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Cloud Gaming Service OnLive Throws Out Monthly Fee-Based Biz Model

Cloud Gaming Service OnLive Throws Out Monthly Fee-Based Biz Model

October 4, 2010 | By Kris Graft

October 4, 2010 | By Kris Graft
More: Console/PC

Cloud-based gaming service OnLive said Monday that it would revamp a key component of its business model, and not charge monthly fees for the service.

With no monthly fees, OnLive hopes its service is more accessible and inviting to users. "The key thing for us is keeping it free simplifies our pricing structure so it is entirely based on games rather than on access," OnLive CEO Steve Perlman told Gamasutra.

"It gives us much more flexibility and it is easier to understand than a two-tiered structure. And, now we know the business model works," he added.

Since its June launch, OnLive was implementing a Founders Program that waived monthly fees for a full year after joining, so customers had yet to pay any monthly fees anyhow. But the company planned on charging $4.95 per month after that year, or about $60 annually, on top of the cost to buy access to games.

With OnLive, customers buy games, but they are hosted on remote servers, and stream directly to users' computers instead of downloaded to the player's hard drive. The company is releasing a MicroConsole that connects the service to televisions later this year.

The service has games including Just Cause 2, Kayne and Lynch 2 and Mafia II for sale on the store, with prices comparable to more traditional digital download storefronts and retail.

"We actually got the first indication that the business could be supported without a monthly fee when we let beta testers start purchasing games before we launched the service," said Perlman. "But, because it was beta, we weren't certain what usage patterns would be at scale [after the service launched]."

He explained, "So, to hedge our bet, we established our Founding Member promotion to defer the monthly fee for a year for everyone. Well, after getting to scale, we found that what we had suspected was true: that the business model works without a monthly fee. This allows us to continue without a monthly fee on an ongoing basis."

While some vocal commenters said that they were not fond of the subscription fee, Perlman said that users hadn't shown any particular aversion to the cost.

"Since the monthly fee was always a sliding 1 year away with the Founders Program, users did not give it much thought, "he said. "We surveyed users and almost everyone was fine with a $4.95 monthly fee (e.g. it's similar to Xbox Live's fee), but you can't really know until you get closer to actually pricing it there. "

OnLive said that it would mark the confirmation of no subscription fees with a new, ongoing free trial program that gives users access to the service with no credit card required to create an account.

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