Back from the dead: OnLive on what went wrong and what has to go right

"It doesn't make you particularly smart saying something's going to fail."

OnLive is dead. Last month's news shocked the game industry, sent confidence in cloud gaming tumbling and left OnLive's staff out of a job. Soon after founder Steve Perlman, his reputation shredded, packed his bags for something else.

That, we thought, was that. But OnLive survived. Investor Lauder Partners swooped in to grab the assets and cloud gaming tech on the cheap using a management buyout and re-hired half the staff. Now, the new OnLive is a leaner company, and, after understandable downtime, is back and wants you to know about it.

At Eurogamer Expo we sat down with the new CEO of OnLive Charlie Jablonski and UK boss Bruce Grove for a no holds barred interview on what went wrong and what has to go right for the cloud gaming company to re-establish itself as a viable business. And what does all the turmoil mean for OnLive customers? Read on to find out.

What is the difference between the new OnLive and the old OnLive from your customers' perspective?

Charlie Jablonski: From an end consumer perspective I hope they have seen very little if no change in terms of the quality of the service. As hard and challenging as the change was at the end of the summer, one of the things we wanted to make sure was the service continuity continued. My old role at the company was operations. So I'm familiar with the metrics and the quality of service. So if you are an end consumer of OnLive, that has changed very little.

The changes we've made hopefully make it a more focused company on being more business oriented and more expeditious in helping out partners make money, because this is about a business and delivering on the great promise cloud gaming has.

Why did OnLive collapse?

Charlie Jablonski: OnLive was a very big idea. A year ago when we were at this show and it launched it was continuing to prove to people that this is doable and it works. In order to do that, that requires a large amount of capital and a burn rate and a staff that was hard to maintain through various funding routes.

In the past we had been able to raise money as a start-up. We thought we were on track to do that at the second quarter of this year, as we had before, but for various reasons none of those things came to fruition, and we quickly had to execute a strategy that enabled the service and the assets and the technology to move forward. That made the staffing reductions very painful, but they had to be done to come up with a company that is fundable and can be focused on what the business is going forward.

What were the reasons the funding didn't come through?

Charlie Jablonski: I was not involved with those discussions directly. Steve, the previous CEO was. They declined to participate or re-up on previous terms they'd been in before. In my life in the Valley I have run start-ups many times. The number of times you go out there with your deck and the number of people who seem interested to the number of wire transfers you get is very large. We'd been through this cycle before and someone or something had always come through. This time unfortunately it did not and caused a very painful process.

There has been much said about Steve and his ego. In your opinion, how culpable was he for the collapse of the company?

Steve is a genius and it was his dream, ambition and effort that got and made cloud gaming a reality. We would not be having this conversation today if it wasn't for Steve Perlman and there would not be a vernacular at this show where cloud gaming is accepted - Charlie Jablonski

Charlie Jablonski: All of us that were at the company there bore responsibility for where we were. Steve is a genius and it was his dream, ambition and effort that got and made cloud gaming a reality. We would not be having this conversation today if it wasn't for Steve Perlman and there would not be a vernacular at this show where cloud gaming is accepted.

As the CEO you are ultimately responsible for everything the company does. I've been in a position where I've had to take drastic actions in other companies because certain things that were supposed to happen didn't. It's not an issue of culpability or whatever. Any CEO and the management team, which I and Bruce were part of, were responsible.

If the funding had come through we would be having a different conversation. It didn't and we had to react very quickly to ensure continuity of the service for folks and to protect the assets and the people so we had something going forward. It's not easy.

I'm sure as I get out there more and more there will be some people who don't like me. I have a different thesis about getting the story out there. We were very out there with what we were doing and how we were going to do it. Sometimes that is difficult to execute against being very aggressive in the marketplace. Now, with a more nimble and focused group of people, we want to be more realistic in what we're doing, and be more conservative in how we talk to chaps about you. It's about us saying, okay, we can only do certain things and we're going to do them well, and let the people responsible speak to the story because it's not about any one individual.

Is that what OnLive's key problem was? That what you were doing wasn't realistic?

Charlie Jablonski: Realistic in what sense? Technologically it was realistic because obviously we did it.

I mean in terms of popularity.

Charlie Jablonski: Look, any new great idea, you go to the market, you think you know what's going to succeed and you have to adjust accordingly. Obviously we now realise we need the support of distribution partners. We had some great assistance in the past, but we need to capitalise on that more to help with things like customer acquisition and marketing.

I've been involved on a lot of start-ups on several sides of the table. It's not a unique problem where you think you're going to go out and do snow tire deodorant. You introduce it and realise maybe product needs to be fine tuned to get an adjacent market of have a different means to get it in front of customers.

How popular exactly is OnLive right now?

