The Surprising Success of OnLive, a Mutant Offspring of Gaming and YouTube

The years have been kind to digital distribution. It's been the brass ring among forward-thinking industry figures for a long time, but digital distribution has come into its own over the last few years, leveraging broadband's ever-increasing market penetration to find welcome homes through services like Valve's Steam platform and Microsoft's Xbox Live Arcade.

Every successful solution so far has relied on two key elements: a network connection robust enough to handle the frontloaded transmission of an entire game, and a machine on the user's end powerful enough to render the results.

Brick-and-mortar stores have survived this far into the broadband era by presenting the removal of the broadband requirement as a good thing. The EBstops of this world persist by invoking anti-futurist bogeymen and embodying a legitimate necessary evil. (Someone still has to sell the consoles, after all.)

What if you could go the other way? As recreational broadband use continues to rise, gaming's critical chokepoint shifts further and further toward the strength of the gamer's machine. If someone could eliminate that chokepoint, would they not become like unto gods in the industry?

Palo Alto-based OnLive wants to be that god. Released last month, OnLive's eponymous gaming-on-demand platform seeks to wrest PC gaming from the grip of prohibitively expensive gaming PCs, opening up millions of previously underqualified computers as potential platforms—and, by extension, their owners as potential customers.

When OnLive was first announced, it was roundly mocked by industry professionals and gaming pundits alike. The memory of the Phantom, the appropriately named vaporware project with claims eerily similar to those of OnLive, was still fresh in the industry's collective mind. After years of empty promises and sketchy demonstrations, Phantom Entertainment dropped out of the content business altogether and released a $130 version of a lapboard which retails elsewhere for $20. With such an analogous setup, would OnLive share the Phantom's punchline?

OnLive shocked critics by participating in a series of competent demos, culminating in the public opening of a fully functional service just a year after its initial announcement. Impressive by any industry's standards, OnLive's alacritous release is almost insultingly fast given the glacial pace of the gaming world.

But what does it do? Long story short, OnLive is to gaming what Netflix instant streaming is to video rentals. Users pay a monthly fee to access the OnLive service, which consists of a library of titles that can be unlocked for increments of time that start at a decent rental's length and end at "forever" (or more realistically at OnLive's eventual dissolution). Pick a title, pay the fee, and marvel as the intertubes send a gaming experience from a server halfway across the country to a computer which just yesterday crashed while playing Minesweeper.

By doing all the heavy lifting back at the server farm, OnLive takes the burden off the user's computer and instead applies it to the user's network connection. Games are delivered as streaming videos; if your computer can handle long bouts of hi-definition YouTube content, it can handle OnLive.

The question is, can OnLive itself handle OnLive? Despite compression technologies bordering on the miraculous, all those video conversions give OnLive-streamed titles a rough look when compared to traditional gaming. Additionally, lag on a decent connection (OnLive requires at least 1.5 Mbps; Metro Pulse test monkeys used 5 Mbps) is better than it has any right to be, but it's still there. While savvy gamers can no doubt compensate, do they really want to?

And then there's the matter of costs to the customer. OnLive's current library is a brief shopping list of yesterday's biggest games, with a few smaller-scale releases thrown in for flavor. To its credit, there's nothing wrong with that at this stage in its development; given the state of the industry and publishers' notorious antipathy toward unproven distribution methods, having even a few recent AAA titles in your stable on release day is no small feat.

Problem is, OnLive's pricing structure is such that purchasing a game "forever" often incurs total costs that meet or exceed the retail price that the game sported back when it was new. For that cost, gamers typically expect the warm embrace of physical media, or at least the security of having their games stored locally.

Given the flaws inherent in the system, it's hard to rationalize recommending OnLive wholeheartedly as just another way to sell games through the Internet. But maybe that's because that's not what it is. Netflix doesn't prosper because people want movies forever, but instead because they want movies now. OnLive does the same thing, only with a product an order of magnitude more complicated.

So use it like you would use Netflix—let it be a relatively cheap, convenient way to satisfy your whims when you're bored, and if you find something that strikes your fancy, go out and get the "real thing" tomorrow. Just don't expect it to be the be-all and end-all of your gaming experience. That was never its intention anyway.