Now it's big business. First up is Gaikai, the streaming gaming service from Shiny Games founder Dave Perry that allows online ads to become full gameplay experiences - an idea that giant retailer WalMart is obviously keen on.
Then there's OnLive. Built on the dream of allowing gamers to play anywhere - any title on any screen in any location - the service is already having a rip-roaring 2011. With Silicon Valley millions in the bank, and the major publishers such as EA and Warner Bros on board, the future looks bright.
Ahead of its BT-endorsed UK launch in the autumn, the firm has unveiled its new controller, which allows for instantaneous gaming on nearly any modern mobile device or TV whilst bypassing the need for a console.
Perhaps even more potential has been unlocked by the recent explosion in the tablet market - with the likes of Apple's iPad placing a decent-size portable screen in the rucksacks and handbags of millions of would-be players.
Forget Wii U: fancy playing the hottest new RPG at home 'til bedtime, then levelling up a little more on the train to work in the morning? That's the dream - and OnLive swears it's not far off.
The biggest problem in its path is latency, and the unimpressive average broadband speed suffered by great swathes of gaming's biggest markets. However, as OnLive VP of engineering Joe Bentley explains in our interview below, the company is confident that won't be an issue for much longer - and that both consumers and developers will reap financial benefits...
Playing games on tablets is nothing new - why are you so excited?
Really OnLive is the only game platform that allows you to play on all devices. We've always talked about "OnLive everywhere" and it's finally becoming a reality.
A lot of these tablets have surround sound, they've got bluetooth headsets with voice chat, so it's like my own little mini living room. I'm playing Borderlands here and there's no compromises. I get to play on something that was designed to be played on, I can put this in my lap and play at work, school or a coffee shop. It's uncompromised gaming to go. At home I can plug it into my TV and its the same experience.
It's great because now our publishing partners have come full circle. They were really sceptical at the beginning of last year, and nobody believed us two years ago. But it's fun because everyone is getting behind OnLive now and building innovative, beautiful games that simply can't be played on tablets or even cell phones. Some of these games don't even run on consoles.
It's fascinating now because the industry is really getting its head around the fact that they can grow their market. Imagine you get kicked out the living room. Now you can take your iPad to the couch and play while the kids are watching cartoons or whatever. You could put two friends in a coffee shop and they could play against each other, instead of split-screen they could each have a tablet.
What does this mean for the very concept of what a games console is - and if Sony of Microsoft invited you to have a presence on their online service would you agree?
Absolutely, they would make great consoles. Our controller is a hybrid between a PS3 controller and an Xbox controller. It's all compatible, it would just work. There are OnLive guys chatting [Sony and MS], but we'll see where it goes. But it would absolutely work, we're ready to work with everybody.
What people are realising and waking up to is everything could be a console, why shouldn't you be able to take your game everywhere. I think the timing of this is perfect. When I joined the company I didn't think it was going to pan out this way.
I give lectures at university and I tell people that finally the internet has grown to be fast enough, and that it's really the age of the SOC; the System-On Chips that you find in the iPad, the snapdragon. They're making these magical smartphones and tablets take off in a huge way.
It makes you use your imagination: what would you do with faster Internet and these SOCs in TVs? It will soon be in everything up to refrigerators. This is what we came up with - turning everything into a console, not taking compromised gaming like Zynga or whatever but fully-fledged gaming with you.
It has to be instant, because the reality is we have a very short amount of time. The reason mobile gaming has taken off is because you can occupy your time at the bus stop or whatever. The limitations of those games, though, are that the entertainment only goes so far. Why compromise that experience?
LA Noire is a fabulous, wonderful story and you could sit there for weeks exploring it in different ways. Why not be able to take that with you and continue the story? It's like a good book.
Apple has announced a cloud service too, of course - which it revealed in the week you showed off your controller at E3...
Yeah. It was bizarre. Apple does great products as well. Coincidentally, Dick Silverman is my VP of system engineering, he's the guy that designed the OnLive controller, the game module and also Apple TV. That's why we have this great design.
It's a blast to watch people come full circle and see them say "yes this vision actually works". When I joined OnLive, there were only 14 people here. At the time, it was Crysis running on this little crappy laptop. I was sitting across the table from Tom Paquin, who is VP of industry for Netscape and is our CTO, and Rob McCool, who wrote Apache. They handed it over to me and said to play it. My head began to spin at the possibilities.
You seem pretty invigorated by the disruption you're about to cause...
(Laughs) It's a blast. Reggie from Nintendo was at E3 getting filmed by Bloomberg near our stand and it was for the Wii U. I mean... Ah, I loved it.
How far ahead do you think you are already, compared to what Nintendo has coming?
I haven't really had a chance to take a look at what they've got. The thing is that we keep dreaming these things up, we're not cdn.static. We've got a bunch of things, prototypes in the works.
Right now, you can have two people on two different tablets playing the same Lego Harry Potter or Lego Batman. Here's one we've demoed before: our CEO Steve is always on the road and a huge baseball fan. At E3, Steve was talking to his son playing MLB and was like: "Okay let me show you how to do that." They switched control, which we call game swap. So he's in control showing his son what to do over voice chat and then they swap back, going back and forth.
