Has Onlive finally found a market need?

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Video streaming service OnLive has long been a business looking for a market.

The company offers high-quality, streamed, console titles to a PC or its proprietary $99 set-top box. It aimed to eliminate the need for consumers to buy a PlayStation 3 or Xbox 360 by offering a simple one-off subscription, using a similar business model to cable or satellite television.

I have long been sceptical about OnLive. I fear that, without compelling content, it will struggle to appeal to enough customers to cover its high fixed cost base. I have argued that OnLive’s only customers are Microsoft and Sony, either of whom might acquire the company to improve the service of their existing consoles or to eliminate a potential competitor. I viewed the investment by BT into OnLive as a sign that the company had to give up equity in order to secure distribution. I even put OnLive in my list of 10 games businesses that are doomed.

I may just have changed my mind.

OnLive has just announced a $39 million investment in the company by HTC, the Taiwanese manufacturer of smartphones. I now begin to see a unique selling point for the OnLive technology.

My challenge with the OnLive model was always that it offered little compelling reason to an existing console gamer to throw out their PS3 or Xbox 360 in favour of a subscription service. It doesn’t have a comprehensive range of titles. Gamers are already heavily invested in existing technology, and the OnLive service was yet another box, yet another subscription, for access to only some of the best gaming content.

But mobile? That’s a different story.

I’m still not fully convinced. Mobile gaming is different from console gaming, and simply streaming a game designed for a 40” HD Plasma screen to a smartphone may be a poor experience. Bandwidth may be too limited for the service to work.

But the sales figures of Infinity Blade suggest that there is a market for console-quality mobile games. OnLive could enable a streamed, high-quality gaming experience to a mobile, probably over Wi-fi, that could be very interesting indeed.

I’m still not entirely convinced. I am inclined to believe in an AppStore-led model, with games given away for free and having a freemium strategy for allowing the most involved users to pay the most for their experience. A streaming subscription service locks users out, while limiting the amount they can pay on the upside.

Nevertheless, the investment by HTC is the first time I’ve thought about OnLive in a positive light. Streaming games to the mobile is a stronger USP than streaming games to the console.

Now we just have to watch for consumer takeup.

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