Is Cloud Gaming the Future?

At the Cloud Gaming USA conference in San Jose this September, THQ CEO Brian Farrell told a room full of people that cloud gaming is the future.

"No physical goods cost for game makers," Farrell said during the conference. "No inventory, no markdowns, and all the money spent by the consumer would go to the developer or publisher."

THQ is not alone. In the last two years, an increasing number of publishers have embraced cloud technology in a bid to rethink traditional business models and change the way that people buy and play games.

Cloud gaming first became a reality during the 2009 Game Developers Conference in San Francisco, where three companies--Playcast, Gaikai, and OnLive--first showed off the possibilities of gaming-on-demand services.

During its GDC 2009 press conference, OnLive revealed that it had been working on its on-demand game-streaming service for seven years, with the aim to digitally distribute first-run, AAA games from international publishers at the same time as retail channels. OnLive cofounder and former WebTV founder Steve Perlman revealed that the system would be designed to let players stream on-demand games at the highest quality onto TVs and any Intel-based Mac or PC running XP or Vista, regardless of how powerful the computer is. Perlman called OnLive "future-proof," pointing to the fact that players won't have to upgrade anything to keep playing on the system in the future. Instead, the upgrades will happen on the back end, with the company regularly boosting the power of the servers it uses to host and stream the games.

In June last year, OnLive officially launched in the US with a monthly subscription fee of US$14.95 (later dropped to US$10 per month) and the support of publishers, including Electronic Arts, Take-Two, THQ, Ubisoft, Epic, Atari, Codemasters, and Warner Bros Interactive Entertainment. Earlier this year, OnLive launched a Facebook application, which lets gamers launch games directly from the social networking site, and announced plans to integrate iPad and Android tablet operability into the game-streaming service in the US and Europe. Last month, OnLive officially launched in the UK, announcing its intention to "steadily expand" throughout Europe and to other continents in the near future.

Gaikai has enjoyed similar success, with the company's cofounder--veteran game developer David Perry--paying careful attention to outline how Gaikai's business model differs from that of OnLive. According to Perry, OnLive is targeting the "living room audience," something that will put the service in competition with publishers like Sony, Microsoft, and Nintendo; meanwhile, Gaikai's strategy revolves around helping, not competing with, publishers to draw in new audiences by offering first-party titles through the service.

In October last year, a report from market research firm Screen Digest predicted that game-streaming services would bring in US$332 million in North American revenue by 2014, with Western Europe accounting for an additional US$79 million.

While many gamers continue to remain unconvinced about the benefits of the gaming-on-demand model, developers see an opportunity in cloud gaming. Bandwidth limitations aside, many developers dream of a time when games are not tied to a particular platform but, rather, can be accessed from anywhere. Watch the video below to see what some of the industry's top game developers think about the future of cloud gaming.