March 24, 2009 7:46 pm

OnLive move poses threat to consoles

A revolutionary video game service has been unveiled that threatens to shake the foundations of the console-dominated industry.

OnLive, launched at the Game Developers Conference in San Francisco, brings so-called ”cloud computing” to video games and television.

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This means it can deliver high-definition gameplay from remote data centres to gamers with broadband connections, by-passing the need for traditional disk-based consoles made by Microsoft, Nintendo and Sony.

Warner Bros is among the investors in the Silicon Valley start-up and it has the backing of significant publishers.

They are looking to eliminate piracy, keep more of the revenues that they share with traditional retailers and pay less in royalties for using the console makers’ platforms.

OnLive’s disruptive business model is not only a threat to console makers and retailers, it could also strike a blow to graphics and processor chip companies and the makers of the higher end computers that use their components.

The technology allows even the most basic PCs and laptops to play fully featured games using free software that plugs into their web browsers.

Steve Perlman, OnLive founder and chief executive, said hundreds of millions of computer users would be the initial target market when the service launches in the US at the end of the year.

”In the short term, this is additive to the market – people are not going to throw away their Xbox 360s or PS3s,” he said.

”It really is going to be in the next console cycle that people will begin to ask: ’shall I shell out another $700 for hardware before I buy my first game or shall I use that money for all my gameplay for the next several years’.”

OnLive plans a subscription service and will allow publishers to sell, rent and serve demos of their games as well as permitting gamers to pay by the session.

It is bringing the service to the TV with a ”microconsole” – a box little bigger than a pack of cards that allows controllers to be connected and provides a broadband network input and HDMI video and audio output.

Mr Perlman previously led development of Apple’s QuickTime video standard and founded WebTV, the TV-based internet service bought by Microsoft in the 1990s.

In a demonstration of OnLive’s capabilities, he showed how players could choose from a matrix of screens to jump into and then watch or take part in game sessions, playing solo or with friends.

There was no noticeable lag in the action playing the graphically challenging Crysis game.

Billy Pidgeon, IDC video game analyst, said he had concerns about whether OnLive could avoid failures and significant lag over a network but the service had great potential.

”People have talked of a future without consoles – five years ago, I would not have given that thought any credence, nowadays I can see it happening,” he said.

Michael Pachter, analyst at Wedbush Morgan Securities, said OnLive had ”first-mover advantage” but rivals would not stand still.

”Frankly, before this becomes big and ubiquitous, if Microsoft looks at this and says it’s going to put us out of business, then they’ll just buy it,” he said.

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