SAN JOSE, Calif. Armed with a proprietary compression technology, startup OnLive will launch this fall an online service that aims to rival the experience of dedicated videogame consoles. The company claims its ASIC-based algorithms will zip content from its remote servers to users on PCs, Macs or TVs in less than 80 milliseconds.
If successful, the service could disrupt the console business and accelerate an emerging shift to games bought and played online. However, the company faces daunting technical and business challenges to deliver a winning service.
"By removing the reliance on expensive, short-lived [console] hardware, we are dramatically shifting the economics of the industry," said Steve Perlman, chief executive of OnLive, a serial entrepreneur who launched WebTV and the Moxie set-top box.
The service aims to push the emerging concept of cloud computing to a new extreme in performance. Perlman suggested that will open up a variety of applications beyond gaming, at least one of which the company will announce later this year.
OnLive claims it will spend less than a fifth what it would cost to design and deploy a new console. It is setting up servers in East and West Coast locations for an initial U.S. service.
"These are the most favorable economics by a long shot for any video game platform every launched," said Mike McGarvey, chief operating officer for OnLive and former chief executive of videogame publisher Eidos.
"It's a good idea and has potential, but the thing I need reassurance on is being able to deliver this over the network," said Billy Pidgeon, a research manager for videogames at International Data Corp. (Framingham, Mass.).
"In games there's no wiggle room--when you press a button to fire you want to fire," he said." But if it works, this could be a disruptive," he added.
The Palo Alto based company has been working in stealth mode for seven years. It has about 100 employees and more than 100 patents granted or filed.
Warner Bros., AutoDesk and Maverick Capital have invested in the startup. OnLive claims it will launch its service with 16 mainly PC titles from nine publishers including Electronic Arts, Eidos, Epic Games, Ubisoft and Warner Bros. Interactive.
"It's a significant group, but the publishers have little to lose here," because OnLive simply represents an additional, low-cost distribution channel for their games, said Pidgeon of IDC.
The shift from packaged games on optical disks to digital delivery online is just starting, he added, and is focused on relatively small, low cost titles now. "It appears digital distribution won't replace packaged goods for 10-15 years, but it certainly is happening," he said.