Transgaming: OnLive business model is not sustainable

TransGaming CEO Vikas Gupta has cast doubt on the future of video game streaming service OnLive.

Speaking to GamesIndustry.biz from the company's Toronto offices, Gupta outlined the technical and economical problems with OnLive, and the way TransGaming's rival service, Game Tree TV, will be different.

"We've looked at OnLive's [business] model and we don't believe it's sustainable," he said. "We don't believe they can make money on it."

"We know what they're making from a distribution fee perspective, because that's their model... So EA says here's a game, and that game retails for $50. We know that they're only making x percent, and within that margin there's no way they can make money, given their operating expenditure, as well as the initial capital expenditure in order to get that data centre up and running."

Gupta describes the end-user experience in North America as "pretty good", but doubts that the AAA console audience OnLive is targeting will tolerate any noticable performance issues.

"The problem, I feel, is that if I'm playing Call Of Duty and I know that on my PlayStation 3 it's an amazing, uninterrupted experience, the minute I get jitters with OnLive, or any kind of stuttering, that's it, I'm going to stop. These aren't the sort of games where you can have that level of delay or unpredictable performance."

Game Tree TV, however, has been built "from the ground up" for smart TVs, with consistency of service and experience as the highest priority.

We've looked at OnLive's model and we don't believe it's sustainable. We don't believe they can make money on it

Vikas Gupta, CEO, TransGaming

"Think of us as the Netflix of videogames-on-demand," he says. "We've got a sophisticated infrastructure located in the cloud... but the one big difference is that we download the content directly to the device, and that allows us to run the content optimally, and not have to worry about bandwidth issues and so on, which, in certain territories, can be a big problem."

In Gupta's view, OnLive and other streaming services offering AAA console games haven't yet found a compelling solution, and Game Tree TV will be focused on a more inclusive, family-friendly experience comprising smaller games that can be downloaded quickly and played with a remote control - Plants Vs. Zombies, Peggle, World Of Goo, Osmos, Puzzle Quest.

"We're taking a very pragmatic approach. My operating expenditure is fixed. I know exactly what it is. We don't have to worry about scalability issues. We have scale in the cloud, but fundamentally, whether I've got one million users or 100,000 users or 100 users, it doesn't matter. We're dealing with a model where it's short bursts of bandwidth requirement."

Rather than produce its own set-top box, TransGaming is forming partnerships with cable operators and set-top box manufacturers to include Game Tree TV as a part of their services.

"We've publicly announced our first operator, Free, the second largest in France. Free will have 5 million subscribers on the Freebox by the end of next year, so that's a 5 million addressable market with a single operator. And we're expecting, by next year, in excess of half a dozen operators."

Game Tree TV is designed to fit seamlessly into the viewing experience by using broadcast television as its main point of inspiration. Indeed, almost the entire staff of Transgaming's Atlanta office was "scooped up" from Turner Broadcasting, including Blake Lewin, the creator of GameTap.

In the near future, Gupta intends to mimic broadcast television by dividing the service into channels. There will be channels devoted to specific companies like PopCap and Disney, or specific genres like puzzle and adventure, all of which will have tailored subscription packages.

"We have the ability to allow the consumer to go from watching TV to – without the switching of hardware or remote controls or anything else – playing games, and then back to watching TV."

"We [also] have the ability to use metadata tags, so if the user is watching a particular show and there's a corresponding game available on Game Tree TV, then at the end of the show, with the help of the operator, we can put up a little message that says play this game now, and with a single click we can transition that consumer directly to that product page."

Whether the AAA experience at the heart of OnLive plays a role in GameTree TV's future is still being decided, but right now Gupta believes it won't play a role in the near term, for both the company and gaming on smart TVs.

"We'll get higher end. Don't get me wrong there. But we don't want to look like we're competing with consoles, because we really believe that the console experience is a very different kind of experience... We're not taking a digital distribution property and now trying to bolt it on to the latest buzzword. We've thought about the televeision experience, we've thought about what the consumer wants."