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Flying Into The Cloud

June 23, 2011 Article Start Previous Page 3 of 3

Executives for both Gaikai and OnLive seem to enjoy downplaying each other's services -- one can tell that they're well aware of one another despite, in several important regards, being in different spaces (when I told Perry that I spoke with Perlman earlier in the day, he jokingly asked if I mentioned the "G-word.")

It's an interesting dynamic of healthy competition and mutual respect -- the fact is the two companies, despite the common focus on streaming games, are hardly competitors. Both innovative entrepreneurs, Perry and Perlman -- and their teams -- seem to simply want to lay claim to the best tech out there, no matter what market they're targeting at the moment.

Perlman offered his thoughts on Gaikai's try-before-you-buy model. "If all it did was say, 'Okay, now buy your own [after playing a demo],' if you already have the platform, I don't know if you necessarily need them to demo it on PC," he argues. "Most people are not going to do a demo on the PC if they have an Xbox 360, and if they have a PC, I think we bring some value to that."

Ryan Breed, VP of development at Gaikai, says his company's business model is sound, stating, "We're in substantive discussions with just about every publisher out there." The company says it's working with 20 publishers in some capacity, the large majority of which have yet to be revealed as partners.

"Our pitch is so much softer than OnLive's," Breed claims, "because we're not going for a percentage of sales price, we're just enabling them to advertise their games." (Breed quickly softened up his claim about a soft pitch, calling his notion "speculative.")

Going forward, it's hard to tell what direction these two particular companies could take -- they may further diverge, creating businesses that are increasingly different. Or as the market evolves, they could overlap more and more. Both companies have the technology for game streaming, but going forward, technology will be a commodity, and success will rely on business savvy.

Gaikai, for one, will certainly not simply stick with click-through demos on and other websites. There are bigger, more interesting plans than that. Gaikai could end up powering streaming games on major publishers' websites. "We will be enabling channels, but we really don't have the intention of creating our own channel," says Breed. "...We will [for example] enable EA to have an EA channel, where they can offer all of their titles... etc."

"Tectonic Shift"

Streaming games have the potential to be massively disruptive to the game industry, depending on how fast streaming technologies and business models evolve. Once these core aspects of cloud gaming hit a certain point, the companies that make the games will have little choice but to adopt streaming games.

Cevat Yerli, CEO for Crysis developer Crytek, recently told Gamasutra that cloud-based gaming is the inevitable future. As the internet becomes more capable of facilitating increasingly fast connections for increasingly complex games, companies like Crytek will be able to create and sell games that require so much processing power that they can't run on a dedicated game console or a typical PC. Cloud gaming companies will do the pricey hardware upgrades for you at their datacenters, so users can play increasingly powerful games.

Today's streaming game companies already do that, to an extent, although often with more latency and lower resolutions than a locally-installed game running on a decent gaming rig. But OnLive is already looking into hosting games that require enormous processing power -- power that would not really be practical for personal computing.

Perlman demoed a real-time feature-film quality CG trailer for Batman: Arkham City running on OnLive servers and created by Warner Bros. It's just a test, but the highly-detailed, grimacing face of an Arkham City character hinted at the potential of games that are specifically tailored for cloud gaming.

"This would be a video game that cannot play on a console -- the computing power's just not there," says Perlman. "Certainly not on a 2005-gen console, but certainly not on the 2012 consoles, like what Nintendo's doing [with Wii U]. When people start seeing games like that, and people want that level of realism, then that's it, you've crossed over."

Brick-and-mortar retailers like GameStop are even recognizing the threat that streaming and online games pose to the physical game-reliant business model. The retailer recently purchased digital distribution platform Impulse and streaming technology firm Spawn Labs. GameStop was also straightforward in saying it will be using its new acquisitions to help the company jump into the tablet arena.

Asked for his opinion on GameStop's initial moves into streaming technology, Perlman says he doesn't comment on "announcementware." He says physical games are here for now, but he drew an analogy from the mobile market, saying old businesses in the game industry could disappear tomorrow like a puff of vapor.

"[Physical games] will not go away overnight," he says. "Nintendo's always going to have Mario and Pokémon and also this fanbase that's going to stick with them for a long time."

"But the other thing that may happen is what happened in the cell phone world," he says. "When iPhone was introduced nobody imagined that Windows Mobile and Palm would be wiped off the face of the Earth in 18 months, but they were. And RIM -- BlackBerry -- was holding on for dear life. And then Nokia has now been wiped off the face of the Earth. One by one. Android was the only one that kind of survived."

Perlman says, "It was a tectonic shift in phones, and now most phones sold are smartphones -- feature phones are now in the minority. Who could have imagined that would happen that quickly?"

Article Start Previous Page 3 of 3

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