Gaming is social, and co-op is the best - but it should also be the best when you're not in the same living room. These are kind of accidental discoveries but once we get the kinks worked out, every four weeks or so the future is coming down.
Are developers excited about you cutting out the middle man when getting a game to its audience?
I can't really go into details, I was at Penny-Arcade the day Randy Pitchford announced they were doing Duke and we happen to have a dinner booked with them that night. So here it was number one on Twitter that day, New York Times and he was super giddy. He started his career working on that title and was super stoked, Randy is one of the most creative people in the industry, he gets gaming, he lives and breathes it and really couldn't care less about the business side of it, he really doesn't want to have to deal with it, it's like a necessity just to get a paycheque.
What I like to be able to do is to ask whether we can create a platform where developers can focus on what they're really good at and help them do new different things. One of the things is our UI, which is actually built on a game engine part of the SDK, live feeds can come in and clips, all of which can be used in game design.
Do you think you offer developers better value than the current platform holders?
We absolutely know we do already. The others can't match us for value. In a retail model you take a $60 title, the retailed gets a cut, you have to play Xbox, Sony, Nintendo, everybody kind of gets a cut out of it. Then you face the problem of second-hand sales and piracy.
There's no piracy here or second hand sales with OnLive. Our games are already on digital distribution prices so run about $10 cheaper than retail, so we already have the advantage of a discount. I can't go into specifics on the cuts and margins but studios are still making a better deal off us...
... than with Sony, Microsoft and Nintendo?
Yes. It was really [UK studio Rebellion's] Chris Kingsley that keyed me on to this. We were in Oxford last year and he said: "You have the ultimate economic marketplace here that lets you adjust the model and find the right price point." If a guy's got to have Duke Nukem on launch, if he wants to pay $50, he can. But if he doesn't have the money and is the kind of guy that likes to get a lot of titles for cheap, we have the Play Pack all-you-can-eat buffet model.
If you watch game sales, a lot of them drop off after two months. Then publishers start throwing in DLC to keep it going. This week we have Homefront coming into the Play Pack, a game that is only two months old, a top tier multiplayer title. Why is that happening? Because as the game curve comes off the top of the Play Pack you realise you can get a longer lead by finding that other type of shopper who would normally go to the used bargain bin - or second hand bin - where you would get no cut of of it. The way we divide that up is game developers get paid depending on usage, the higher used games in the Play Pack get the most out of that cut.
Can you explain how you offer value to consumers long-term through your payment models when they can go to a retailer and buy a game for a one off fee?
We have a lot of different price points, sales and rentals. There's this idea of ownership. I recently moved and got rid of all my vinyl records and am debating whether I should do that with my CDs next. The physical good is no longer that important to me as long as I have access to go back periodically. Each medium is different: with music I want to go back and have my kids listen to The Rolling Stones or The Beatles in the same way my parents did for me. But games are played intensely for two to four months and then we maybe go back to refresh our memories when a new version is coming out.
OnLive has price points such as subscriptions, rentals, Play Packs and the Play Pass, which is like ownership. The prices are so affordable and every game has a free demo too. I'm also convinced the Play Pack will continue to grow. Maybe it will all go that way, it might be thousands of titles all available for a flat fee.
It's hard for game publishers to get their head around this because it's scary for them. They don't know whether they're going to make or lose money and they're responsible to the Wall Street markets and the bottom line. But I think for the consumer its just about getting over the fact that you don't have the media in your hands.
There's a fear that only the people with the fastest broadband speeds will be able to enjoy the experience properly which other will suffer lag and where are we in terms of mainstream broadband versus what OnLive requires?
It's growing like crazy. Our three largest investors are the three largest carriers in the world including AT&T and BT. These carriers understand their growth and how they're building out their networks. Since they're investors in OnLive they have an interest in making sure this product is successful.
We have discussions with their business guys and networking team, helping them to understand our traffic, how its changing. The reason why they're investing is because the world is demanding more and more bandwidth, in the mobile market and 4G. People want to do things like watch films, play games... what the carriers have to do is figure out if they're going to put new fibre into the ground, how can they monetise it and get a return on the investment.
This is why they make investments in companies like OnLive - because they may be able to provide a bundle adding the service when a user upgrades to a 10MB connection or whatever it is, that will help supplement the cost of putting the fibre down. They realise they have to build faster networks. There are a tremendous number of households in the UK and US that have the bandwith today and it's only growing.
The network is getting better and the latency is getting lower. The latency is phenomenal in the UK by the way. We were at Rebellion and had a ping time of nine milliseconds - we were asking ourselves how that was even possible. It was the fastest network we've ever seen.
As people see more forms of entertainment like Love Film, OnLive and iCloud they're going to go their carriers and ask for [faster broadband]. You can't always build for what people have today, you have to think about what people might have four or five years from now.
We don't need to have 25 million users tomorrow. A year from now its what we'd like - but what is the internet going to look like then? None of us know.
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OnLive: 'Xbox and PS3 can't match us for value'
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