Warner Bros. backs new game console

OnLive aims to provide high-end play on computers, TV

SAN DIEGO -- Warner Bros. is among the financial backers of a new gaming venture, OnLive, that promises to leverage cloud computing and broadband connectivity to provide high-end play of the latest video games on PC, Mac or TV.

To be unveiled Tuesday at the Game Developer Conference in San Francisco, OnLive is the brainchild of Steve Perlman, who founded WebTV more than a decade ago.

Perlman described OnLive as a revolutionary, on-demand game platform that can deliver the latest and most advanced games on any TV via a sleek, inexpensive MicroConsole or on almost any PC or Mac. "You can have instant access to games," he said in an interview. "You just click on it and it goes."

Unlike current consoles like the Sony PlayStation 3 or Microsoft Xbox 360 -- or even the PC -- OnLive will have all the graphics, assets and game play taking place on its servers and then streamed in real-time using a special interactive compression technology that took seven years to develop.

Set to launch in winter 2009, OnLive is aimed at the more than 70% of U.S. households with a broadband connection. The company plans to charge a monthly subscription for access and then offer a number of different pay programs ranging from rental to outright purchase of games.

"By putting the value back into the games themselves and removing the reliance on expensive, short-lived hardware, we are dramatically shifting the economics of the industry," Perlman said. "Delivering games instantly to the digital living room is the promise game fans have been waiting for and OnLive makes that promise a reality that's affordable, flexible and focused on their individual needs."

Formed out of the Reardon Labs incubator in Palo Alto, Calif., OnLive is backed by financing from Maverick Capital, AutoDesk and Warner Bros. The company also has gathered an impressive management team that includes Perlman, former Eidos Interactive CEO Michael McGarvey and Charles Jablonski, former vp broadcast and engineering at NBC.

Although it's eventually going to compete with gaming heavyweights such as Nintendo, Sony and Microsoft, OnLive already has lined up the support of top publishers such as Electronic Arts, Ubisoft, Take-Two Interactive, Eidos, Atari and Warner Bros. Interactive Entertainment.

"OnLive is an innovative gaming platform that will be very well received in the marketplace, and it is a good fit with our strategy of bringing our games to consumers on the format of their choice," said Kevin Tsujihara, president of Warner Bros. Home Entertainment Group. "Our game titles appeal to a wide variety of audiences, so we are always looking at new ways to bring them to players of any age, and OnLive provides a terrific new option with their game service."

The appeal to publishers is obvious. Because the game resides on the server, OnLive COO McGarvey said there are no worries about piracy or even retailers selling used games without publishers sharing in the revenue. "We're also cutting out retail margins, cost of goods, returns, all those things that make it tough to be profitable in the games business," he added. "And our margin structure is much better because we're on a straight revenue share with the publisher."

OnLive will have parental controls, making it ideal for families, as well as the latest high-end games for the hard-core player. And because OnLive will be able to switch to the most powerful Intel and Nvidia chips in its servers the moment they become available, McGarvey said OnLive is a service that is future-proof.

"Hopefully, when people are still playing their current consoles in 2010, that technology will start to feel a little old," he added. "We kind of like our value proposition where we offer a fraction of the entry cost for games that will look and play better than a client-heavy solution that you can't upgrade."

Although it won't be offered initially, OnLive could easily be adapted to deliver movies and other linear entertainment as well as games on demand. "At launch we'll be very focused on gaming because it's the last digital content frontier that hasn't moved toward direct to consumer," McGarvey said. "But clearly if we can do interactive video. we can do linear video."

Of course, the game industry is littered with the corpses of startups who thought they could launch a new platform. Just this week saw the unveiling of Zeebo, a Qualcomm-backed console that plans to focus on developing markets such as Brazil, where Sony and Microsoft have made little inroads.

Because of that IDC game analyst Billy Pidgeon is taking a wait-and-see approach, though he noted OnLive potentially can offer publishers a lot of upside. "It could provide publishers with a way to go into direct digital distribution through a third-party," Pidgeon said. "But right now I'm a bit skeptical about their ability to stream that much content over the network -- and also they have to build a business."

But for now, the game publishing community seems to at least willing to give OnLive a chance. "OnLive's platform offers a new model for consumers to access our games," Ubisoft CEO Yves Guillemot said in a statement. "With OnLive, gamers will have a new community to play with other OnLive users, capture and share recorded highlights of game play achievements with other users, demo new games on the market and purchase and play titles instantly."