How Cloud Gaming Helps PC Gaming

For those not in the know, late last night (or early this morning if you are in Europe), cloud gaming company OnLive, released their Android and iOS apps, that will allow anyone with an Android tablet, Android smartphone, an iPhone, or an iPad, to play full PC games anywhere on the go, where they can connect with a 3G, 4G, or WiFi wireless connection. Along with the apps, OnLive debuted the OnLive Universal Controller, which will wirelessly connect to any of the above mentioned devices, plus an entire cornucopia of future HDTVs, blu-ray players and settop boxes that will come with OnLive already embedded in the device. Over 30, out of the near 200 games currently on the OnLive service, do not require a controller to play while using them over your mobile device. Working with publishers, these games either come with button overlays for your touchscreen, or in the case of titles like From Dust (arriving on the service soon), and Rockstar Games’ runaway hit, L.A. Noire, the developers worked extremely closely with OnLive to create game specific touchscreen controls. Which if reports are to be believed, not only represent the future of bringing PC games to mobile ecosystems, but are truly extraordinary, and have to be demoed by everyone to be believed.

Over at Joystiq where I regularly hang out, the topic kind of sprung up among some of the posters there (namely myself, ZoomyRamen, Scuffles, eat it, nerdydesi1, Kentbrockman, and a few others) about how OnLive, and more specifically what they were doing, could serve to benefit PC gaming as a whole. I was in the process of contributing my insights on the issue, upon realizing those insights were getting a bit verbose for Joystiq’s forums, and out of courtesy to the community there, have hosted my comment from my own blog.

How OnLive benefits PC gaming is several fold – some direct, some indirect.

Firstly, as has already been pointed out, there is the ‘bleeding effect’. Someone plays a PC game over an Android or iOS device, and perhaps this gets them curious enough about PC gaming, that they go direct to the source for their future purchases. Highly unlikely considering that a game running over OnLive allows this individual the freedom to play the game on their tablet or smartphone, as well as at home on their PC or Mac. But, it could happen. And in the cases where it does, it’s more of a potential indirect way of helping PC gaming, and I would not expect too much to come of that, in and of itself.

The real manner in which OnLive helps PC gaming is four-fold:

1. OnLive, and every other cloud streaming service out there relies on actual hardware to play the games on inside the data centers. Since neither Sony and Microsoft are willing to license out their own hardware or proprietary coded game ROMs to anyone, then it falls on cloud gaming services to use PC gaming hardware to play the games on. So EVERY game that you play when using OnLive, no matter what the client device is you are using to play the game, is the PC version of the game. OnLive literally uses the PC ROMs that have been optimized for the cloud, using OnLive’s APIs.
   

2. OnLive has zero piracy. I don’t normally subscribe to the idea that anything is truly impossible, but I have to admit that the prospect of actually pirating an OnLive game is a fairly impossible feat. The actual games themselves are locked up tight in data centers, and the service only streams video of the game in action to the end user. What zero piracy means for publishers is obvious. Publishers like Ubisoft are currently threatening to dump PC gaming support altogether, because piracy has gotten too rampant on the platform – a claim that I can neither prove, nor disprove. So it may be true, or false at the end of the day. However, the zero piracy aspect of cloud gaming is a happy medium point between the desires of the gamers, and the needs of game publishers worried about piracy.

3. Publishers earn more money per unit sold by supporting cloud gaming, than they earn supporting console gaming. With OnLive, the publisher earns 60% from the sell of each ‘copy’ of their games; the other 40% goes to OnLive. That 60% that the publisher is earning, is greater than the usual 20% to 30% the publisher earns from selling the same game on a console at retail. With the retail distribution model, retailers get a cut, distributors get a cut, and the platform owner (Sony, Nintendo, Microsoft) get a cut. The cut from the platform holder alone is usually between $15 to $25 depending on the platform holder, and the deals they have in place with the game publisher (larger publishers get better deals, smaller publisher pay out of their ass). Subtracting $15 to $25 off the front of every game sold, even on $60 games is a huge chunk to lose on something, whether it actually sells-thru to the customer or not. But it is a fact of the business of selling console games that has not been able to be circumvented in two decades . . . until now. And that, you still have to cut retailers and distributors in on the revenue value chain. Also, any pre-owned sells of that same game, 0% of the revenue generated goes to the publisher. Publishers win big going to the cloud.
   

4. Cloud gaming is a growth vector in the core games industry. I think everyone actually paying attention realizes that cloud gaming is the future for the entire industry (whether we like it or not). Just today’s announcements by OnLive that you can now play your PC games anywhere, even on your Android smartphone or iPhone, is testament to the ubiquity that cloud gaming represents. Anyone attending the Cloud Gaming USA conference back in August, or looking forward to the Cloud Gaming Europe conference in January, can tell you that cloud gaming firms are popping up everywhere. Last count on my part, there are over a dozen cloud services similar to OnLive already known, with talk of doubling or tripling that number over the next three to five years. The very fact that your cable TV provider, broadband internet provider, and IPTV providers can jump right into cloud gaming services and offer them the same way they currently offer on-demand movies, just opens up whole new and untapped markets. Cloud gaming is here to stay, and for core games (as opposed to casual, and mobile games), is the one true growth market for the foreseeable future.

