OnLive: Video Games Without the Hardware

An imposing new force in the video game industry is promising to give Nintendo, Microsoft, and Sony some life-threatening competition come winter. OnLive does what no console-maker has done before: removes the console from the equation.

Steve Perlman, the entrepreneur behind WebTV, and Mike McGarvey, formerly of Eidos, are using cloud computing and OnLive's patented data compression technology to beam video games to rudimentary devices without tarnishing graphics quality.

What You'll Need

To get started, you'll need a decent Internet connection. For standard play, you'll need a 1.5 megabits per second Internet connection, and in order to view games in 720p resolution, you'll need at least 5 mbps, which is standard for high-speed broadband providers.

Forget the souped-up PC; if you own a netbook, you're ready to get started. As long as you have Windows XP or Vista, and can handle the 1MB plug-in, OnLive's Internet servers promise to do all the heavy graphical lifting, using patented video compression technology and algorithms that eradicate pesky lag.

If you don't have a Windows PC to use, OnLive also will offer a set-top box that will connect to your TV (standard-definition or otherwise). This allows you to use a controller instead of a computer-based mouse and keyboard. This device, which will supposedly be low-cost, functions as a decoding box with no significant hardware inside. It also features two USB inputs, support for four Bluetooth devices, and optical and HDMI connections. This option allows gamers to dodge Microsoft's monopolistic bullet and stick with the traditional console feel.

How It'll Work

OnLive hasn't revealed its business model yet, but it will likely use a subscription service wherein gamers can buy or rent titles instantly. Instead of paying $400--or more--for a gaming device, and $60 for each title, you'll get access to titles through a streaming model. The bargain is clearly aimed toward the buyer, and depending on how much OnLive's subscription service ends up costing, the company could blow its rivals out of the water in terms of value.

How the Industry Will Take the News

Major game publishers have already warmed to the idea and signed on. The names include EA, THQ, Codemasters, Ubisoft, Atari, Warner Bros., Take-Two, and Epic Games. Clearly these companies see a profitable future in cutting out the console middleman and dealing directly with customers. These agreements also signal a massive catalog of available video games.

What you won't be able to play is Halo, Zelda, Little Big Planet, or any other console-specific title. Don't expect Microsoft, Sony, or Nintendo to let these properties go just yet. However, given that consoles generally lose money, but software sales gain, OnLive presents a unique business opportunity for its competitors, should the rivals choose to hop on board. Otherwise they face stiff competition, especially in the form of online gaming.

OnLive has the potential to generate a wide-ranging and powerful video game community in existence, one that could trump even the seemingly unbeatable power of Microsoft's Xbox Live service. Gamers who are into playing with their buddies will likely flock to OnLive, as there will be no restrictions based on who is playing with what.

Streaming video games also wipes game piracy out of the picture. With no physical manifestation, it becomes impossible to copy or steal. This alone explains why so many publishers have already shaken hands with OnLive.

OnLive acknowledged that, at least in the beginning, gamers will keep their consoles and use OnLive as an add-on. But when the next round of consoles is released, it's fair game. Perhaps the next Xbox, PlayStation, and Wii will look more like handhelds and depend instead on massive servers -- if they even exist by then.

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