GDC 2009: Analysts sold on OnLive

Industry trackers say streaming game service could be "the beginning of the end" for GameStop, is already "stealing the show."

SAN FRANCISCO--The Nintendo keynote announcement of a new Zelda game for the DS this morning may have gamers buzzing, but for industry analysts, the biggest news out of the 2009 Game Developers Conference has been the announcement of the OnLive streaming game service. Analysts walked away from a Tuesday night press conference for the new service pondering the long-term impact it could have on digital distribution, console sales, and game retailers.

OnLive already has an array of big-time publishers on board.

This morning, Wedbush Morgan Securities' Michael Pachter sent investors a note on GameStop bearing the dire title, "The Beginning of the End." While the actual content of the note was a little more reserved in its prediction, Pachter said OnLive could accelerate the industry's shift to digital distribution.

"In our view, the OnLive model will appeal immensely to publishers, who will likely derive greater revenue per sale than is derived through conventional retail distribution," Pachter said. "Instead of 20 percent of the game's purchase price going to retail and another 20 percent to the console manufacturer, OnLive will likely charge around 30 percent (our estimate) of the proceeds, with the balance going to the publisher."

Pachter said the success of digital distribution could undermine sales of new retail games and used games, thus providing a long-term threat to GameStop, which specializes in both markets.

In his own note, Signal Hill analyst Todd Greenwald told investors that OnLive is "stealing the show" at GDC 2009. Beyond the appeal to publishers and danger to the used-game market, Greenwald noted that OnLive's streaming would eliminate the need for console cycles entirely, since any hardware upgrades would happen beyond the consumer level.

"While there are still many details still unknown (pricing, launch date, retail distribution), this has the potential to be a game-changer," Greenwald said. "In our opinion, OnLive needs to launch with a big marketing campaign, to ensure that this becomes more than a niche product and caters to more than just the hardcore gamers and tech-savvy early adopters."

He added, "While this won't happen overnight, we think that the 'long-term threat' of digital distribution just got accelerated meaningfully."

For more from the show, check out GameSpot's complete coverage of the 2009 Game Developers Conference.

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Discussion

176 comments
shadowyreaper
shadowyreaper

Shadowsflame, recent developements like onlive schnubbing e3 and other stories here on Gamespot point to your ultimate depression about this. No discs means all streaming must be connected to onlive to even play a "offline" game, like mass effect. Answer #1 yes monthly fee to play your offline game you either just purchased from them or are renting. no worldwide gaming meaning all online gaming is handled by local servers meaning in turn that a gamer on the west coast cannot game with someone on the east coast. thirldy whats the overall cost? I know i am late to the party but i think onlive is epic fail vs xboxlive and ps network simply for worldwide connectivity.

xXxShadowsFlame
xXxShadowsFlame

I am nearly 100% behind this! I almost support it fully, but if i could get an answer to this that i want to hear, u have my guarantee on buying OnLive.. The Question is, When they say, "Monthly Fee" does that mean, every single month, even when im not online i have to pay a monthly fee? Or is it going to be like the 360, where i pay to play online with friends, but costs nothing to play offline? Because if it costs me money to play games by myself, and not online with friends, then i say EFF THIS! Over time that amount of money could easily add up to simply buying all three systems i wanted in the first place. But, if it only costs money to play online multiplayer, like Xbox Live, then i support this company 110%

rogmaus
rogmaus

This is the future I reckon, cant wait

walbk
walbk

I don't see how this is going to work. They are relying completely on broadband to deliver hi-def graphics from a server that is miles away. The base pod that each player is going to have is just going to serve as a router to send the information back and forth. How do they expect to meet the demand of gamers? If this actually does take off and more people start playing these servers are going to be accessed by more people, thus making it slower for everyone as a whole.

