When OnLive first came out of stealth mode just over two year's ago it was met with cynicism and disbelief because it had such high goals - to stream AAA games to any internet connected device for a seamless gaming experience. Users would need no expensive hardware and they wouldn't even need to own the games - the cloud service would do everything for you, and more. The fact that OnLive even thought of a business on such a scale was met with derision. It would never be possible.
Fast forward to today and it's delivering on the initial plan and then some. The original vision has been adapted to consumer pricing expectations and expanded, with more social features added, and the original MicroConsole is being replaced by installing OnLive tech in TVs, Blu-ray players and set-top boxes that are getting ready to ship this winter. At E3 earlier this month GamesIndustry.biz sat down with founder and president Steve Perlman to dig deeper in to the recent announcements, this year's big push into European regions, and why OnLive is more like Zynga than any traditional console business.
It's been so much fun working with those guys. We can connect social networking with core gaming. Some of those Zynga games are cool, they're good for what they are, but they're just not the kind of games you'd have on console, PC games.
That's correct. We have social capability in OnLive, so you have friends there and so on, but this allows you to go and connect outside and connect back in. You know the other thing that's cool is that you click on a link and you jump right into a game. It's also a great way to engage people who didn't even know OnLive existed and didn't know much about it. You literally put up a brag clip and you just click on it – I think it's says "watch me" – you click on it and it takes you right to that user's profile page, it can dive you right into the game, it can drives you.
One of the things that makes Zynga work really well is the notion of no friction, the fact that you can go from your Facebook page into Mafia Wars or CityVille and then right back into Facebook and right into the web. The reason you can't do that with a core game is because you don't know if the person has that game, you don't know if the person has the computing power to do it, you don't know if they have the right console, whatever. But with OnLive they can click on it and at the very least we can throw them into a demo of the game and then they can decide if they want to buy it or not, or be referred etcetera. And then anyone can go and spectate, so we've made the friction, that same go inside/go outside, without any kind of barrier that's going to prevent that happening. And that's one of the reasons social gaming works.
Our total addressable market is much more similar to that of a television channel, or perhaps Netflix or LoveFilm
I guess it was a little bit of each. We've announced Vizio so far, it's building OnLive into their TVs and Blu-ray players, but essentially every manufacturer wants OnLive built in because it adds value. And the minute one of them has it then they all feel like it's a potential reason to not buy their TV if they don't have it. And it adds no cost to their TV. So there's a lot of TVs being built now with Intel silicon in. For one thing any Google TV has Intel silicon in, for example. And so we were working with them anyway and then of course they see the demos and they're like "oh my god, this is amazing" and then they're like "can we work together on this? Can we work together on that?" And of course we're using a lot of Intel processors, a vast number of Intel processors, in our data centre, so they were like "we have got to go and talk about how we're working together" so to say they approached us, we approached them, it was a mutual decision – this relationships got pretty big, let's go and tell the whole world about it.
Yes, so in the States you'll be seeing Vizio TVs and Blu-ray players that have been announced but there will be other manufacturer's as well. And Vizio does not have a presence in Europe, but the other manufacturer's do.
Yes. Our expectation is, you never know exactly when the timing is, but our expectation is that we'll launch in the UK and you'll be able to get a TV with OnLive built into it.
We expect, given the estimates given to us by manufacturers – we can only go by those – about 25 million internet TVs and about 50 million Blu-ray players. So, you know, combine that with iPads and Android tablets, there's always PC and Macs, and then of course OnLive game systems, and you're talking about a pretty large total addressable market. If we were a TV network they would talk about "TAM", total addressable market, because of course anything can carry a TV network, satellite TV, cable TV, broadcast TV, or you can set it on the internet right?
With videogames what you're talking about with a total addressable market is how many Xbox 360s, or how many PlayStation 3s right? OnLive is different. Our total addressable market is much more similar to that of a television channel, or perhaps Netflix or LoveFilm. People will begin to stop thinking about videogames as a type of software tied to a particular platform, and begin to think about video games as a type of media, the same way we think about television or music or pictures or the written word. The thing that's interesting about those is video games and the videogame industry – first of all OnLive does what the cloud has done for all the other industries in making it so it can reach everywhere – but video games are in a very special place. Although the cloud does that for distribution, in terms of every other industry unfortunately it makes it easier to pirate all other types of linear media, the written word and things like that.
When it comes to videogames, there's no way to pirate a cloud based game. Because the game is not running locally, it's running in the cloud. And there's also no used games, so the margins zoom up for them. And what that means of course for the consumers is that prices can come down. From the publishers point of view they want to sell as many of these as they can and right now it's tough because they have this cliff right after the game's released because the used game market begins to carve into all their sales. It gets harder and harder to sell new games after they've been out for a couple of months. And then of course, especially on the PC side, but also now on Xbox 360, they're getting increasing amounts of piracy and it's easier to distribute through bit torrent and so forth.
Publishers have this cliff right after the game's released because the used game market begins to carve into all their sales
No no no, we're all day and date. So 2010, we're catching up, two or three day and dates in 2010. 2011 virtually all of our games are, there are a couple that are a little later. They're working hard to make sure we're day and date with consoles. The thing is their margins are so much higher with OnLive than they are on either consoles or downloads.
Piracy. And reuse and so forth. It's very hard for them to control that. With OnLive if somebody wants it they get it. And the other thing is they have rentals with OnLive, and demos that can lead to rental or demos that can lead to purchase. So it's tough for someone to do a 1GB or 2GB download just to do a demo because they have more friction getting someone into it. With OnLive what we've found, and it's funny, we came to them with our statistics of "here's our conversion rates from demos to purchase, how does that compare with other demos to purchase now" and they said "we don't know". They're completely unaware, they don't really know how many demos link to purchase, they just put them out there, they know demos help. So it the first time they've ever had any data.