$1.1bn valuation haha. That's my laugh for the day. Assuming an average tech/software sectors EV/sales of 1.65x that implies revenues of $670m (that's rather a lot of subscribers paying $4.95 a month). The sector average PE of 12x implies earnings of $92m. That's my second laugh of the day. At least their investment bankers are earning their keep.

I've never understood OnLive's pricing model. At first, I was pretty excited about the service. The idea of paying a reasonable fee every month to play the latest PC, XBOX, PS3 games without actually owning the hardware was attractive. Once the service launched, though, it was PC games only, quick moving games were unplayable(like the racing titles), the monthly fee is too high, AND, if you wanted to play one of the latest titles like, say, Assasin's Creed 2, you STILL had to fork over the $49.99 for a game that you don't even own.. So my question is, what market of demographic are they trying to tap into? Are there going to be enough players that are willing to pay full price for a game that is basically a DIVX stream of the same game they can just buy on their PC? Are there enough users that do not have GPU's capable of running a game bought through STEAM? I'm not slamming OnLive, I think it's a great idea, but NOT for the price that they have in place.

I've been thinking about this and the key fact is that the telcos (British Telecom and Belgacom) have made investments in Onlive that consequently value Online at an implied $1.1bn valuation. In Ol' Blighty there is a race to provide bigger and better broadband/TV/Phone packages. At the moment speeds are still on average 8megs over the phone line though they advertise 20 megs max (and get regulary slapped by the advertising regulator since that's BS). The point is differentiation. You can see what they are thinking. 'What if we could provide a gaming system as part of the package?". Makes sense, could work and I understand why they invested. That said the valuation is laughable and OnLive will end up being bought by a telco or cable company.

Has anyone tried the service and care to comment on the gaming experience for various genres and platforms?

A few weeks back I asked in my Facebook status if anyone was using or had even tried OnLive and got no responses, despite having over 150 developers in the 10-20 year experience range on my friends list. Sure not everyone responds to FB status inquiries but I often get several comments on game related news and questions and in this case got zero.

I haven't tried the service as I already own too many game consoles and one more box in the living room ain't going to happen for a while.

The "valuation" is most likely derived from the certificate of incorporation which states how many shares have been issued and at what price they were issued. This is public information that can be searched on the secretary of state website (probably Delaware). Whether its "earnings" or potential "earnings" justify that valuation is somewhat irrelevant. The investors invested cash in exchange for a percentage of equity and that transaction reveals what they believe to be the Fair Market Value of the company on the open market. It does not have to be logical or based on fact, just a negotiated amount. It will be interesting to see how the pricing adjusts if they can't gain traction considering iTV is going to be battling for the same consumers.