partytimekegs
partytimekegs

Some of you guys below seriously need to go read the FAQ on the OnLive website. Most of the questions you have are answered there and some of them are quite simple to answer. Even if you have a hard copy of a game.. how will it run on the micro console? It won't. It doesn't need to read CDs when it streams from a server. So it will probably not have CDROM drive. Not to mention, if you have hard copies of games already.. you may be able to register them to one account. Although, if thats the case there will be security features, I'm sure, to ensure one copy doesn't get passed around to friends. Just go to OnLive.com with your questions and have them answered there. Technically all this is still in the works anyways as there aren't any concrete details that are ironed out. Like the subscription fee. It may or may not have one. (Probably will but I've read it won't somewhere and I can't find it now. :\ )

maccy99
maccy99

How about the broadband download with these people who don't have unlimited download them it would eat it up and you will have to pay even more fees to your Internet provider for going over the limit At the moment not sold on the idea hope they come up with better ideas

Welshmun
Welshmun

ummm i believe u can still buy the games as usual in the package as u would with any game on other consoles so stop moaning!!!!!!!!.. its a good thing buying the games because if onlive did go down for what ever reason.. just say it did... you would have physical copies of the games u own and there would bound to be a rogue application out there that would let u play them :)))

BudIsWiser
BudIsWiser

It might make the consoles buckle, but PC fan boys might be harder to convince. A person that takes the time to build their computer, takes pride in how fast the game runs and most of all, how it looks on their rig. With OnLive, how will the video graphic quality compare? I don't think that you will be able to change graphical settings. On a related note, people have been saying that pc's won't evolve, but there are still the people who need a beefy rig for multimedia purposes. More questions I have: How will this work with Wii Controls? What about mods and old games? Will my collection of already owned game be able transfer over to their servers? I would definitely not want to re-buy all of my games.

Absolutezerr
Absolutezerr

I do not see this being a seamless service, but if it ends up working like netflix, I might be a fan. This technology is still a long way off though, right? I still like owning media on-disc. I have never even bought a CD online, I always go to the store to get music and games, but I haven't bought a DVD in years, save for a few of my favorite films like In Bruges, Hot Rod, This is Spinal Tap, and The Patriot...

gluzyg
gluzyg

As much as they say it's going to work...I highly doubt it will. It's a great idea, but I don't think the technology is quite there enough to really do everything they want. Maybe on great FIOS connections you may get an experience as expected, but on the other hand, someone with basic DSL would have problems with playing the game over an online connection WITHOUT lagg.

cocomacoco
cocomacoco

ok, so then computers will not evolve, who needs hardware ever again?, not only video games but everything will use cloud computers, c'mon!!! stop this trend now!!!

davemaster42
davemaster42

I don't want this at all! I want to be able to buy my games at the store on disk till the day I die!

8smokes
8smokes

I think the game developers and publishers might make the studio behind On Live 'disappear' if you know what I mean.

mistrbigg
mistrbigg

If this works as it claims... im onboard. according to the head of it as i was watching g4 this morning he said there will only be a 1 millisecond latency. although i find that hard to believe....it is possible if the servers are monster computers and you have a 5+mb/s internet anything under 3 milliseconds should be unoticeable. what i am afraid of isnt that it will work.. its that the hardware on the consumers end is unreliable. what if im at the end of a level in a game that saves with check points and my internet goes out...your just screwed... do it all over. that currently very rarely happens with an offline console. however looking at the companies that have signed on to develop....it HAS to work nearly flawlessly...the entire consept of gaming ONLY works when the Good develepers are signed on to supply product...anyone remember the dreamcast? hehe.awesome console way ahead of its time.. with absolutely no third party support... so it bombed. with ea and ubisoft and tdk just to name a few signed on, this really really makes me raise an eyebrow... we'll see.

