Assets of Palo Alto gaming company OnLive were sold off for just $4.8 million
mercurynews.com
mercurynews.com
OnLive was a frequent customer or Prolific Oven Bakery in Palo Alto, said Regina Chan, daughter of the owner of the local chain. By the time the company went through its insolvency in August, it owed the bakery $2,000, which represented about a month's worth of Onlive's orders, she said.
So generally offering things on credit is like bait to catch customers, there is risk I agree. But profits from such schemes vastly exceed losses, to make them almost negligible.
Lets say you own a bakery, you sell cupcakes on credit. Say you sell $40K worth cupcakes an year to a company. There are chances that you may go under a loss of $2K if the company folds. Will you go for it, or do not offer any credit and lose $40K worth cupcake businesses to somebody else?
You just have to decide if you are ready to lose the opportunity if you don't want to take the risk. I know it sounds unfair, but unfortunately that is how things work in the real world.
If there was no risk associated with opportunities, then the number of people who be would competing for an opportunity will go up by a large number. Nature puts filters to keep the size of the game limited.
Plus that was just the example. If they were net-30 on the break room food, it's a safe bet a bunch of freelancers and other local businesses also had losses.
;).
How do you tell when a startup is just desperate for cash and when they actually mean something like this?
1. Data caps are now the norm. A service that streams video 100% of the time is swimming upstream. OnLive would also need to recoup the significant costs of an uplink capable of serving all its customers full-HD streams. Typically a video service heavily uses a CDN (think Akamai) to only upload a few streams and then have the CDN push those out to edge servers. OnLive needed enough bandwidth to be its own CDN. And cellular data is an even thornier problem in terms of reliable throughput AND latency, which both have a direct effect on OnLive's service.
2. Game Studios are famously protective of their high-value assets. OnLive needed to convince some AAA studios to do a new release of their titles on its service. Engineering the games to work well with OnLive isn't the only problem here: it would be easier to be wholly acquired by a big studio than to convince anyone in the industry to do a deal that fit OnLive's marketing. Game studios want to see big up-front profits on opening day. OnLive's marketing was more along the lines of a trickle of profits over a longer term.
(Yes, they had some titles, but they needed bigger ones.)
3. The OnLive marketing about enabling some amazing capability (like cinema-quality graphics or breakthroughs in AI) swims upstream against what the "cloud" is supposed to offer. An OnLive session for one customer takes several machines, while the "cloud" basically makes money by stacking idle VMs so it's many customers to a machine. The only way OnLive would make money is if everybody rented the AAA title and nobody played it.
There is some really interesting tech in that space, but those are some basic problems with what OnLive was trying to do.
The tragedy here is, they had bigger titles. At the last minute before launch, they pulled all EA titles from their service. When rival Gaikai got the rights to offer demos for EA games (not to actually sell them,) CEO Steve Perlman went batshit-crazy irate and pulled the plug. From then, even games that had been confirmed or greenlighted were pulled if Gaikai got them first.
I recommend anyone who's interested in what went wrong read this story from The Verge:
Yikes, that's not a library at all. Think of this analogy "My local library was going to offer the most recent Stross novel, but it turns out that's available at the library in the next town, so they had a book burning party instead"
How is GaiKai doing now that OnLive has folded? Are they headed towards running out of cash as well at some point or are they doing better?
And OnLive folded, and sold themselves to a newly created company named OnLive. So, it's still there. And I think still has a lot of potential under the right person. (With enough money.)
I still half-expect Steam to eventually offer streaming of games players already own for a small monthly fee. I'd expect them to make gangbusters if they did.
Shows what a difference a business model can have. They both had cloud gaming technologies, but while OnLive wanted to sell it right to consumers, Gaikai went for the publishers.
Maybe these titles had high licensing costs (regardless of whether any OnLive users rented them or not), and they figured if their competitor had the game less people would be playing it with OnLive? So they'd be more likely to make a loss on the licensing cost.
That doesn't sound like a business decision to me...
4) The supposed benefits of cloud gaming were never as big as a deal in the first place, and quickly becoming less and less interesting.
Today even almost the lowest-end of notebooks you can buy will get you a better gaming experience than OnLive (better graphics, less latency, no internet connection required, choose all your own games), for gaming on the go phones and tablets are pretty capable, and last but not least you can pick up a used PS3 or 360 with a whole stack of games for less than 1 year of OnLive.
I've said from day one that the whole idea of building expensive, specialized data centers in the hope that people will pay to play games on them, is simply a stupid business idea. Casual gamers will happily use whatever cheap device to play simple games, and serious gamers will always want the best possible gaming experience, which is not what OnLive will ever be able to offer. Cloud gaming is a lost cause IMO.
2. I can run games that would barely work at a stutter on my integrated graphics.
3. I can try games out in seconds without installing 7gigs
4. I can rent games for a day or so without installing 7gigs
5. I can subscribe to hundreds of games and play them without installation.
6. I can play (some) PC games on my phone or tablet
7. I bought a £40 online mini-console as small as cigarette packet that came with a great quality gamepad and lets me play my games on the TV without needing to wire up a PC.
8. My entire game library is instantly available anywhere without installing anything other than the OnLive app.
The million dollar question is how many people there are that -like yourself- prefer paying for a service like OnLive, compared to the number of people that will simply buy their own hardware, or just use whatever hardware they already have anyway.
You can justify spending money on OnLive as much as you want, but my point was not that the service is completely useless, just that the target audience is too small to make the service profitable. Hardcore gamers build their own rigs or are prepared to buy a console once every few years, casual gamers will play on whatever they have available, people who don't play games don't care. It appears there's just not that many people who are so hell-bent on being able to play all their games, anywhere, on any platform that happens to be available, that they want to pay for a subscription service that somewhat allows them to.
