A blog post from OnLive sheds a lot more light on the Sony deal : A Bright Future for Cloud Gaming at Sony. The post also confirms my thoughts that it’s unfair to paint Sony as the evil corporate villain in all of this, because there are some cold hard facts about the viability of the business are explained in the blog post.
One important point to note is that the blog post suggests that OnLive were indeed looking for someone to purchase them, and this section of the blog post spells out the situation quite clearly :
Since 2012, the company has dramatically improved its technology and business models such that all of its 5 services are gross margin positive, ranging from 43% to 86% margin. The fact that we had such positive margins should prevent repeat speculation that we were “crushed by infrastructure costs.” The company also was able to achieve conversion rates from free trial to paid of between 64-78% for its services. Despite these positive metrics, the lifetime value (TLV) of a subscriber was still less than the cost to acquire subscribers (CPA), but they were converging. While we knew we could not get to break-even on our own, we believed that there were many large companies who would be able to get there due to: 1) being able to communicate broadly and inexpensively (lowering CPA), 2) having their own distribution platform for the service, and 3) being able to license the most popular games and MMO’s, the latter 2 would have had the effect of both reducing CPA and reducing churn (thereby raising TLV). Despite these positive developments, we were unable to entice an acquirer who wanted to continue the service, and Sony already had their own service.
Therefore OnLive were seeking assistance in terms of breaking even and whereas some of that assistance could come from companies such as Linden Lab, they needed more companies to jump aboard the ship to make this project viable in the long term.
Step forward Sony. Unfortunately for us SL Go users and those who use OnLive Desktop, Sony have absolutely no need for a streaming service, as they are already running one in the shape and form of Playstation Now.
However there is part of the blog post of which I’m a little less happy, namely this :
We were driven by analyzing the opportunity based on first principles, and held off selling until we had proven critical milestones.
The fear that lurks at the back of my mind is just what were these proven critical milestones and were the consumers once again being used as part of a proof of concept to enable a sale, rather than being treated as genuine customers. That’s a fear a lot have with technology when things don’t end well, yet we consumers keep getting back up and diving in again. That’s obviously because we hope things will be different in the next round, and to be fair, they often are.
In another recent blog post, OnLive made the case for cloud based gaming : The 2015 Case for Cloud Gaming and OnLive. The blog post pointed out that bandwidth is getting faster and cheaper and that mobile computing is on the rise, making the case for powerful remote computers to do the work more important. I firmly agree with this and the case for cloud based gaming gets stronger by the day.
The issue isn’t just about games or virtual worlds either, more and more companies are embracing virtual desktop infrastructure to allow workers and students to work from home or via mobile devices. Technology wise, things are certainly heading in this direction.
However many people remain unconvinced and we’re still quite early in the cycle. The tech is getting better, bandwidth is improving but there are also many examples where the technology simply doesn’t do what it says on the tin and people end up wanting to go back to powerful desktop machines.
The part of the cycle we’re currently in is probably why Sony were only really interested in OnLive’s patents and some of their technology rather than wanting the whole lot, lock, stock and barrel.
The future of cloud gaming should be bright and cloud based computing for virtual worlds is likely to happen. However we’re not quite there yet and that’s probably the main reason why some of us are today rather disappointed about the loss of a service.