SupaMarioPlumma
SupaMarioPlumma

I don't really know how I feel about this. I prefer to have an actual product versus a digital copy. I do have some fears and though I'm no expert at any of this I just have to wonder about it. I have a collection of around 500 games. Lets say something serious happens in my life and I'm in need of cash. I'd regret it but games are an easy choice to sell in that situation. With so many games I could make quite a bit of money reselling them if I needed to. As far as I've always known; digital downloads have always been available with a "no refund" policy and it would virtually have no resale value at all. If I make an investment in something I want to be able to either make a profit or at least recover a partial amount of what I paid for it if need be. No one can re-sell a digital download. So that creates a problem in the long run if this gets popular. Also the no refund policy creates a problem if you buy a game you don't like. You won't be able to trade it in for another game because you'll be stuck with it. People can argue that point with demo's but sometimes a demo doesn't always guarantee you'll like the game until you try the actual finished product. That's my thoughts. I have to admit I don't know a whole lot about this OnLive thing and I'm sure many questions will be answered in time.

INMATEofARKHAM
INMATEofARKHAM

Is it going to happen... Sadly, yes. Will it be today, tomorrow, or next year is what is to be demerited. Personally, I don't see this being feasible for at least 5 years. Maybe much longer.

ronnieo54
ronnieo54

Excellent idea, netflix has proven this digital distribution model is viable for movie rentals, with former super power blockbuster playing a major game of catch up. If Onlive or another similar service can rise up and make this work it will revolutionize the industry. For gamers that are also collectors, it would be nice if you could still buy the hard copy of the game, however it will likely be 5 to 10 years before this will really be impacted. Either way, gamers will win in the end if this is done correctly.

JGoWild
JGoWild

Me, I myself like the thought of owning a game hard copy. But I presume this whole onlive deal is totally different perspective. For one I dont think its "buy a game and play it as it streams" deal. I think its more of a " we have a huge collection of games, and you dont need a computer to play them, all you need is internet conection, for a low monthly payment", more like a renting deal, where as in this case you can keep your game for as long as you want. But thats just me trying to think out of the box. ;)

snakes3425
snakes3425

We knew it was coming, if OnLIVE works, all three of the big three Console Makers are going to have to rethink their plans for the future

blassan
blassan

Well first of all,. this is a great idea! You play over internet and you do not need to bother to keep it up with all new features on hardware and so on,. or a new console to keep playing the latest fashion game out there! I hope that a guy talked about earlier in these posts is this with latency that when you keep playing that you are connected to a server that is in your region so a guy like me from sweden isent playing on a server thats stationed in japan for example... that would be not so satisfying to latency tho,. 50 - 70ms is average to play online,. like MMoRpgs and so on,. this would be a great thing to conquer all those console freaks out there!! Its worth a test anyway! Be A Man JOIN THE CLAN of Quakelive.com! /over and out!

wishiwasuber
wishiwasuber

Also its cloud computing so your putting a major strain on your Internet, its not downloading a game its pulling a part of the game off and constantly updating and refreshing thus your always using connection and never have the whole game at one time

newbei
newbei

Xaviersx, you have some really good thoughts. It is a step forward for the gaming industry. It is an interesting device. I’m a pc girl myself and like owning the physical games. Along with the disks I do like the maps/posters and hard copy manuals, which my husband and I put up in our “gaming room”. We enjoy having friends and family over to play LAN games rather than on-line. It’s more of an experience and social thing. In the US they most likely have the bandwidth to pull this off, but here in Canada there are so many small towns that don’t have decent bandwidth (ours is barley better than dial-up). Where I live just downloading demos takes hours. I have bought a few games that I can only get on Steam and they take hours to download in install.

wishiwasuber
wishiwasuber

This is a good concept and eventually I can see this becoming a major contender but im guessing that the price for a membership (becouse theres no way it will be free) will be high. The other problem is people that play games that dont connect to the internet, yes their still out there, are screwed and I do enjoy my hard copy of games

zaphod_b
zaphod_b

This article is a little misleading about the technology behind OnLive. You don't download the game to the console which is the traditional definition of "digital distribution". The game actually runs on OnLive servers. Your inputs are sent to their servers, processed, and the on-screen action sent back to you. There is just one problem with this and it isn't bandwidth, it's latency. No matter how much you beef up a network, data travels across the wires and optics that hold the Internet together at an average that is about 2/3 the speed of light. That sounds fast, but a network with very low latency can go from LA to NYC in about 120-150ms. So in that case, you would be talking about 150ms for your input to reach their servers, maybe another 10-20ms for their servers to determine what to do with it, and another 150ms back. It would take around 300ms for any action you take in-game to be represented on-screen. In a multiplayer match, everybody would be playing the game about 1/3 of a second behind the action. This is a best-case scenario. When you consider that people were complaining about a 150ms delay with KZ2 prior to the patch, try playing with at least double that latency all the time, sometimes worse. Even with regional servers I wouldn't expect a tolerable delay. This is a waste of everyones' time and just another Phantom.