I'm not really sure why I'm even debating this anymore (like I had to when OnLive just launched and got flamed by hordes of people with the same arguments like yours, because OnLive would surely be the future of gaming). I think the 'economics of OnLive' more or less have proven my point sufficiently.
My untested hunch is that there is a good enough market for these services.
I might be a customer too, I'm a former gamer that now has to cope with work, study and very soon a family, having an "instant-on" service would be worth it for me.
And why is it prohibitive for you? It says it used to cost U$ 4.95/month, which I perceive as really cheap (as compared to U$ 50 for a title like Diablo III).
Much like the Nintendo Wii, I don't think that hardcore gamers is the target demographic.
Edit: see sshirkov's comments, I fall in the same demographic I guess.
For starters, there are no data centers near enough where I live, so the service is not available ;-)
But even if it were, there are many reason a service like this has no value for me:
- I have 2 consoles, a tablet, a laptop and a desktop, so when I'm at home I already have plenty of options. I can't imagine this will ever change, because I need my computers for work, and the games I like most are very often console exclusives.
- I never take my tablet on the road, and I only take my laptop with me if I need it for work, so a cloud gaming service for playing away from home doesn't make much sense for me.
- In terms of cost savings, I don't really see the benefit either. To play OnLive games you still have to pay for the game license (in addition to the subscription fee). Since I buy almost all my games second-hand or over a year after their release, I'm not going to save a lot of money on the games themselves. All my consoles have tradionally lasted over 6 years, so the write-off on them is minimal. On a side note: if I was strapped for cash and couldn't afford to buy hardware or games, I wouldn't be subscribing to any subscription gaming service anyway, I would spend however little I had on useful things.
- I don't really play games a lot, less than 10 hours a week, and I almost exclusively play a single game at a time until I finish it. This means it takes really long before I finish games, often over 2 or 3 months. This basically means the rental-model for individual games does not work for me.
- I like to play classics and 'vintage' titles, e.g. PS2 games or classic XBLA games. OnLive seems to mostly target mainstream, popular and newer games.
If I think long enough I can come up with other reasons why a cloud gaming service like OnLive is not for me. Just to be clear: I can see how it would be great for certain players, but I'm highly sceptical about their numbers, and how much they would be prepared to pay for the service.
My conclusion is (and has always been) that when it comes to cloud gaming, downsides > benefits, and costs > profits, which makes it a no-go in terms of business case. I have yet to see someone prove me wrong (GaiKai being acquired for big $$$ doesn't count, because it was obviously bought by Sony for other reasons than profitability).
That would be a deal-breaker for me.
Thanks for the clarification and explaining the downsides.
Many wouldn't apply for me (my latest console is a PS2, for example), but certainly the non-availability in my region is probably a given, and having to pay for each game is the deal-breaker for me (unless the price is minimal/equivalent to a rental).
OnLive is free to join.
There are 3 purchasing models:
1. Buy the game outright (or until OnLive folds ;-)
2. Rent the game for a short period
3. Buy a bundle (the 'Play Pack') which gives you access to a huge list of indie or older games for a pretty low monthly cost). They are a mixed bag. Some old A-list games, some really interesting indie games and some junk.
Investment companies should be a bit more careful when they put their cash on the table ($23M from Belgacom, for instance).
The basics are pretty simple, you start with some money (capital) and you spend it to build the product, somewhere along the way you start selling product and getting revenue, the revenue grows and eventually it provides enough money to pay all your bills (operationally cash flow positive).
You capitalize the company such that you have enough money to do what you need to do until you get that cash flow positive point. If you don't have enough money your bank account goes to zero before revenues cover cost. If you have too much money you still have a lot of money in the bank when it starts growing again.
When companies succeed, it was management prowess. When they fail, it's exogenous "headwinds". It's commonly seen in big and small cos.
What's more interesting is that based on this statement, the company's biz model actually seems to be raising financing. Very 1999-2000 of them.
Btw, this is not to imply that capitalization is unimportant but if you are running out of money and need more, you either convince someone to give it to you or you make some hard resource allocation decisions and reduce your short-term plans so you can live to fight another day. Failure to do so is simply a management failure (no matter the nice spin).
I got out of hardcore gaming, and quite enjoyed the idea of booting up a game in a few seconds on my laptop, playing it for an hour and forgetting about it.
It worked very well for things like Borderlands and a few indie titles (Madballs, The Ball).
I also owned the physical console, so the transition of "I want to play Borderlands for an hour on my laptop immediately after finishing this work thing" to "My day is over, let me pick up that same game on the TV" was pleasant.
As far sluggish controls, on a connection that exceeded 10Mbps, the experience was only slightly worse than a wireless controller on a console, and after a few days of it being the only time I picked up a game I adjusted quite well.
I've since accepted that the service was aimed squarely at the market that my situation happened to exactly occupy (high bandwidth, casual gaming, multiple physical devices, just the right titles..), so your mileage may very well vary.
There are 12 games on one page, and there are 26 pages - 12*26 = 312. I'm really baffled as to where did your number came from.
In addition a decent gaming PC doesn't cost much these days and games on mobile devices are as enjoyable as desktop and console ones. They will get even cheaper and cooler with time.
There is no reason for existence of such a service.
I heard about OnLive all the time, but never Gaikai. Was it big in Japan perhaps?
According to jeffool, it seems Gaikai got EA demo rights, and OnLive then self-imploded http://news.ycombinator.com/item?id=4635405
This is especially true when the company doesn't own any real estate at all. After the shops shuts down, nearly everything gets sold for half price.
My chair at home costs 25K INR if I buy it in the showroom, I bought it from a scrap shop for 2K INR, the guy in the scrap shop told me the chair came a software shop which closed recently. That is how low things like infrastructure get sold.