider makes no sense for the provider. I wonder why hasn't asked me for an interview yet...

Onlive though is a distraction Trasnsgaming's real competition is Steam and all the other existing casual game and digital distribution players. I'd like to hear how they expect to distance and differentiate themselves from those existing players.

Edited 1 times. Last edit by Jeffrey Kesselman on 5th July 2011 6:12pm

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