Barighm
Barighm

I do enjoy the option of owning a physical copy of my game and purchasing a used copy. Digital distribution eliminates both and greatly increases market exposure, thus greatly increasing a game's "price life" and ensuring it maintains a higher price for a much longer period of time. This would result in an overall increase in game prices because there would be little need for a publisher to lower the price. With so much ease of access and distribution, why bother lowering the price? There will always be someone lurking around the network who may purchase the product, and since it will be very easy for a publisher to throw out a digital advertisement, there will always be some kind of market. All of this also assumes OnLive doesn't just turn around and demand a huge cut for the content, in which case the additional cost will be passed along to the consumers. There is also the possibility for OnLive, or any similar service, to "remove" or deny access to your purchased games for some reason. As it is with Xbox Live, there are many different ways for you to be denied access to your purchased DLC, whether it be a simple technical problem like that weird thing with Castle Crashers or something more complicated like the License thing. Now that is mostly my experience with Xbox Live. Admittedly, OnLive would be an independent service and would have to offer the best and most competitive service and prices for anyone to use it, so it probably won't have those problems. Still...Murphy's Law.

watermanx
watermanx

if valve publish there games an all major game developers do then i will get it but will it be out in the uk

battle_chaser9
battle_chaser9

I too like having my game in a physical form in some what. I own hundreds of games that are basically collecting dust. But I do see this as a success. This is the future and if it cuts cost, the majority will go for it. I want this to succeed because it will open the gaming platform to more people. It sucks when I have to deploy and can't play the games but this is a positive step to trully see and play next gen games without coughing up next gen cash every 6 months (for pc) or every 2 years (for consoles).

gameking5000
gameking5000

I prefer to buy games by retail, because of the financial crisis. But if the financial crisis continues and OnLive is released then that will hurt the retailers so bad.

istuffedsunny
istuffedsunny

If this will cause GameStop to fail I'm all for it.

BohlBERG
BohlBERG

This will be amazing! The possibilities will increase beyond comprehension. If it works (and this is highly dependent on barriers to entry, as in bandwidth issues) it will be the first great show of power for cloud computing. Computers are not built for running these types of applications. If it goes over it could change the concept of a computer! I personally want contact lenses to become the visual aspect,and for interface I think computers will be powerful enough to recognize uniquely painted fingernails as input interface(Myst for real life!!!!). Let that sink in for a bit (its gonna happen). As for payment plans I think of steam. I own like 30 games on steam, and I can install and uninstall them whenever I want. Having that ability is great. I already no longer care about physical copies because the internet is not going away. I would even be willing to pay $20 a month just for the anytime/where service plus the price of games. If you average out how much it costs to stay up to date on running PC games just on medium settings you will be saving TONS. I will most likely be an early adopter of this. Computers can change the quality of life for so many people if cloud computing goes over. Imagine going to a baseball game with the theoretical interfaces mentioned above. You could be sitting in the stands watching the game with your contacts in place using the stadium's wireless connection to connect to an ESPN server that sends over not only their own in depth commentary, but replays, highlights, and other various recognition apps (as in swing analysis) to your contacts. You could then manage the size of the videos inside your field of view with your fingers (think iphone but in real life). This type of application could be used for a countless numbers of things. Life could be amazing!!!!!!!!!!

aaronobst
aaronobst

also @ MrMan2000 I really think saying that all forms/mediums of media will be digitized in 20 years is jumping the gun a LOT...