Bruce Grove: One of the things that was interesting when events happened, the service has been up and running. Everything has been operational. Last night we launched Sleeping Dogs. We're still very much focused on getting content out there. There has been some great pick up on that. But we saw this bad event happen to the company, and everyone was expecting the worst, but that didn't happen. In fact, one of the things I noticed as we followed the press particularly from the fans and the people engaged in the service, was we hope they pull through. We hope they succeed. We want this to happen.

For the last four weeks I've been running around publishers, as have multiple others in the company talking to our partners and publishers saying, okay, here's what's happened, it's been quite a jarring event, but now we've got to move forward. Everyone is saying great, because we want this to happen. We want this to move forward.

So, let's figure it out. Let's figure out events of the past and let's see what we need to change. Everyone wants to see this succeed. There's been, I can honestly say, a very positive outpouring. There are always going to be articles. It's very easy when a start-up comes out for someone to say that's going to fail, because over 90 per cent of them do. It doesn't make you particularly smart saying something's going to fail. What's more relevant is the number of people saying, we want to see this succeed. There's a lot of that element. That's the cool thing about the reaction and the response.

I meant more in terms of customers. Reports revealed OnLive had 1800 concurrent users. Exactly how many is OnLive experiencing right now as we speak?

Charlie Jablonski: We've seen no material change. The patterns adjust with product releases. It's as it was before the event.

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Can you confirm those concurrent numbers?

Charlie Jablonski: We don't talk about subscribers because it involves relationships with publishers. So we don't talk in terms of user numbers. That's a polite way of saying no. Sorry.

That 1800 concurrent figure is surprisingly low.

Charlie Jablonski: I will tell you, without speaking to the number, having been involved in subscription and concurrency numbers in the past with different businesses, whether it's cable modems or subscription video on demand, there are a tremendous number of people here at the funnel. Yes, you may only see the numbers here, but the area under the curve is what really matters. That's what we need to exploit and deal with.

This is not unlike a lot of other consumer facing services in terms of those kinds of numbers in markets we had deployed to and marketed to.

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What is the number you look to in terms of being most important then as a gauge of the health of the business?

Bruce Grove: We have all these multiple different offerings and they have different value. If you come onto the service and buy a retail priced game and we see a whole load of people come in, that game spikes and then it's seen as a success and then it tails off, because that's what happens with every retail game. And then we have the subscription pack where we have a whole load of people paying month on month to be engaged. The reality is, although that doesn't have the spikes and excitement of a first day launch, from a business perspective, as an ongoing business, there's a lot more reality in the way that works, particularly as a platform where we're trying to deliver content.

So, part of what we're working through right now is, we don't have the exact answer to that question. We're working on that right this second. We've got all of these different things. Which are the right ones for the value of building this business?

Look at the services that are coming out there in the cloud streaming space. It doesn't matter whether it's TV or radio. The principle business is around getting a recurring engaged customer of some form. And then premium offerings are the cream that goes on top of that. It's how do we build up that core engaged recurring audience that is the key to these businesses going forward.

And how big is that right now for OnLive?

Bruce Grove: Right now, the recurring engaged audience according to the number I saw this morning is 1.5 million.

What does recurring engaged audience mean exactly? Are these people paying for content?

Bruce Grove: These are people coming in and using the service. They've been on the service within the last month and they're actively participating in the service. So we've got an audience of 1.5 million who are coming in every month checking it out.

Our job is best ways to monetise them. They may be making a one off purchase. They may be in the subscription pack. They may be doing a rental. They may be doing a demo. Our job is to now take that, grow that audience, but also make it financially viable.

Charlie Jablonski: One of our senior executives came out of Pandora. This is a very similar challenge. It's easy to get sampling. But then you need to have the product and a reason for them to keep coming back and hopefully give you money to do something. That's the challenge we have. Customer acquisition is always doable but at a cost that makes sense. You look at a customer life cycle cost as a metric. It doesn't matter if I have a hundred customers come in, if I lose money on every one I'm not going to make it up on volume. Looking at the data of what causes people to stay engaged is very important.

That's the key figure - the number of people who do that. But that's not one you talk about publically.

Bruce Grove: That's the figure we need to grow.

Charlie Jablonski: It's never enough, if that helps.

Bruce Grove: We're here as a business. Our job is to make money. When people talk about free-to-play, it all sounds very nice as if there's no money. But somewhere in that model there's always money that has to transact. It's our job to figure out what the right models are to take this customer base - and it it is a wide customer base - and monetise it successfully for the company and for all of the people we work with. There are publishers, partners, delivery and operations.

Look at the different services that are out there. Steam is the dominant player in the distribution space. When you talk about being online on Steam, it's because you're logged in. Every time you fire up your PC it logs into Steam and claims you as online. So we're talking about numbers that aren't necessarily comparable. When you're logging into OnLive you're making an active decision to go in and start up and play a game.

For us the important thing is to show there's a business and show there's a model here that's engaging, and attract customers. When we attract customers that will become self evident by the way the customers talk about it and engage with the platfrom.

