Archive for April, 2015

A Bright Future for Cloud Gaming at Sony.

Posted in OnLive 2014 on April 2, 2015 by olwriter

It is with mixed emotions that we acknowledge the sale of much of OnLive’s assets to Sony. It has been a long road for many talented people. Ultimately, Sony is the beneficiary due to their correctly appreciating the eventual importance of cloud gaming  and sticking to their beliefs prior to robust commercialization. OnLive and Sony’s PlayStation Now are the two leading cloud gaming services that offer the highest-end games over the open Internet. They each have their respective advantages. OnLive’s service will continue until 4/30/15. It can be tried on PC’s, Macs and many other platforms.

In the process of OnLive’s 2012 restructuring, a new company (OL2, Inc.) was formed to buy the assets. Although the new company continued all of OnLive’s services from that moment forward without interruption, the public perception was that OnLive was gone. That misconception continues well into 2015. In fact many of the recent articles that mention OnLive refer to it as “defunct” or something similar. Overcoming the perception of being dead has been one of the unanticipated challenges of the turnaround.

Since 2012, the company has dramatically improved its technology and business models such that all of its 5 services are gross margin positive, ranging from 43% to 86% margin. The fact that we had such positive margins should prevent repeat speculation that we were “crushed by infrastructure costs.” The company also was able to achieve conversion rates from free trial to paid of between 64-78% for its services. Despite these positive metrics, the lifetime value (TLV) of a subscriber was still less than the cost to acquire subscribers (CPA), but they were converging. While we knew we could not get to break-even on our own, we believed that there were many large companies who would be able to get there due to: 1) being able to communicate broadly and inexpensively (lowering CPA), 2) having their own distribution platform for the service, and 3) being able to license the most popular games and MMO’s, the latter 2 would have had the effect of both reducing CPA and reducing churn (thereby raising TLV). Despite these positive developments, we were unable to entice an acquirer who wanted to continue the service, and Sony already had their own service.

In 2012, Sony bought Gaikai for $380M, and we felt that we were worth at least as much, but we did not anticipate the “hype cycle” running its course and the resultant disillusionment and skepticism of cloud gaming that ensued. See graphic shown by NVIDIA at a cloud gaming conference:

Hype-Cycle

Most of the companies that declined to acquire us did so due to the perception that they did not know how far off in the future cloud gaming would be. Predictions that cloud gaming will only be far off in the future are self-fulfilling prophesies.

We were driven by analyzing the opportunity based on first principles, and held off selling until we had proven critical milestones. We are happy that Sony is validating the innovations of OnLive by purchasing our IP and selected assets, and are immensely proud of the work that has been done by the talented team at OnLive, and we thank them for their amazing work. We are also grateful to our customers, game publishers, distribution partners and many other partners who have helped make this a reality over the years. We look forward to a bright future for cloud gaming at Sony.

The 2015 Case for Cloud Gaming and OnLive

Posted in OnLive 2009 on April 2, 2015 by olwriter

OnLive was the first company to introduce low-latency cloud gaming as an over-the-top service in 2010. After the 2009 announcement and prior to that launch, many had deemed it impossible. People were correct to be skeptical since there were many hurdles that had to be overcome. There was a lot of excitement and hype at the time that it was proven to be real in 2010. Paradoxically, the hype and excitement have waned at the same time as all of the business fundamentals have dramatically improved. This slide shown by NVIDIA at a cloud gaming conference shows this in the context of the Gartner Group’s “Hype Cycle.”

Hype-Cycle

Every major technology goes through this process of inflated expectations, disillusionment and dismissal, and subsequent establishment of importance. Unfortunately, as of this writing, the game industry is still in the “Trough of Disillusionment” regarding cloud gaming. That attitude is out-of-date for many reasons.

Cloud gaming is a matter of when, not if. Media delivery always passes through three stages:

  • physical (e.g. CDs & DVDs),
  • downloads (e.g. iTunes & Steam) then ultimately,
  • streaming (e.g. Pandora, Netflix & OnLive).

First it happened for music, then video, and now OnLive enables it for games and all applications. Reliably streaming latency-sensitive graphically-intense applications (GIA’s) over the open internet is a huge challenge that OnLive has overcome.

Every major trend is moving dramatically in the right direction for cloud gaming:

  • Bandwidth is getting faster (50%/year), cheaper and more highly penetrated.
    • In homes, offices, via wires, Wi-Fi and mobile.
    • LTE is fast and prevalent enough to deliver the service well.
    • With faster speeds comes lower latency and higher quality
  • Thin clients that can’t run big games are multiplying in people’s lives:
    • Tablets, TV-connected devices (e.g. Amazon’s Fire TV & HDMI sticks)
    • TV’s themselves (OnLive is integrated with several)
    • Chromebooks & thin Windows laptops such as the HP Stream
    • 3/15 introduction of the Intel Compute Stick for ≈$150
    • Game controllers emerging for Android and iOS devices (e.g. Wikipad).
    • Games are getting bigger each year, so harder to fit many on RAM-based laptops or other platforms that are gaining share.
  • PC Sales are declining, so PC games need other means of delivery
  • Server technologies are advancing, reducing costs and improving quality
    • GPU virtualization is just becoming available

OnLive has also radically improved its technology and business:

  • All lines of business have positive gross margins for paying customers.
  • Over 70% of free trials convert to paying customers.
  • The time (and therefore cost) to on-board and test applications has gone from weeks to hours.
  • Added MMO’s that monetize in ways that don’t require revenue splits.

OnLive’s cloud gaming has inherent advantages over traditional modes of play:

  • No waiting for downloads. Instant play.
  • Works across wide range of platforms with consistent user experience
  • Platforms never need upgrading
  • No risk of piracy
  • Unlike home platforms, there is no limit to the amount of computing power that can be brought to bear in the cloud to create new experiences.

OnLive’s platform can run Windows applications remotely from a wide range of clients. This is a similar capability as Amazon’s AppStream, but we deliver it at lower cost, lower latency and with better performance at lower bandwidth while tolerating more packet loss. The ability to deliver any application to any platform is a big deal.

OnLive has 144 patents issued or allowed, with another 135 pending (as of 3/15). Many of these are fundamental and are a result of OnLive having pioneered this area.

Reliably delivering OnLive’s service over the open internet without interruption for over 4 years is the result of tremendous talent and dedication on the part of many brilliant minds. The innovation continues.