[Gaikai and OnLive are often lumped together under the much-hyped label of "cloud gaming," but the two companies are notably different. Gamasutra speaks with executives from both companies to sort through OnLive and Gaikai's distinct approaches to the emerging space.]
"Cloud computing." Some argue that it's an annoying marketing buzz-term that describes server-based computing that has existed for years, or a way for companies to have ultimate control over their content and their customers. (Go ahead and Google "cloud computing bullshit" and see what comes up.)
Right around 2009, though, we started hearing about "cloud gaming." Two companies emerged out of nowhere that year, both claiming to have figured out how to stream graphically-intensive games from remote servers to lower-powered PCs and even televisions. It would be up to these startups to show that there is some real substance behind the buzz term.
Those two companies were OnLive and Gaikai, and despite being grouped under the "cloud gaming" umbrella, the firms -- led by Steve Perlman at OnLive and David Perry at Gaikai -- are distinctly different beasts.
Both innovators in their respective fields, Perlman is known for his work on QuickTime and web-based services like WebTV, while Perry is known in the game industry as founder of Shiny Entertainment and an active participant in various aspects of the games industry.
The two entrepreneurs are approaching cloud gaming from distinct angles. OnLive is a consumer-facing service that sells streaming game access to consumers via a storefront, giving publishers a cut of those sales.
Gaikai, on the other hand, is business-facing, positioning itself as an "enabling platform" -- retailers and publishers pay Gaikai for its ability to provide streaming technology in order to reach gamers directly.
But the differences go even deeper than the distinct business models. Both companies have very different approaches to utilizing the web, different approaches to their networks and different visions of where exactly the cloud will take gaming. Turns out that there are real businesses, new technologies, and fascinating ideas behind this ambiguous, fluffy term "cloud gaming."
The Latency Question
Both Perlman and Perry are probably tired of talking about latency issues with cloud gaming, but the fact is that latency can utterly destroy a gaming experience, which is bad for gamers as well as the publishers who put their games on the cloud.
OnLive and Gaikai have distinct approaches to the latency issue: where OnLive has only three datacenters in the U.S. (Bay Area, Texas, Washington D.C.), while Gaikai currently has 24, with more on the way.
These servers host games that are streamed to gamers' computers all across the country, and data has to move back and forth across long distances.
Perlman defends the strategy of having relatively few datacenters, saying OnLive simply does not need so many. "There's a big misconception about [latency]," he claims. "You see the vast distance, and you assume that's where the latency is. There is much more latency in the last mile to your home on a DSL or cable modem connection than there is in the internet.
"So a thousand miles on the internet, if you have an optimal route, is about, say, 21 milliseconds. But we have DSL connections of 25 milliseconds in the last mile of latency," Perlman explains. "And of course most of the people are closer than a thousand miles; they may be 200 miles or so.
"We'll probably add one more [datacenter] -- we haven't needed one." He says that OnLive has "direct connections" to about 10 different ISPs, adding that 90 percent of OnLive's traffic doesn't go over the "internet," per se, rather directly through the "backbone" of various providers.
Perlman is over using latency numbers in order to justify OnLive. "The reality is that people are using it and they like it," he says. "We could do whatever kinds of scientific measurements we want, but it really comes down to the experience." He adds that a new algorithm is slated to be implemented later this summer that will help further reduce latency on OnLive.
Gaikai's approach to latency is markedly different. Chief strategy officer and former SVP of EA's Global Online Group Nanea Reeves says, "Having the datacenter close to you is going to have the biggest impact on latency. So if you're a company like OnLive, and you're in three or four datacenters... it works great if you're in that neighborhood. The fact that [our datacenters] are distributed is a key differentiator in our speed."
She claims that web performance company Gomez tested Gaikai and OnLive's latency, and Gaikai was faster 25 out of 26 times. A behind closed doors E3 demo of Crysis 2 running off of a remote, high-performance Gaikai server exhibited minimal noticeable latency -- less so than my personal "out in the wild" experience with OnLive.
"It's an architectural decision made early on -- it's difficult to manage, there's a lot of service infrastructure involved in managing that, but it is really what will cause us to win," Reeves adds.
Gaikai head Perry says, "Our objective is to get closer and closer to the users... We're very focused on latency... There's no limit as to how many datacenters we'll have. We'll end up with about 30 by Christmas.
"It's distance. It's the whole transit," he adds. "The most valuable thing besides getting close is peering, and that means going direct... That's been one of our strategic plays, getting great peering with the [ISPs]. That's an enormous part of this equation... That's something that both companies [OnLive and Gaikai] had to solve. There's not a way to get this to work unless you solve that."
The Race Towards Ubiquity
Accessibility: it's the whole reason that cloud gaming is such an attractive notion. Being able to access games regardless of one's location or the power of local hardware has tremendous value to consumers, and both Gaikai and OnLive realize this -- but once again, their approaches to the same problem differ.