Jake98_Bagley
Jake98_Bagley

I for one can't wait for this service to come out, I am so sick of having to go through console wars, I would love to just have to buy a game instead of putting down hundreds upon hundreds of dollars for a console when I will have to buy another one in about 2 years or so. I think with buying a WII, PS3 and a Xbox 360 I have put down more than $1000 easily. If I could have had this service with its inital downpayment and then just buying the games that I want instead, I would rather have that. Also I would hope that since it's being distributed digitally, eventually the costs for games would go down from their current ridicuolus prices, maybe back to an average $40 instead of the current $60. That would be something to look forward to.

aaronobst
aaronobst

I too love having a collection of games in their PHYSICAL FORM not the digital download rubbish, I hope OnLive does fail and fail miserably

ftjx
ftjx

my estimate: it will change over night. To put it in another way: GAMEOVER

Xaviersx
Xaviersx

It'll be a niche market, a online arcade for the 'casual' player who doesn't care about ownership of the physical media, who'll like the play anywhere aspects, but not think about the what to do 'offline' realities. It'll make hardware makers ill with thoughts that people will not buy the latest and greatest hardware, while enthusiasts, custom builders and upgraders will continue to buy hardware to deal with all the other multimedia needs that are and aren't gaming on their rigs. Right now, Onlive isn't really alive but a good concept of the future, not as an all or nothing way of the future, but for the near term, a slightly different competitor. Right now, it isn't too far off from . . . my satellite tv's idea of games over the tv, . . I don't own anything they offer, nor play anything they offer, but that's because my satellite provider doesn't have anything appealing. If they did, or if Onlive does, and enough, I'll play somethings I wouldn't elsewise. But I still rather own the majority of discs and have them in my collection.

Daxiongmao87
Daxiongmao87

@ xtoperchris I don't think they will be having any monthly payments (maybe they will, I'm just speculating). Why? A few reasons. They are talking about cutting the cost for the publishers by eliminating the cost of physical distribution of their product. Quote: "Instead of 20 percent of the game's purchase price going to retail and another 20 percent to the console manufacturer, OnLive will likely charge around 30 percent (our estimate) of the proceeds, with the balance going to the publisher." What this means to me is that instead of a subscription fee, they would simply allow you to make an account, and basically purchase access to that game through your account, kind of like 'owning' that title since your account is free. The only real problem I see with that is if onlive doesn't hit it off and they end up closing down, what ends up with all your 'bought' games? Another reason why I believe its not going to be a monthly subscription is if you see their teaser video, they show the option of being able to play a 'demo'. If this is how its going to be (as its too early to tell) then I assume they have demos available to 'try before you buy.' As I said this is just speculation, but it seems to make sense to me.

xtoperchris
xtoperchris

It's appealing to the analysts but not to their customers. I'm one of those people who loves to own the copy of the game. it's like I have my copy of prince of persia as long as I don't break it, while this service limits me for playing my game if i don't subscribe for a month. If my net is down, i don't have my game. Here are some problems I predict. 1.) We can never tell that their system cannot be hacked or attacked by a virus. I'm not underestimating they're system but who knows? 2.) Having your system working for 24/7 will need a system maintenance, though I think there's a way to avoid that. But if in any case they'll need to have a system maintenance, for the duration of that maintenance, you cannot access on live. 3.) If you ran short of money and can't subscribe, you don't have your game.

x9z
x9z

I would not be surprised if Microsoft has already offered huge sums of cash to onLive and are planning to take the company over few months before onLive goes live. Could the next generation of Xbox be called Xbox onLive or maybe even the Xbox 360 with a firmware update, since the web plug-in is only 1mb. More I think about it, this seems like a great business model for Microsoft, they would be able to offer games on demand and also offer games from physical media, this will help ease gamers into the transition of digital distribution and have options for those who are not ready (no internet, no credit card, fear and so on...). I hear a lot of people complaining about not being able to own physical copies of games, that's what some people said about music CDs, who buys music CDs these days? Maybe this was the plan for onLive, create innovative technology and make money on selling its intellectual properties and patents. The technology seems to prove its possible, but onLive will have to sustain a monumental infrastructure and fund a huge advertising campaign for few years until it gains momentum, and a company like Microsoft with its huge dedicated user base and unlimited funds, may be better suited to move the service forward and sustainable. The founder of onLive also developed the webTV which had the same business model as onLive (cheap and accessible computing for a specific need) which was also sold to Microsoft.

