Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.
Confounding many of its detractors - including this columnist, I admit - the OnLive service is now up and running. Early users seem impressed by certain aspects, such as the community features, but nonplussed by others - most notably, the performance of the service in fast-moving, graphically intensive scenes, which has drawn criticism from most quarters.
As a result, OnLive presently seems like a pretty bad deal as a replacement for a games console or high-spec PC. However, the very fact that the service has launched at all and works in some contexts has landed a blow in the name of cloud gaming. Internet speeds will continue to rise rapidly in the coming years, while the cost of powerful video decoding hardware for the client side will continue to fall, helping to eliminate two of the key bottlenecks which OnLive-style services presently face.
The extent to which those obstacles will block the popularity of cloud gaming in the coming years should not, however, be underestimated. Internet infrastructure by its very nature is plagued by bottlenecks. There are whole swathes of the planet which don't provide connections fast enough to operate OnLive even in its present state - and not just in poorer countries, either, with many developed nations (including large parts of the UK) still regarding 2Mb as a top-end connection.
Even in places where connections are fast enough, contention between users at peak times or congested pipelines between ISPs can drastically reduce speeds, making cloud games unplayable. More unreliable still is the situation in individuals' homes, which lies entirely beyond the control of companies such as OnLive.
The company would argue, for example, that its deal with BT in the UK will bypass many of the network issues that could hinder the service - but it is powerless to stop your gaming from being wrecked by a flatmate starting to watch a HD video on iPlayer or downloading something large from iTunes or Xbox Live. Many homes also use Wi-Fi connections to hook up their various devices, opening themselves up to a host of interference problems from appliances or other networks - problems which most services are robust enough to survive, but which would seriously impair an OnLive session.
These are not insurmountable problems, but they are not minor issues either, and it is naive to make assumptions about a timescale on which they may be resolved. These technical issues mean that the audience for cloud gaming is heavily restricted at present, and it's not unfair to suggest that the growth of the addressable audience will be quite slow.
There is, however, an even bigger question facing OnLive - one which cannot be answered by reference to the march of technology. That is the question of the business model for the service. At present, it allows consumers to play a lower-quality version of existing games, for which privilege they pay full price for the game plus a monthly subscription fee. It is a singularly unattractive proposition, one which reduces all of OnLive's technical achievements into being an answer to a question nobody has asked.
Actually, that's not entirely fair - there's a select group of people who are asking questions to which OnLive is the logical answer. They are, of course, games industry execs, for whom the concept of a system which takes ownership of games entirely out of the hands of consumers is something of a holy grail.
It's not merely that this could, in theory, be a silver bullet against the demon of piracy, either. In common with other media industries, games companies have shown great enthusiasm in recent years for moving away from the idea of selling products towards a new idea - selling licences. Under this system, you never actually own a piece of software, you have merely paid for a licence to use it in certain restricted ways.
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