Small Ideas

Finding the next big idea by exploring small ones – by Rishi Khaitan

Archive for the ‘gaming’ tag

OnLive Launching June 17th

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OnLive is one of the most exciting startup launches of 2010. Why? Well, OnLive is trying to disrupt the video game industry. Here’s a description of OnLive from their recent blog post announcing the launch:

OnLive fundamentally transforms the way users experience games and interact with each other, and in time, will transform the way games are developed and marketed. By distilling specialized game hardware out of the equation, OnLive will allow games to be played as a pure media experience on virtually any device, with the same flexibility and instant-play experience that we’ve come to expect from online video and music.

You might be thinking that any company description which has the word “transform” twice in the first sentence is likely BS. So, for a more in-depth, tangible description and demo of OnLIve, I would HIGHLY recommend you watch this presentation by CEO Steve Perlman (Quicktime, WebTV) from the 2010 Dice Summit:

Game TrailersE3 2010

Even if you aren’t interested in the video gaming industry nor OnLIve, the first few minutes of Steve’s talk is very interesting. He basically runs through the evolution of media consumption. One interesting stat that’s really stuck in my head is that torrent traffic, while still representing a huge (think 50%) chunk of total internet bandwidth worldwide, actually peaked last year and is now on the decline! Steve says it’s largely because people are growing impatient. They want their media now and thus are preferring streaming/on-demand experiences.

Since their first emergence out of stealth mode at GDC ’09, the chatter about OnLive seems to be slowly shifting past “wait, does this thing actually work?” to “great, so how much will this cost?”. And it is indeed the pricing issue that is one of the most intriguing aspects about OnLive. Well, as of last week’s announcement at GDC ’10, we have the least part of it.

OnLive will charge a monthly fee of $14.95 for access to the service. This does include access to game demos and other media bits (think PSN or XBox Live), however, this does not include any actual games. Access to games will be available for rent or for sale on an a la carte basis.

So, let’s run some quick numbers:

OnLive costs 14.95/month x 12 months/year – 10% multi-month discount = $160/year

Gamefly costs $16/mo (1 game at a time) x 12 months/year = $200/year

A PS3 costs $300 and let’s say at this point has a 4 year lifetime so amortized is $75/year

So how much will games be on OnLive?  If you take a look at about the 34:30 minute mark in the above video, Perlman shows a graph of which players in the value chain get what margin of a $60 video game. In that graph, the publisher gets around $27. Perlman contrasts this with the OnLive model where his graph appears to show that OnLive is offering about a 70% publisher /30% OnLive split to developers. At that split, OnLive needs to charge about $40 per game for publishers to make at least $27/game sold. (It’s probably also worth noting that publishers also win because that game, because it’s digitally delivered, cannot be resold on the used game market nor can be pirated.)

So, let’s see..

Scenario A: Consumer owns PS3 and rents 1 game/month. Using PS3 + Gamefly that will cost 75+200=275/year. Using OnLive that would be 160+rentalpricex12. Do some simple math and rentalprice needs to be about $10 to equal the PS3+Gamefly scenario.

Scenario B: Consumer owns PS3 and buys 4 games/year (assume $60/ea). Cost of that is 75+60×4= $315. Using OnLive that in my estimate would be 160+45×4 = $340. To make the prices comparable the game purchase price on OnLive would need to be under $40.

Of course I haven’t discussed other advantages to the consumer such as being able to play any game regardless of platform. On the other hand, for gamers that already own a current-gen console, the cost of the console is a sunk cost and thus the argument for OnLive becomes more difficult. A pricing scheme that is interesting to think about is usage-based. In other words, gamers are charged per hour that they play any given game. However, I can imagine that might be a tough sell to publishers because, let’s face it, they are capturing a lot of consumer surplus from gamers who buy a game and never end up playing it much or at all.

Finally, though, OnLive does more than just enable streaming gaming. It adds a social dimension to gameplay that PSN/XboxLive haven’t fully been able to do. One example is brag clips (highlighted in the video above). I look forward to checking out the OnLive SDK to see what types of functionality game developers may be able to leverage.

To signup for a free 3-month launch membership to OnLive, signup here.  Whether OnLive is a success or not, the OnLive service represents a major milestone for all media.  OnLive proves that even the most complex media experiences (HD online multiplayer video gaming) can be delivered via a stream.  We all knew that the the disc was dead.  Well now it looks like the download is also dead.

