Why Onlive May Be AWESOME

I think for the serious gamer (someone who plays a lot of games), this obviously would not be an option.

Let’s say for a minute that this service works as advertised (can deliver decent game play experience to a low/medium end PC or TV without any noticeable lag) – IF they can deliver that, then the rest falls on price (both the cost of purchasing or renting the game, and the monthly cost for the service.

If there was NO monthly subscription cost, and somehow they take in their share of the revenue by taking a percentage of game sales or rental revenues (like a retailer or distributor does), then I think this could be a console killer technology/service.

However, as you say, if they charge a subscription fee, and that fee is higher than it would cost (amortized over 5 years) for you to purchase a high end PC or Console/High Def TV plus games, then it will not win out.

Let’s assume that they will have to charge a fee to subsidize their server and bandwidth costs. What would break even be for them?

$7/month for the service – just to break even to cover costs assuming the following….

Let’s say they have a server with 4 GPU cards in it, capable of hosting 8-16 people at a time playing a high-end game simultaneously at 720p. Let’s say that the server is $3k, the 4 GPUs cost $1800 and their custom hardware card $300, ram $800 – total server cost would be around $6,000 per server. Best case scenario, they can host 16 players at a time, and let’s say that the average player plays for 2 hours a day. That means that 96 people can utilize that server in a day, and if they use it every day to play games, then the server generates 96 times the subscription fee in revenue per month. If that subscription fee is $10/month, then it is generating $960 a month in revenues. If you took that $6,000 server and amortized it over 3 years (the useful life of the server) it gives you $166/month in fixed cost. So if that server can generate $960/month in revenue, that it is making $794/month gross. Bandwidth cost for that server would probably be around $500/month (guesstimate) so that would bring the gross down to $294. So that means that for break even the subscription cost would have to be $7/month per subscriber.

That is the cost side.

Now lets look at the consumer side.

If they charge you $8/month in subscription fees (making $1/month profit) and they charge you $20 to buy a game or $4 to rent a game….

Let’s say an average gamer would buy 6 game titles a year (again not a serious gamer but an average gamer).

Under their service it would cost you $120 to purchase those games through the service, and $96 for the yearly subscription fee – total cost $216/year to play those 6 games. That is considerably cheaper than buying a console and 6 games to play for the year.

So I guess it really depends on what they charge you for the subscription fee (to keep accessing your purchased games). Also their policy on when you stop paying your monthly fee for a month and then want to get back your account with games in it at a later date – or whether you have to buy your games all over again…. there will be technicalities like that which will make the difference.

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About Eric Meek

Just an average, everyday Apple lover.
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