OnLive business model a "shot in the arm" for Gaikai

David Perry has pointed out the drawbacks of cloud gaming service OnLive compared to his own Gaikai service, due to launch later this year, in the wake of OnLive's pricing and strategy announcements at this year's GDC.

Although OnLive players can rent games and try free demos, they are being asked to pay for their PC games on top of a $14.99 subscription, a pricing strategy that some are suggesting will hold back any significant growth.

"It's very different to OnLive," he told GamesIndustry.biz. "We're not trying to replace the consoles.

"[OnLive] have done an amazing job with the user interface [but] the cost per data centre to do all of that streaming is very expensive. That's why they have a subscription. Would you pay $15 a month for it? You're paying for the games on top of the service. You're paying $15 only to have the opportunity to buy the games. $15 gives you no games. If you decide, 'I don't want to keep paying that subscription', you've just lost access to your games bought at full price," he said.

"We were just as surprised as everyone else when we heard the final business model. That's why it's a shot in the arm to us because now we're just perfectly positioned. You can play Call of Duty over there for $15 or you can come here and try it for nothing. When you buy it from us, you own it, for the rest of your life. When you buy it from over there you have to keep paying a subscription to keep access to it."

Far from trying to replace the console market or create a distribution channel with Gaikai, Perry said the company would be happy to stream the service onto console platforms.

"Why wouldn't we?" he asked, adding that Gaikai could stream onto anything with a screen, internet connection and form of input, potentially including internet-connected TVs.

"Our target is for websites like yours - wouldn't it be great if when you write about something [your readers] can try it right there? Instead of us marketing and trying to drive all the customers to a certain URL - like OnLive for example, they have to buy every player and convince them to come to a certain place on the internet.

"It's better when they're reading an article that - bam - it says, 'do you want to try it now?' The publisher would like that. The game might not even be ready for release so you'd be looking at an early preview. We can run it on our servers, they can experience it on your site, and they can make a pre-order to EA.

"So you win, you get a demo you could never have had before. The gamer gets to play something they could never have played before, and EA gets a pre-order a year in advance. Life is good for everyone."

Online retailers such as Amazon will also be kept happy, said Perry, since sales can be made through them as well as directly via publishers.

He gave other examples of how the technology could be used too - including for demos of applications such as PhotoShop and for beta testing of games - the advantage being there would be no code to be potentially hacked or pirated.

He also spoke about Twitter compatibility. Users will be able to post the URL of the game they're in for their friends to try out, he said. And a longer term goal was to work with publishers so that a user's friends will be placed into the game in the exact same spot as they are in.

"Say I discovered Starcraft's beta first out of all of my friends, I can tweet it out and say 'I'm in Starcraft right now' and, one click, and they're all in the game too with me. That's unbelievably compatible with the marketing needs of the publisher. And you're super cool because you've got all your friends into the beta without them having to beg for keys, registering or anything.

"If a publisher works with us, we'll actually teleport them to exactly where you stand because we can give where you are in with the link. You'll see all these people appearing around you who are your friends. That's what we'd like to get to - it's longer term, publishers need to buy into it, but we think that would be awesome."

Perry added that the toughest challenges Gaikai had faced were now solved. A deal just struck with TriplePoint - a company that has funded servers for Facebook and YouTube - will fund Gaikai's own expanding network of servers, starting in the US.

"They have no fear of size and, for them, this is an exciting company because it could buy a lot of servers."

Meanwhile, Benchmark Capital - whose partners include Gaikai board member Mitch Lasky - is funding the business and a deal the company is currently working on will grant it deals with a majority of internet service providers.

The issue of partnering with networks in order to ship data around has been a problem even bigger than the one associated with latency and data centres, said Perry. "Whoever you're paying your cable bill to, we want them to be connected directly to our servers so the data path can be as fast as it can possibly be, and that's really hard.

"The deal we're working on gets us 900 of those deals already in place. And that would be years of negotiation to get that done. That should put us in a very good position, where the data problem is pretty much solved for us. We're 80 per cent done - the hardest part is now solved as far as I'm concerned."

The 300 data centres around the US Gaikai is planning to launch with will give far greater coverage to users than the service's two rivals, Otoy and OnLive, added Perry.

"Otoy is planning to go for very large super computers. When you use super computers you can only afford a few data centres - they're so expensive. It's really cool technology, but the distances they're dealing with are huge.

"And then you have OnLive with five data centres, and they have a Powerpoint slide with five data centres on it with big circles around them, but the internet isn't wired that way with little lines going out and big circles around data centres. You're going to get strange kidney shapes, or mushroom shapes - it'll look like Tetris pieces the real coverage you're going to get."

Alongside the news of TriplePoint's backing, Perry also said the company has secured a former Google executive - the appointment will be formally announced in the next week.

"I contacted him and asked if he'd move to a start-up and he said, 'no, not in a million years'. He had a stake in Google. Then I sent him an account and he emailed back to say it was an incredible proof of concept but he still wasn't going to take the job.

"The next day he emailed again and said, 'you're not going to believe this but my wife is in love with Spore now. So he goes, 'I'm going to take the job'. And the reason is that he realised she would never have bought Spore or downloaded it or even have heard of it before."

The primary appeal of Gaikai to publishers will be a reduction in the costs of their advertising and getting their games to potential buyers, said Perry.

"Normally when you're paying for someone to come and try the product, if they don't like it all that money you've spent getting them through the install and the registration is lost. About $3 would be a typical number.

"In our situation, we sell server time to people so if someone goes to a site and clicks then they don't like it and abort, it's cost 1 cent. So it's a complete game changer as far as the pricing goes. We're expecting all publishers to want to give this a whirl. The idea that all software and all applications can be anywhere with a 1 cent failure rate is really why we're getting excited."

OnLive announced its release date - June 17 in the US - last week, but Gaikai has refrained from confirming its own roll-out date. However, Perry did say that E3 would be when the company starts handing out accounts to the proper network, and a release date then seems likely.

"We've been dragging our heels just a little waiting for a new chip to come out from Intel," he said. "All the major publishers already have accounts and are testing it right now. At E3 we'll have a pretty strong network up and running."

Apparently unconcerned by OnLive's movements he added: "In a weird way I actually want them to be successful because it's a good thing if streaming gets a really good reputation, so I actually want them to succeed.

"It's healthy competition but we have very different strategies and it's all going to shake itself out over the next 18 months, say. In 18 months let's sit down and see what happened. It's going to be interesting."