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Pricing could stunt OnLive growth

Game prices on top of subs and small user base not compelling for publishers or consumers, says Signal Hill

A number of factors are pouring cold water on the launch plans for cloud gaming service OnLive, including an installed base too small to be meaningful for larger publishers, and a pricing model that could prove too expensive for consumers.

That's according to Signal Hill's Todd Greenwald, who also pointed to problems with lag, and no support for home TVs or 1080p HD output until after the June 17 PC and Mac launch.

"While we find the service compelling and exciting, we are somewhat sceptical that OnLive will really turn the gaming world upside down any time soon," wrote Greenwald in his latest note to investors.

"While OnLive enables users to forgo spending $300 on a console, the $15 per month fee adds up to $180 per year, or $360 over 2 years. Additionally, we believe the target audience for OnLive (hard core gamers) really values the packaged good disc version of a game, which allows them to quickly re-sell a title in the used market and gain back $20-30 of the $60 purchase price.

"If publishers try to sell digital-only new release games at a $40-50 ASP (average selling price), we don't think gamers will find the price points compelling," he said.

The service will more likely be useful for publishers to sell older catalogue titles, such as the games already confirmed for launch – Assassin's Creed II, Borderlands, Mass Effect 2 – which will be 6-9 months old when the service starts.

"Finally, we'd note that even if successful, the installed base will be too small to be material for large publishers like EA, Activision, THQ and Take-Two (perhaps 500,000 to 1 million units, compared with 67 million Wii, 39 million Xbox 360, and 33 million PlayStation 3 units," he added.

As well as a launch date, OnLive said yesterday that it would reveal detailed pricing packages nearer to the date, with long-term deals expected. The first 25,000 users to pre-order the service will receive three months free subscriptions.

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Matt Martin avatar
Matt Martin: Matt Martin joined GamesIndustry in 2006 and was made editor of the site in 2008. With over ten years experience in journalism, he has written for multiple trade, consumer, contract and business-to-business publications in the games, retail and technology sectors.
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