Ed
04-14-2009, 02:01 PM
Article From: http://www.videogamestocks.net/2009/04/onlive-next-sirius-satellite-radio.html
OnLive Is The Next Sirius Satellite Radio
OnLive has been making a lot of headlines lately. The company thinks it will kill console gaming. Others think it will fail.
And what do I think?
OnLive is the next Sirius Satellite Radio (SIRI).
OnLive’s management is out there talking a lot of smack about how amazing their technology is and how it will revolutionize the video-game business. Here’s an excerpt from a recent interview with OnLive VP of Games and Media John Spinale:
Without giving away our secret sauce, I can say that the servers have been custom built by OnLive to run high-end games like Crysis better than you can on a typical home gaming rig. Additionally, our servers go well beyond this because, in addition to running any given game at top speed, we need to do all the fancy bits to get it down into your home with instant response time. Which means we needed to create entirely custom gear to do this. What's nice about the design, though, is that we can continue to upgrade it over time, so that as the performance of various components continues to evolve, our service grows along with it.
In other words, all the time it used to take bits and bytes to flow between the CPU, hard drive, video card, ISPs, servers, routers, and whatever else, has all gone bye-bye. The media has been impressed by OnLive’s demos, but it needs to be tested under real-world conditions, NOT the cozy environment of a gaming convention.
And even if OnLive’s hyper-fast networking technology works under real-world conditions (geographically dispersed users, ISP hiccups), it will be incredibly expensive to operate. Building a network to handle sophisticated graphics and audio processing in a multi-player gaming environment with close-to-zero lag could easily push infrastructure costs into the hundreds of millions, if not billions of dollars. And that’s not even including expenses like staffing, marketing, systems maintenance, and network upgrades.
There are also numerous challenges on the content side. For example, Nintendo (NTDOY), Microsoft (MSFT) and Sony (SNE) will never allow their big-money exclusives like Mario and Halo onto OnLive. You need premium, and in many cases, exclusive content to move people onto a new platform, and OnLive just doesn’t have it.
Add it up, and what do you have? A company that will requires heaps of capital to build an expensive network to attract millions of subscribers to pay for that expensive network. And oh yeah, there’s plenty of ready-made competition for that network in the form of hundreds of millions of consoles and PC’s loaded with exclusive content people love.
Here’s one possible scenario:
1) OnLive Raises Big Money In an IPO
2) OnLive Stock Skyrockets Despite Massive Operating Losses
3) OnLive Raises More Money In a Secondary Equity or Debt Offering
4) Investors Begin to Wake Up As Stock Falls.
5) Bankruptcy
Sounds like Sirius to me…
OnLive Is The Next Sirius Satellite Radio
OnLive has been making a lot of headlines lately. The company thinks it will kill console gaming. Others think it will fail.
And what do I think?
OnLive is the next Sirius Satellite Radio (SIRI).
OnLive’s management is out there talking a lot of smack about how amazing their technology is and how it will revolutionize the video-game business. Here’s an excerpt from a recent interview with OnLive VP of Games and Media John Spinale:
Without giving away our secret sauce, I can say that the servers have been custom built by OnLive to run high-end games like Crysis better than you can on a typical home gaming rig. Additionally, our servers go well beyond this because, in addition to running any given game at top speed, we need to do all the fancy bits to get it down into your home with instant response time. Which means we needed to create entirely custom gear to do this. What's nice about the design, though, is that we can continue to upgrade it over time, so that as the performance of various components continues to evolve, our service grows along with it.
In other words, all the time it used to take bits and bytes to flow between the CPU, hard drive, video card, ISPs, servers, routers, and whatever else, has all gone bye-bye. The media has been impressed by OnLive’s demos, but it needs to be tested under real-world conditions, NOT the cozy environment of a gaming convention.
And even if OnLive’s hyper-fast networking technology works under real-world conditions (geographically dispersed users, ISP hiccups), it will be incredibly expensive to operate. Building a network to handle sophisticated graphics and audio processing in a multi-player gaming environment with close-to-zero lag could easily push infrastructure costs into the hundreds of millions, if not billions of dollars. And that’s not even including expenses like staffing, marketing, systems maintenance, and network upgrades.
There are also numerous challenges on the content side. For example, Nintendo (NTDOY), Microsoft (MSFT) and Sony (SNE) will never allow their big-money exclusives like Mario and Halo onto OnLive. You need premium, and in many cases, exclusive content to move people onto a new platform, and OnLive just doesn’t have it.
Add it up, and what do you have? A company that will requires heaps of capital to build an expensive network to attract millions of subscribers to pay for that expensive network. And oh yeah, there’s plenty of ready-made competition for that network in the form of hundreds of millions of consoles and PC’s loaded with exclusive content people love.
Here’s one possible scenario:
1) OnLive Raises Big Money In an IPO
2) OnLive Stock Skyrockets Despite Massive Operating Losses
3) OnLive Raises More Money In a Secondary Equity or Debt Offering
4) Investors Begin to Wake Up As Stock Falls.
5) Bankruptcy
Sounds like Sirius to me…