You wouldn't be here if you didn't believe cloud gaming still had a future. But you must accept that the trouble OnLive has experienced has dented confidence in cloud gaming.

Charlie Jablonski: I take the point that people when the event happened had concerns. That's a fair point. We demonstrated to our customers and publishers that their day to day business with us has remained the same and unchanged. So, if there wasn't a future of a business here, why would an investor step up and say, look, we've got a problem, we're now going to continue going forward because we really believe there's something here?

The investor we now have has been in the cloud streaming video consumer space from the Valley for 15 years. That's a tremendous validation. This is not about anything in the short term of changing something in a week or two. This will become a business, and just judging by the number of people who want to be in it, it's a much better business today than it was a year ago.

So what will you do to achieve this?

Bruce Grove: In the short term the plan is to keep everything going as it is today and continue to bring on new content and make sure the customers we already have continue to get served. It's very important we don't break that.

Then, going forward, one of the things we are all as a company doing right now is, there's kind of a mixture of refocusing but also narrower focusing. We had a lot of different things going on. Now let's focus on the things that are very important.

What are they?

Bruce Grove: We've looked at some partnerships in the past. We've always talked about coming to smart TVs. We've talked about products like Ouya. They're going to be very important because they're going to expand the audience. So by focusing on ways to get out to the audience, that's going to be key for us.

So, working with partnerships and better using those partnerships to help raise the awareness for example. If you switch on a TV and the product is there, it there's that instant moment of just trying something out, and you expand your audience greatly. Right now, with a very limited marketing budget, everything we have to do is by our own word of mouth, by our own voice. That's very challenging as you're developing this.

Charlie Jablonski: As we want OnLive to be anywhere and everywhere, to be as accessible to the end consumer as possible, that means working with partners to enable them to enable that, whether it's a hardware device or a software offering. So not only do they make money out of it, but also it's relatively easy for them to implement on a technological, marketing and branding sense.

It's sometimes easier said than done, but that's what we have to do.

Are there any areas the old OnLive was focused on that you now won't be bothered with?

Charlie Jablonski: The gourmet cooking is out now. We're definitely not pursuing that any more.

We're trying to target both hardware manufacturers we can conveniently put them and us together. You've seen us pop up on a couple of platforms with Google TV. So, enabling things like that. Focusing on the geographies that make sense. To target that and not try to be as wide and in multiple places as possible. It's both a money and quite frankly a resource issue. With a set number of staff they'd like to know what they're going to be working on today or tomorrow.

How many people work for the company right now?

Charlie Jablonski: About half is the old joke. We're close to 90 people, and they're almost all people who were with the previous organisation. It was very painful to have to go through one of these exercises. It always is. I don't want to minimise the pain as you have this step function at an organisation. One of the reasons I haven't been out there is dealing with internals to develop a strategy to say, okay, this is what we're working on today and the day after tomorrow.

It sounds to be like you're going to focus on fewer things and do them better.

We're not the first company to go through something like this. Nor will we be the last. It's not an unprecedented event - Bruce Grove

Bruce Grove: I think so. There are lots of things we know now. We have a lot of learnings. We have a leaner organisation that allows us to take those and adjust to them. We're not the first company to go through something like this. Nor will we be the last. It's not an unprecedented event. But not we've got this opportunity to take everything we learnt and apply the pieces we know work and push away the things we know were dragging us down. Internally there were things that were holding us back just because time had allowed them to grow and develop that way.

Like what?

Bruce Grove: Maybe you have contracts that have been there for a long time, or you may have certain operational practices that are just the way you do things.

Charlie Jablonski: Or pursuing being aggressive in other parts of the world you haven't launched in. That takes up resources. Let's say, take a fictional country, Albonia is interested. My time is there to be wasted, because that's what a CEO does. But when I bring an engineer or one of my staff members along, every time they're doing something there's something else they're not doing. Whenever I've run a start-up the issue is crossing things off the list, not adding things to the list. That's sometimes very painful because when you start out you're going to conquer the universe. That's the thought process. You have to be that way, because you really don't know whether you're going to be a desert topping or a floor wax, even though you've got this great technology behind it.

As you get it out there you then refine and focus on what you do and make the transition from technology demonstration and a theory proof to business sense with our partners. So how we deal with our partners is now totally different that what we were looking at two months ago. And we need to stick to what we do best, because we can't do everything. If somebody else is doing it and I can take advantage of it and it's cooperative, why the hell not?

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How many servers are you running right now?

Charlie Jablonski: Several thousand.

We all expect next generation consoles to launch late next year. Won't the games designed for them put your servers under an incredible stress?

Charlie Jablonski: A start-up like us has to keep innovating. A start-up does not win by engaging into a land war in Asia. But innovation applies both to raw technology. Consoles evolve and there are these step changes out there. We always continually iterate our server design. You have to. We're aware of it.

So you are in a position to improve the OnLive experience despite your troubles?

Charlie Jablonski: Oh yes. We have to. If we don't we will die.

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