Start ups see new beginning for video games around world (Feature)

By Andy Goldberg Mar 26, 2009, 2:24 GMT

San Francisco - That brand spanking new Nintendo Wii that's gracing your living room may seem like the greatest thing to hit video games since the evolution of the human thumb.

But for several start-ups at the Game Developers Conference this week in San Francisco, the best-selling console and its competitors from Sony and Microsoft are about as cutting edge as a rusty typewriter.

If these gutsy entrepreneurs are right, the new paradigm in the video game world is not about ever more powerful consoles sitting next to your flat-panel TV and running games bought from the local videogame store. Rather, it is about having a simple device that plays games over a broadband connection, allowing all the heavy processing to be done by a server halfway around the world and zipped to you in real time at the speed of light.

That's the vision of veteran technology innovator Steve Perlman, whose Silicon Valley company Onlive unveiled its new system Tuesday night to the rapturous applause of the industry press.

'We think this moment, this day, will be remembered as the beginning of a new era,' Perlman said as he demonstrated his wonder- device's capacity on both a cheap laptop and a Mac notebook.

Later, he used an adapter about the same size as a deck of cards to play games on a big-screen, flat-panel TV.

'This is huge. This will be the last console you will ever own,' Perlman vowed. 'You can get any game, any time, anywhere.'

The secret to the OnLive offering is a unique compression technology that allows high-definition images to be streamed in real time. The moment you pull the trigger on your controller, you should see the monster's brains splatter over your screen.

The company has already signed up 10 of the industry's biggest game publishers and expects to start selling the system in about six months.

Game makers like the OnLive business model because they can do away with expensive discs that are now used to run games. The new technology would stymie game pirates who would not have any discs to copy.

'The promise of something like OnLive is that you'd never need to upgrade your PC again to play the latest games,' said Sid Shuman of GamePro. 'That's impressive any way you look at it.'

But it's a little early to go hawking your Wii on eBay.

The OnLive system may not work as well in reality as it did in the launch tests. Competitors like Apple, Nintendo, Microsoft and Sony might also launch rival systems. But commentators seem to unanimously agree that so-called cloud gaming, where all the heavy lifting is done online, is the way of the future.

Geoff Keighley, executive in charge of game content at MTV Networks, said it was too early to determine which companies would prevail but that digital distribution would eventually eclipse disc sales.

'I have no doubt that 10 years from now, this is how we will be playing games,' he said.

'Companies that make disc-only games will be the dinosaurs of the future,' said Billy Pidgeon, analyst with IDC.

Another start-up with a game-changing plan is Zeebo, backed by cellphone chip giant Qualcomm. The Zeebo console, which is to be launched initially in Brazil and then in Russia, India and China, will cost 199 dollars but will use cellphone networks to deliver games, often for as little as 10 dollars, a huge boon for customers in the developing world who can't afford the 50-dollar-plus prices of new games and the much higher prices of traditional consoles.

'They are finding an under-served and under-exploited market that is going to embrace what they have,' said Michael Pachter, a video game analyst with Wedbush Morgan. 'Publishers are going to love this because they can sell older catalogue titles for something.'