Alone, either of these has pretty solid potential of helping out the PC gaming. But combined, PC gaming is about to explode in ways that most of us have never dreamed of just a few years ago.

Cloud gaming will likely always rely on PC gaming hardware – eventually slightly customized, multi-core versions of that hardware for use in data centers. But ultimately, it is still PC hardware. Because of the proprietary nature of console gaming, cloud gaming will also always rely on PC gaming ROMs. And this is the key for the long term viability for PC gaming that cloud gaming brings with it. For companies like Ubisoft, there is a lot of incentive from piracy to abandon PC gaming altogether. Matter of fact, they have been threatening just that over the past month, with the revelation there is no PC version of upcoming Tom Clancy titles, Ghost Recon: Future Soldier. Think about that for a moment. There is a Tom Clancy game, a Ghost Recon title no less, and there are no plans to ever bring it to PC. If the future of PC gaming kinda isn’t turned upside-down by the thought of that, then I do not know what is. What’s next? A new Quake game from id, with no PC version planned ever? Okay, that one is a bit of an exaggeration, but I said it to drive the point home. There is an increasing incentive by piracy, to simply just abandon PC gaming altogether; forcing PC gamers to adopt consoles. And if Ubisoft is fiscally successful in this endeavor, then by this time next year, they will not be the only publisher following this plan of action.

But for all the incentives for publishers to abandon PC gaming, the advent of cloud gaming, and cloud gaming’s dependency on PC gaming, may turn into a much larger incentive to continue to support PC gaming. If publishers intend to take advantage of the growth market in the cloud over the next few years, they are still going to have to produce PC versions of their games to do so. The success of the cloud, is going ultimately going to force even Ubisoft to stop attacking PC gaming, and embrace it once again. Think about it. In order for them to exploit the benefits of the cloud, they will have to expend the resources necessary to continue to produce PC ROMs to do so. And if they have those PC ROMs in their possession, the chances are pretty high they will ultimately go ahead and release those ROMs to PC gamers directly, while they are releasing them to cloud services. And this how cloud gaming helps PC gaming to stay the course.

A few years from now, cloud gaming will have grown significantly where publishers can afford to release their PC ROMs to cloud services exclusively. But that’s quite a few more years down the road. In the meantime, if publishers wish to build inroads to the growing cloud marketplace, they need to get their foot in the door now. And while cloud services like OnLive are not yet large enough on their own make it worthwhile for most publishers to spend millions porting their games to PC, when you factor in the growing cloud market, with the existing PC market, there is an investment in the future that is going to pay off big time, as well as a helluva lot of money to be made in the short term by selling the same ROMs to both markets – even with piracy still an issue for one of those markets. And by the time cloud gaming grows to the point where publishers will deal with them exclusively, the technology will have also improved to the point where it is truly indistinguishable from gaming on a local PC rig. And I know that is a claim that most of you reading this, simply will never want to believe could ever happen. But it will, and even so, it is still a win for PC gamers. Just look at OnLive as the perfect example. When it originally got started 18 months ago, the service could barely keep up with consoles. It was laggy, it would cutout, it had tons of compression artifacts, textures on some games would be muddy . . . the list goes on. Today, playing more recent releases like Deus Ex: Human Revolution, Saints Row: The Third, and L.A. Noire, the experience over OnLive is practically indistinguishable from playing the same games over Xbox 360 and PlayStation 3. That is how far they have come in less than 18 months. In another couple of years or so, even some of the most stalwart of PC gamers may be questioning the need to continue to ignore and chastise OnLive like a ginger step-child.

But that’s getting off of point. My point is, even in the now, OnLive is good for PC gaming, and as more new features come to the service (like mod support, which is in the works), is probably the one thing that is going to convince console gamers in the millions to dump their consoles and take PC gaming seriously. Think about it. The next generation of consoles is almost upon us. 2013 is likely to bring both the Xbox 3 and the PlayStation 4. With the exception of games like Halo and Uncharted, which are exclusive to those consoles, over 90% of the games coming to both consoles are 3rd party games, almost all of them coming to PC. Given the prospect of spending $400 to $600 on a next-gen console to play the next generation of games (the bulk of which are 3rd party), or paying $0 and playing those same 3rd party next-gen games on your PC, Mac, HDTV, blu-ray player, as well as instantly having portable versions at zero extra cost to play on your tablet, laptop, netbook, or smartphone, if you were a console gamer, which would you choose? Take my word for it. Just a general perusal of the various OnLive-centric gaming forums, and it becomes readily apparent, that to many console gamers who make the switch, OnLive is more like a gateway drug to PC gaming, than anything that has come to PC gaming since Grim Fandango. You see it all the time. They come, because of OnLive, they have their eyes opened to the wider world of PC gaming, and suddenly they have Steam accounts, and are members at GOG, and are purchasing Humble Bundles.

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