Written by Rishi Khaitan

March 13th, 2010 at 8:46 pm

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Tetris 360?

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Xbox 360
As most of you probably know, Microsoft’s next-generation gaming system, the Xbox 360, debuted last week. While the Xbox 360 will undoubtedly be the “gotta have it” gift this Christmas, exactly how successful the Xbox 360 will be for Microsoft will not really be known for a few years. The Xbox 360′s competition, the Sony’s PlayStation 3 and Nintendo Revolution, will be hitting the market within a year or so and the gaming masses will soon get to choose which of the three gaming franchises they want to buy into. For the past few years, most gamers have been choosing Sony’s PlayStation 2. Sony enjoys approximately 60% of the console market. Microsoft has around 20% and rising. Some analysts call 20% a success because Microsoft, in its first attempt, was able to take the 2nd place spot from Nintendo. Others say that given the investment Microsoft has made into the Xbox franchise, they could have done better. For the Xbox 360 to be labelled a success, how much of an increase in market share does Microsoft need to achieve? I personally think a number like 35% would be a great accomplishment. Such a 15% increase would likely come directly out of Sony’s market share, putting Sony and Microsoft almost neck-and-neck.

Ultimately though, no matter how great a gaming console is developed or marketed, success hinges primarily on the quality of the games that are developed for that console. Console manufacturers know this: they sell the consoles at a loss. Profits rely on license royalties from games sold for the console.

With a couple exceptions such as Halo, quality of games is where Sony and Nintendo dominate Microsoft. Will this change with the Xbox 360? I visited Fry’s over the weekend and got a look at some of the launch games for the Xbox 360. Two of the more anticipated launch titles, Call of Duty 2 and Project Gotham Racing 3, were on demo. Nearly every shopper that walked by turned their head and stared at the beautiful HD graphics offered by both games. Even with these first generation of titles, clearly the developers are utilizing the newfound horsepower in the Xbox 360 to make some awesome eye candy. Is killer graphics enough?

Let’s take a look at IGN’s list of the top 10 video games of all time:

#10 Super Metroid/SNES/1994
#9 Star Wars TIE Fighter/PC/1995
#8 Street Fighter II/[Many]/1991
#7 StarCraft/PC/1997
#6 Sid Meier’s Pirates/PC/1987
#5 Super Mario 64/N64/1996
#4 Sid Meier’s Civilization II/PC/1996
#3 Tetris/[Many]/1986
#2 Zelda: Ocarina of Time/N64/1998
#1 Super Mario Bros./NES/1985

What do you notice about this list? Well for starters, the newest game on that list is seven years old. Moreover, none of these top 10 games are for the current generation gaming consoles. The newest of the games on that list are for the now two-generation old Nintendo64. The PC games on that list are just simple, good ol’ 2D games. Digging deeper, if you look at IGN’s reasoning behind choosing each of these games, there is little mention of graphics. Instead, in nearly every case, what was mentioned was great storylines, innovative and depth of gameplay, and intuitive controls.

For me, the two innovative trends in gaming are:

Game Interaction
Dance Dance Revolution isn’t wildly successful because of the graphics. It’s been successful because you get to be in the game. Dancing on the DDR mat is far more visceral than pushing buttons on a controller. A few months ago I bought the Logitech force feedback wheel and pedals for use when playing Gran Turismo. I had been playing the Gran Turismo series for several years with the regular controller and it’s always been a game I enjoyed. With the Logitech wheel/pedals, the fun I have has really gone to the next level. I can honestly say I’m having more fun playing GT4 than I’ve had playing any other game on any console. When will I be able to play a fighting game and actually play by doing the fighting motions? Or play a golf game by actually swinging a club?

Online Gameplay
Definitely the biggest movement in gameplay has been in enabling multiplayer activity through the Internet. No more playing against lame, predictable AI opponents. Online gameplay clearly takes competition to the next level whether the game is sports, first-person shooter or MMORPG. But I think the really cool applications of online play is those that form community gaming experiences out of individual gaming experiences. Games like The Sims or Nintendogs. Remember how big those Tamagotchi virtual pets were? In Nintendogs, you have a virtual pet, but the pet lives in a virtual world thats shared on millions of devices.

Unfortunately, instead of innovating, most game developers are just taking the easy road by re-releasing the same games with better graphics and a couple new elements. What’s next…Tetris 360?

Written by Rishi

November 30th, 2005 at 1:52 am

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