At E3, Perlman demonstrated OnLive-streamed games playing on a variety of different devices, including TV, iPad, Android tablet and smartphone. Ubisoft even created a touch-enabled version of the upcoming From Dust which was running on a tablet, streamed from OnLive. It's that kind of remote processing power that can make such high-end games a possibility on mobile devices.
Perlman says that OnLive's philosophy is to make its streaming service as frictionless as possible, letting users easily access their games on various platforms, with support from various control methods such as a traditional gamepad or mouse and keyboard, or an on-screen touch gamepad or custom touch controls.
The company also signed up with U.S. electronics firm Vizio early this year to incorporate OnLive's technology in Vizio's line of internet-ready HDTVs and Blu-ray players.
Perlman expects OnLive to be in 25 million televisions by the end of the year, and 50 million Blu-ray players. "You get to the point where our total addressable market... is going to be larger this time next year than any game console," he says.
The math is simple -- Perlman is projecting a total addressable market, or "TAM", of 75 million this year. Not all of those people will adopt OnLive, but Perlman is counting on internet TV users who use built-in Netflix apps to hook their TVs up to the internet, and then later -- hopefully -- explore what OnLive has to offer. OnLive already has an "in" to TVs thanks to the relatively cheap MicroConsole, but streaming game tech built into living room electronics takes a more seamless approach to market penetration.
"When you suddenly start seeing OnLive on every device in your home, and you have to do nothing to get access to all of your games, and they're available anywhere they are and all the hassles of gaming go away ... at some point, people say, 'Why do I have all this different hassle?'" he says.
Mobile will be "huge" for OnLive says Perlman, who adds that the company has dozens of engineers working on getting OnLive working properly with various mobile chips.
Gaikai's Perry shrugs off the approach that OnLive is taking to get its service on many different devices. "The thing that they need is a chip in the device... to do their decoding," he says.
"I will promise you this: you will see Gaikai on digital televisions in 2012," says Perry, "and it will not require any big [partnerships]. I would expect it to be on lots of televisions. We're able to stream our [technology] into the TV without putting in any chip. That's a pretty big advantage, and there's been a lot of effort put into that... We can put the Gaikai app on the Vizio TV without modification of the Vizio TV."
Last year, Perry posted images of World of Warcraft modded for an iPad's touch screen, streaming to the device via Gaikai technology. While that was just a prototype (Gaikai stresses that it does not have a deal with WoW developer Blizzard), Perry says that Gaikai's team is hard at work on bringing Gaikai to mobile devices.
The goal is to get on as many screens as possible, seamlessly. "As long as the device can accept a video stream, we can deliver to it," says Gaikai's Reeves. "And since we don't require a custom chip, we're dealing with standard technologies here, and that's another big differentiator between us and other players out there. We've figured out how to make the devices think what they're seeing is standard."
"Where Netflix can be deployed, that's where we can be deployed, that's how you have to think about it," she adds.
Sharply Contrasting Business Models
Gaikai and OnLive surfaced around the same time, back in 2009, when the possibility of streaming gaming was barely on the public's mind. When two companies emerged using fundamentally similar technologies, comparisons were inevitable.
But the two business models employed by Gaikai and OnLive are vastly different. OnLive is essentially an all-in-one streaming game business that's targeted directly towards gamers. If you've ever used iTunes or Steam, it's quite similar, only instead of having to download a game to a hard drive, players pay for instant streaming access to these games. OnLive is betting on the notion that the idea of actually "owning" software is fading away -- a notion that many outspoken gamers won't let go of.
OnLive's customer-facing business can also afford to try out new pricing strategies that are easier for a cloud-based service to implement. The company offers a Netflix-style PlayPack option that lets users pay a flat rate of $9.99 per month for access to certain OnLive games.
OnLive creates the technologies, brokers deals with publishers to bring their games to the service, markets to gamers, and works with hardware manufacturers, taking a cut of sales generated through the service. OnLive will host over 100 games this year, and 150 games are "in process," says Perlman.
On the other hand, Gaikai's executives position the company as a service for game publishers -- Gaikai doesn't try to do business directly with gamers. Instead, the company enables publishers with the technology and ability to deliver streaming games.
Currently, Gaikai is focused on a try-before-you-buy model. Gaikai enables publishers who buy online ad space for a game to allow web surfers to click through and play a demo through a browser, with no game install, and after just a few seconds of loading time. At the end of this demo (and also during), users have the option to click a link that directs to the publisher's digital storefront, or to a physical online retail outlet. Gaikai gets paid by the minute, by publishers or retailers, based on the number of minutes users spend streaming the demos.
Walmart recently implemented a major deal with Gaikai, which now powers game demos of Electronic Arts' Dead Space 2 and Mass Effect 2 through the retailer's website at its Gamecenter destination. It's a powerful advertising tool that takes the core idea of accessibility and implements it in a different way than OnLive.
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 Walmart.com 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."
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?"