Lopur94
Lopur94

The problem is a lot of game developers aren't making as much money due to the fact that people and retailers are selling used games so they wouldn't make enough money. This will change that problem plus piracy. But this will definately kill console gaming and retail copies of games and I am one who likes to hold and see my purchases physically build in front of me... Sigh... OnLive is great news and devastating news at the same time.

wwonka666
wwonka666

Also, this could be the vision for the one console future that has been sparked by developers in recent years.

wwonka666
wwonka666

I'm all for this if the console is cheap and the monthly fee reasonable and has at HD graphics and a decent controller. It would seem though that the analysts are trumpeting this as the future for investor purposes and it could be a total flop. I know I like having a disc I can let a friend borrow and or trade for something they have (don't sell used to gamestop any longer because they rip you off so if It hurt that business then I'm all for it).

poptart
poptart

Its interesting to see that many on this board are resistant to change. I fall into that category as well - I've always been staunchly against the idea of downloading CD's, but looking at the decline of CD sales means I'm in the minority. I think the next gen of gamers will embrace this idea wholeheartedly, whereas myself and the other people on this board will be grumpy old men clinging onto the good ol days when games actually came in a box.

zero9167
zero9167

i cant wait to see some exclusive games made for their "super hardware"

Pyromaniac210
Pyromaniac210

5Mbps? I didn't even know such a speed existed. I am plenty happy with my 100Kbps DSL, and have no intention to pay 70$+ for a 5Mbps connection.

Tandem_Toad
Tandem_Toad

XanderZane, so true. Also, if your own ISP goes down it's game over. I don't think many people are going to have an internet connection as fast as 5Mbps. That's considered pretty fast. Otherwise, all the current gamers are going to have to settle for standard definition. Not-to-mention, what about lag? How often does your ISP consistently give out your purchased bit rate? I'd rather buy and trade. Big console makers are still going to buy exclusives like they do now anyway.

Zidaneski
Zidaneski

Ummm, my PS3 does more than just play games. I download games off PSN from time to time but this new service would have to be truly something else for a lot people to take interest.

crackhamster01
crackhamster01

xxx33 : dude your kidding right? yea this is great and all, but its not gonna put people working in retail out of buisness any time soon, and no way in hell will it be more life like then a console actually in your room not over the internet

Deano
Deano

I doubt there is going to be a way to allow 3rd party mods to run for games, since everything is on their servers. Imagine streaming WoW and playing with no mods... yeah not fun.

berlindex
berlindex

People are the main problem to the service. Gamers mentality is still very closed to new ideas. If this works, and it sure is a big if at this point, what's the big deal? You don't get the copy in your hands? That's great! I'm almost out of room in my bedroom for more boxes. You can't take your games over to your friends? You take your miniConsole and your account and every game you own is there right away! Now-a-days almost every one as a TV and an internet connection. Most claims against it I read in this website aren't very rational, while I share others. They claim it to be lag free, but will this be true in a world scale? What about the pricing? Time will tell if this is true or fiction. It will be true some day, you'd better believe it. No one expected it so soon though...

XanderZane
XanderZane

Analyst and developers may love this, but they are forgetting about who will buy it; the consumers. Streaming games is an interesting idea, but most consumers like to hold and feel what they purchase. Many gamers like to be able to sell their games and make money back after they beat it. You can't do that with this service. You pay to play streaming games, but their really no return on your investment. You can already download games on the PS3 and XBox 360 and even though you can't sell these downloaded games, they are still on your system and you own them. PC gamers may be happy about this, but maybe not, as they won't be able to pirate these games or mod them. Yikes.. that'll hurt. This will be good for people who only want to play a few games each month and that's it. I can't see hardcore gamers getting this.