The Unraveling of OnLive

[mouser]

An interesting read about how an interesting technology company could not make a profit.  Note the theme we've discussed before -- completely fantastical ginned-up grossly inflated membership/customer numbers, designed to create a false sense of momentum and source of profit, and a giant pile of cash being burned through at an astronomical rate.

The problem was simple. OnLive never made any money, and it was burning through as much as $5 million a month. As Perlman himself explained during the fateful all-hands meeting, the company had deployed thousands of servers that were sitting unused, and only ever had 1,600 concurrent users of the service worldwide. Over the past week, OnLive has tried to distance itself from that 1,600 number, but every former employee we spoke to in a position to know told us that it was true. "We were so optimistic at launch, but the users never came," one long-time staffer said. "There were all these reasons why we were going to be an instant success, but it didn't succeed instantly." Even if the users had come, though, some employees dispute whether the service could scale: OnLive needed a physical machine for each concurrent player, and though Steve continually pressed the team to figure out a method to virtualize the load, the current model might have been untenable.. Officially, the company states it has 2.5 million users, and 1.5 million active users, but staffers tell us those numbers count every single person who ever signed up for a free account, or tried it in the last year. The other thing you need to understand is that many of those users never paid a dime.

http://mobile.thever...274739/onlive-report

from http://waxy.org/

[Attronarch]

That's most unfortunate, especially taking into consideration that it would have been on Ouya that seems like a big hit. It could've been a great combination.

[mouser]

A more positive take:
http://arstechnica.c...-only-option-we-had/

[40hz]

I'd characterize it more as putting some 'spin' on the story.

I find it interesting that the one important thing he continues to refuse to comment on is the number of users (average or simultaneous) OnLive actually has hosted. Which is disingenuous at best considering that a promised zero-downtime and the virtually unlimited number of users they can support is pretty much the raison d'être for OnLive as a business. Otherwise, it's no different than any other MMORG host.

As was noted by the interviewer:

if the load balancing is such a huge task, how many concurrent users is OnLive equipped to serve? Perlman wouldn't comment on the number of simultaneous users OnLive has seen thus far (neither the most nor an average),

Why?

All Perlman offers in response is what amounts to a marketing pitch:

[OnLive] was architected from the ground-up to be completely real-time and adaptive, no matter what it is hosting, no matter what network it is using, and no matter what device it is connected to. This is largely implemented in real-time Linux code on specialized, ultra-low latency processors. The number of Linux sessions varies greatly depending on what is needed to support the experience being delivered, depending on the network, device, location, application, etc.

The article goes on:

Perlman said this type of setup doesn't compare to any existing online system: "There is no simple way to characterize all of the computing resources needed to manage this," he wrote. He noted a time when one of the company's ColoSpaces had a two-day power outage due to generator failure. Other customers of that ColoSpace were completely shut out, but OnLive rerouted its users to sister data centers without interruption so that they could resume their activity seamlessly.

"In fact, people spectating them around the world were able to resume spectating within seconds," Perlman noted. "We did not receive a single customer service ticket (e.g. our compression algorithms have evolved to the point where the latency to a distant data center is less than it was to a nearby data center at launch). There is no simple way to compare this to any existing online system and no simple way to characterize all of the computing resources needed to manage this."

Nothing of substance there. All it says is that their infrastructure is amazing. No metrics to support that assertion. Just an assurance (followed by some war stories) typical of what might be given to institutional investors.

Dunno. Makes me wonder when a tech company like this suddenly starts hand-waving and refusing to talk tech.

Maybe I'm disappointed because I was interested in OnLive, not so much as a gamer, but more as a Linux tech observer and a network integrator. And so far I haven't heard anything that tells me much other than somebody somewhere got blindsided by something. But exactly what that was Perlman has yet to come forward with. I don't buy the load-balancing bit. That's a common element in network design. You build and test for it. It's something that should have been anticipated and planned for.

Maybe it's me, but I still feel something important is deliberately being left out of what's being said.

[mouser]

It seems clear to me that there was some honest-to-goodness impressive technical stuff being done by OnLive, and that they took an inspired risky new idea and made it work, at least to some extent.  For that, they deserve some real credit and admiration.

The thing that always sticks in my craw is the common thread I see in internet businesses, the fakery involved in pretending to have enough customers to be profitable in order to make it past one more round of funding, and then just continuing this cycle indefinitely until the inevitable crash.

[TaoPhoenix]

The thing that always sticks in my craw is the common thread I see in internet businesses, the fakery involved in pretending to have enough customers to be profitable in order to make it past one more round of funding, and then just continuing this cycle indefinitely until the inevitable crash.

-mouser (August 29, 2012, 07:10 PM)

Nailed it Mouser. It's a tough problem to solve, "front loading the customers hoping for upsells later", but the cycle can only hold out for like 2-4 years for the smaller businesses, and eventually after about three of these cycles I for one have sorta quit bothering to try all these fancy services because it just becomes exhausting to have to "exit" them with out having wasted all your time creating your content/value.

[40hz]

The thing that always sticks in my craw is the common thread I see in internet businesses, the fakery involved in pretending to have enough customers to be profitable in order to make it past one more round of funding, and then just continuing this cycle indefinitely until the inevitable crash.

-mouser (August 29, 2012, 07:10 PM)

It is almost a variation on a pyramid scheme in that it depends on massive influxes of additional users to make good on something being presented as already existing. Might have worked in the 90s. But it's an unrealistic (and IMO unethical) model to pursue today.

But you're seeing that happening more and more places. The movie industry has already latched on to it. They'll take a dog of a movie and promote the daylights out of it with the goal of recouping the cost plus make some profit between Thursday night and Sunday. They need to make it quick before word of mouth gets out that it's a lousy picture and attendance drops off.

Some of the sleazier producers are now starting to adopt this as their entire business model: make cheap movies that only need to sell tickets for a week before they tank in order to make a quick couple of million.

You'd need to do it several times a year in order to interest outside investors. But that probably explains why there are so many stupid "buddy films" and "slice & dice" teen horror flicks being released these days.